Last week in Handelsblatt we discovered a rather interesting and succint article titled "Battle for a Training Edge" about artificial intelligence and trading. The article emphasizes several critical points about algorithmic trading, which we strongly believe investors both private and professional should always keep in mind when considering machine-learning approaches like STATS4TRADE.

Well it has happened again. Yet another large well-known hedge fund has suffered a huge loss. This time it is William Ackermann's Pershing Square Capital Management. As detailed in the New York Times by Gretchen Morgenson and Geraldine Fabrikant, Pershing Square reported an incredible US$4 billion loss on 13 March – all caused by a "sure bet" on one company, Valeant Pharmaceuticals.

This huge loss is a perfect example of how risk is greatly amplified when one subjectively bets large amounts on one stock. There are no absolutes in markets or any other type of human behavior – Mr. Ackermann should know this already! And if he does not, then why he is leading a well-known hedge fund? Or even more salient, why do investors invest in his fund with such risk?

We at STATS4TRADE adamantly believe that it is a fool's errand to predict price movements with absolute certainty for "sure bets" never exist. Morever it is extremely risky to bet everthing on just one stock.

​Instead we fervently believe that markets are complex with stochastic characteristics that lend themselves to statistical approaches like ours – approaches that increase the probability of picking stocks with positive returns while enforcing diversification to reduce risk. Sure we might miss the stellar returns that a bet on just one stock can yield – say Apple at the moment. But we also minimize the risk of "putting too many eggs in one basket" like Mr. Ackermann.

We ask that you think about Mr. Ackermann's investment process and ask yourselves – why would anyone pay his fund's fees considering such an astounding yet preventable loss? Investors expect and indeed demand better performance. We do too.

Another article just caught our attention in today's New York Times. Andrew Ross Sorkin reports that Warren Buffet has condemned the poor performance and high fees of hedge-funds in his annual letter to Berkshire Hathaway shareholders.

We fully agree with Mr. Buffet's harsh criticism of the hedge-fund industry and invite you to read the article via the link below.

We are in the midst of a beta rollout of our application for private investors and extending our website. However something caught our eye today in the financial press that we just cannot overlook. The Wall Street Journal reports that Catalyst Hedged Futures Strategy Fund lost $600 million or 15% of its value in just one normal week.

To put it mildly this news is absolutely astounding not to mention troubling. First Catalyst Hedged Futures Strategy touts itself as an active-fund that protects capital. A 15% loss in one week without any catastrophic event is protecting capital – especially for small investors? Clearly by any measure the fund's managers have completely failed in this regard.

Second according to Morningstar the fund's annual management fee alone is 1.75%. And the fees do not stop here. The fund nominally charges an upfront sales fee of 5.75% of initial value (e.g., a sales load) as well as various additional annual fees such as marketing that bring the total annual fee to 2.17% in 2016.

So let us summarize. Catalyst Hedged Futures Strategy touts it capital protection strategy yet loses 15% in one normal week and charges high fees. Is this the peformance that investors expect? We think not.

This is exactly the problem today. Actively-managed funds are not meeting investors' expectations. As private investors ourselves we demand transparency with consistent performance in terms of both return and risk as well as fair fees that eliminate excessive annual management fees and any sales/redemption loads.

In view of this most recent example we encourage our user community to continually question their funds' performance and fees – including pension fund arrangements such as tax-deferred 401(k) structures in the United States. Furthermore and like our tagline "Democratize Investing" states, we support an on-going democratization of the investment process by giving private investors the necessary tools to bypass expensive underperforming funds and actively manage their own investments.

We have been diligently working over the past months to add more markets and revamp our website with new metrics for portfolios tailored for both private- and professional-investors.  In addition we are almost ready to debut our trading application for private-investors.  

There are many new details to explain to our user-community – in fact too much for one blog-post. As a result we intend to introduce a series of upcoming blog-posts that explore our new metrics, approach and applications in more detail. So please stay tuned!

In the meantime and as always please contact us anytime if you have any questions or feedback. We look forward to hearing from you.

Late last week we noticed an anomaly with our Dow Jones forecast data.  In particular the daily list of buy-recommendations has apparently for some time only listed the ISIN code for the Dow Jones index itself. Moreover the charts reflected a corresponding and unusual lack of movement.

We spent the last few days investigating the root-cause and ultimately discovered a subtle software bug, which we fixed today. Now the charts and list of buy-recommendations are again accurate.

We sincerely apologize for the bug, which was associated with the daily synchronization between our external price-database for US stocks and internal software environment.

If you have any questions, please do not hesitate to contact us via the contact formula on this page or email at contact@stats4trade.com.  

Well it has finally arrived – our new forecast-data format is now available.  However the new format is quite different from our prevous format. Therefore we decided to provide our user community an introduction in this blog-post.  More detailed information can also be found on our new Help page.

Motivation for Change
First a little background as to why we changed the forecast format.  Over the past few months since the release of our initial forecast format in early April, we came to the realization that our initial format was unwieldy in terms of both useability and flexibilty. This conclusion was based not only on our opinions but also early feedback from our user community. As a result we embarked on a development effort aimed at improving the format with respect to ease-of-use and options for customization.

More Useability and Flexibility
Compared to the old format, the new format is much simpler and therefore both easier to understand and implement.  For example before we listed raw probabilities for price movements relative to ceilings and floors.  Now however we have condensed these probabilities and levels into a simple buy recommendation – updated daily and valid for twenty trading-days.

In addition the new format offers more opportunities for customization than before.  Whereas the old format only offered forecast data for the CAC 40 and S&P 500 indices themselves, we now provide forecast data for all stocks in the CAC 40 and Dow Jones 30 indices (depending on interest among our user community, we plan to add stocks in the S&P 500 at a later date).  Therefore one now has access to a much wider range of invidividual securities.  In turn this allows the development of unique investment strategies focused on specific stocks or groups of stocks across markets.

Key Features
Our new forecast format incorporates some key features, which we believe you will find useful for your investment activities.

As mentioned above we now provide daily buy recommendations for all individual stocks in the CAC 40 and Dow Jones 30 indices.  The recommendations are based on forecasts of price-increases from our machine-learning algorithms and are valid for the next twenty trading-days.

For each index we now provide charts of portfolio performance for a simple investment strategy based on our buy recommendations. Namely each day we buy all the recommended stocks in our forecast.  Then for each stock we buy, we sell it twenty trading-days later. The charts are interactive and continuously compare our relative performance since 1.January.2014 with the performance of a buy-and-hold strategy for the underlying index.

The same charts of portfolio performance also allow one to track the amount of what we call "capital invested" – that is the amount of capital invested in our portfolio of buy recommendations at any moment in time. As you will see with our portfolio, one is not rarely 100% invested in the market like traditional buy-and-wait strategies. This fact offers several advantages including reduced volatility and thus risk as well as freeing capital over extended timespans.

Each time we sell a open investment-line after twenty trading-days we incur a return – hopefully positive! We feel it is important to show you these returns.  Therefore we provide pie-charts that show the relative frequency of returns for investment-lines based on our current investment strategy

Additional Information
We have addressed only the highlights of our new format in this blog-post. For additional information, again please see our new Help page. In addition we intend to publish several follow-up blog-posts that expand on specifc details of our new format.

Overall we hope that you find our new forecast format and portfolio summaries not only more useful but also more intuitive for your investement needs.  In the meantime we thank you for your patience.  And if you have any questions, please do not hesitate to contact us – simply use the contact-form in the right-hand margin. We very much look forward to hearing from you.

As we mentioned in our previous blog-post, changes are coming.  Now these changes have arrived! 

The first change occurs this weekend with the end of our current forecast-data format over four-days with ceilings and floors for the CAC 40 and S&P 500 indices. In the coming days we will replace this format with a new one consisting of specific buy-recommendations over the next twenty-days for individual stocks in the CAC 40 and Dow Jones 30 indices. 

Since April we have also issued a summary of our forecast results each weekend. This weekend we also cease publishing this summary after twenty-one weeks.  Instead we will soon provide new portfolio summaries – updated daily and in an interactive chart-format – for investment strategies based on our new forecast format.

Again we hope that you find our new forecast format and portfolio summaries not only more useful but also more intuitive in terms of your investement needs.  In the meantime we thank you for your patience. And if you have any questions, please do not hesitate to contact us.  We sincerely look forward to hearing from you.

If you have visited our website over the past weeks, you have noticed a few additions like new pages.  These additions reflect much internal change – change that will very soon be reflected on our website. 

New Forecast-Data Format
The biggest change is the format of our forecast data.  Presently we publish a four-day forecast with ceiling and floor probabilities for the CAC 40 and S&P 500 indices. However very soon we will switch to a twenty-day forecast for individual stocks in the CAC 40 and Dow Jones indices. Stocks in other major indices will follow later. 

The new forecast format will contain two significant improvements in terms of both useability and flexibility. First we will provide daily buy-recommendations for stocks in each index. The buy-recommendations will be straightforward and include a list of stocks, whose prices are forecast to rise in the next twenty trading-days with a corresponding probability. Second we will publish easy-to-understand performance summaries that compare our on-going performance to a buy-and-wait strategy for the corresponding index.

More User-Friendly and Flexible
After much testing we are now convinced that our new approach is more user-friendly than our previous approach. Moreover the new approach allows our users more flexibility in developing their own investment strategies across groups of stocks. For example one can now tailor an investment strategy to exclude traditional energy companies and only include environmentally-sustainable stocks.

Of course we intend to publish upcoming blog-posts that explain our new forecast approach in detail. Nonetheless these posts will come after we change our forecast format in the next two weeks.  Therefore we wanted to give you advance notice of our near-term change in this interim blog-post.

If you have any questions, please do not hesitate to contact us.  As always we look forward to hearing from you. In the meantime sit tight and get ready for our new forecast format!

Welcome to our inaugural blog entry – our first step in building a lasting relationship with small investors just like you.  As with any successful relationship we are adamant that our relationship with our community always be based on trust, respect and mutual success with the goal of not only providing investment strategies and forecast data to our users and customers but also educating small investors so they can actively invest with more confidence and independence than ever before.  As a result and before we begin, we want to introduce and emphasize our values and goals while outlining our next steps.

Core Values
Our work is based on three fundamental values that guide our daily work and interactions with all of our stakeholders both external and internal.  First and foremost we believe that trust is the absolute bedrock of any sustainable relationship whether it be professional or personal.  In turn and for us trust implies clear and transparent communication, delivering on our committments, and accepting full responsibility for our actions including openly recognizing and correcting any mistakes while ensuring that they never occur again.

Second we believe that social committment is essential for any modern enterprise.  Therefore we are committed to providing our user community not only commercial but also social value.  In particular we are committed to helping small investors decisions attain realistic financial returns with lower volatility over shorter timespans.  In doing so we are "democratizing" investment decisions such that small investors have access to the same information, which professional investors have long possessed.

Third we believe in mutual success for our entire community.  In other words we constantly seek "win-win" situations, in which all of our stakeholders – users and customers, investors, suppliers and colleagues – together profit from our work.  Only when we strive for mutual success among all of our stakeholders can we enable our own success and thereby ensure a sustainable long-term venture.

Longterm Goal
Our longterm goal is simple.  We intend to help small investors augment standard investment approaches with active approaches that yield benchmark returns or better with lower volatility over timespans ranging over years instead of decades.

Next Steps
Our first major step in realizing our longterm goal is the execution of our alpha and beta phases over the next few months.  During these two initial phases we will gradually introduce investment strategies and forecast data to the general public via this website and Twitter.  In addition we will begin live-testing our investment strategies using our forecaset data.  Overall at the end of these two phases in the summer of 2016, we aim to prove the legitimacy of our investment strategies and forecast data for small investors by proving that we can deliver benchmark or better returns with lower volatility over a comparatively short timespans.

And what is planned beyond the conclusion of our initial alpha/beta phases in the summer of 2016? Well we will concentrate on officially incorporating our company, consulting with investors, enlarging our user community, fine-tuning our investment strategies, and extending our forecast data.  However we are adamant that we first prove legitimacy.  Therefore and for the moment our focus is on our initial two phases over the next few months.

We intend to not only provide you upcoming information about our investment recipes and forecast data.  As a result please regularly check this blog for both educational information and updates.  In addtion we encourage all comments and feedback.  Therefore please do not be shy!  We very much look forward to hearing from you and begin developing lasting relationships with our user community.