Leveraging AI to Find Financially Sound Stocks

In the realm of modern stock trading, the ability to leverage advanced technologies and sophisticated algorithms can make the difference between mediocre and stellar investment performance. Tickeron Inc., renowned for its AI-driven trading tools, continues to innovate and provide cutting-edge solutions for traders. This article delves into Tickeron's Trend Trader Long-Only Profitability Models, which encompass strategies tailored to different stock categories such as mid-cap and small-cap stocks. By utilizing comprehensive profitability analysis and trend evaluation, these models offer a robust approach to maximizing trading opportunities and managing risks effectively. Whether you are a novice trader or an experienced investor managing your IRA, Tickeron's strategic features are designed to enhance your trading experience and outcomes.

The Role of Backtesting in FLMs

Backtesting plays a pivotal role in trading by allowing traders to evaluate the efficacy of their strategies using historical data. This technique provides insights into how a strategy would have performed in the past, under the assumption that past performance could predict future profitability. A 2022 study by the CFA Institute found that strategies subjected to rigorous backtesting had a 15% higher success rate compared to those that did not. Moreover, integrating price action analysis into backtesting can enhance the strategy's robustness. By examining price movements and patterns, such as support and resistance levels, traders can improve the predictive accuracy of their models by up to 20%. This comprehensive approach not only validates the reliability of trading strategies but also offers a deeper understanding of market dynamics.

Advanced trading algorithms utilize multi-level backtesting to ensure robustness across various market conditions. This involves testing strategies on different timeframes, market scenarios, and asset classes to identify and mitigate potential weaknesses. For instance, the Sector Rotation Strategy robot undergoes extensive analysis of historical data spanning over 20 years and incorporating more than 100 market indicators. These backtests simulate extreme market events, such as the 2008 financial crisis and the COVID-19 market crash, to assess the algorithm's performance under stress conditions. By doing so, traders can develop more resilient strategies that are better equipped to handle diverse market environments, ultimately enhancing their long-term profitability.

Financial Learning Models (FLM) in Backtesting play a crucial role in modern algorithmic trading. Tickeron, Inc. has developed an AI financial platform that facilitates the creation of thousands of Financial Learning Models (FLMs). These models are utilized in algorithmic trading services for both self-directed investors (SDIs) and hedge funds. The core of Tickeron's AI offerings is its proprietary FLMs, which analyze and back-test extensive financial data from various sources, including stock prices, trading volumes, economic indicators, and corporate financial statements, to identify market conditions where well-known financial models excel. By incorporating historical data spanning decades and millions of trading points, these FLMs ensure robust and reliable predictions. Inspired by ChatGPT LLMs, the main concept is to dynamically activate effective financial models when they are performing well and deactivate them when they are not. This dynamic adjustment is achieved through continuous monitoring and real-time data analysis, ensuring the models are responsive to market changes. As a result, Tickeron provides exclusive algorithmic trading and predictive analytics, consistently outperforming returns of major financial institutions, often by margins as high as 5-10% annually.

 

Strategy based on Valuation & Profitability (FA)

This model is designed for traders preferring long positions through complex fundamental analysis systems. It is suitable for both novice traders and those managing their IRA accounts independently. The strategy focuses on identifying undervalued stocks with strong profitability metrics, aiming to achieve long-term capital appreciation.

Key Components

1. Valuation Metrics:
   • Price-to-Earnings (P/E) Ratio: Identifies stocks that are trading at a lower price relative to their earnings, suggesting potential undervaluation.
   • Price-to-Book (P/B) Ratio: Evaluates stocks by comparing their market price to their book value, helping to identify companies trading below their intrinsic value.
   • Price-to-Sales (P/S) Ratio: Assesses stocks based on their revenue generation, offering insight into potential undervaluation relative to sales.
2. Profitability Metrics:
   • Return on Equity (ROE): Measures a company's profitability by revealing how much profit a company generates with the money shareholders have invested.
   • Return on Assets (ROA): Indicates how efficiently a company is using its assets to generate earnings.
   • Net Profit Margin: Reflects the percentage of revenue that translates into profit, indicating the overall efficiency and profitability of the company.
3. Growth Indicators:
   • Earnings Growth Rate: Tracks the annual growth rate of earnings per share (EPS), providing insight into the company's potential for future profit expansion.
   • Revenue Growth Rate: Monitors the annual increase in a company's sales, highlighting its ability to expand its market share.
4. Risk Management:
   • Debt-to-Equity (D/E) Ratio: Analyzes a company's financial leverage by comparing its total liabilities to shareholders' equity.
   • Current Ratio: Evaluates a company's ability to pay short-term obligations with its current assets, indicating financial stability.
   • Beta: Measures the volatility of a stock in relation to the overall market, helping to assess the risk associated with the stock.
5. Dividend Yield:
   • For income-focused investors, this strategy includes an assessment of dividend yield, ensuring that the stocks not only appreciate in value but also provide a steady income stream through dividends.

Implementation

1. Stock Screening:
   • Utilize financial databases and screening tools to filter stocks based on the defined valuation and profitability metrics.
   • Regularly update the screening criteria to reflect changes in market conditions and company performance.
2. Fundamental Analysis:
   • Conduct in-depth analysis of shortlisted stocks, including qualitative factors such as management quality, competitive advantage, and industry position.
   • Review financial statements, earnings reports, and analyst ratings to ensure comprehensive understanding and evaluation.
3. Portfolio Construction:
   • Diversify investments across various sectors to mitigate sector-specific risks.
   • Allocate capital based on individual stock ratings derived from the valuation and profitability metrics.
4. Performance Monitoring:
   • Continuously monitor the performance of the portfolio, rebalancing as necessary to maintain desired exposure to high-potential stocks.
   • Keep abreast of market trends, economic indicators, and company-specific news to make informed decisions.

Suitability

This strategy is ideal for traders who:

• Prefer a systematic, data-driven approach to investing.
• Are focused on long-term growth and capital appreciation.
• Seek to minimize risks through diversification and fundamental analysis.
• Are willing to dedicate time to continuous monitoring and adjustment of their portfolio.

By adhering to this strategy, traders can potentially achieve consistent returns while maintaining a disciplined approach to stock selection and risk management.

Strategic Features and Technical Basis

The algorithm integrates three approaches:

1. Fair Value Assessment Method: Combines Benjamin Graham's techniques with modern algorithms to identify undervalued companies.
2. Comparative Analysis of Company Profitability: Uses indicators like Total Revenue, Net Income, and EBITDA to rank companies and select the top 30 for trading.
3. Profitability Metrics Inspired by Ian Wyatt: Ranks stocks based on growth dynamics of profitability indicators such as Operating Income and EPS.

Position and Risk Management

• Fixed Stop-Loss: 20% of the opening price.
• Monthly Reviews: Ensure positions are closed if a stock's rating drops below the required level.
• Signal Timing: Provided two hours after the market opens.

Trading Dynamics and Specifications

• Maximum Open Positions: High
• Robot Volatility: High
• Universe Diversification Score: Low
• Profit to Dip Ratio: High

Example of Backtesting: Trend Trader Pro - Company’s Financial Health Model (FA)

Overall Performance:

• Total Trades: 61
• Maximum Open Trades: 54

Trade Outcomes:

• Profitable Trades: 51 (83.61%)
• Loss Trades: 10 (16.39%)

Position Performance:

• Long Positions Win Rate: 60 (83.33%)
• Short Positions Win Rate: 1 (100.00%)
• Profit Factor: 25.78

Drawdown Analysis:

• Absolute Drawdown: $8,573.94
• Maximal Drawdown per Trade: $22,771.33
• Profit to Drawdown Ratio: 19.42

Consistency Metrics:

• Average Consecutive Wins: 7
• Average Consecutive Losses: 1
• Maximum Consecutive Wins: 26 ($86,045.40)
• Maximum Consecutive Losses: 4 ($1,366.14)
• Largest Profit/Loss Trade: $14,955.63 / ($1,366.14)

By integrating these strategies into the Trend Trader Long-Only approach, traders can utilize sophisticated algorithms and thorough profitability evaluations to enhance trading performance in diverse market environments and stock segments.

 

In the ever-evolving landscape of stock trading, Tickeron Inc., a leader in AI-driven trading tools, has made a significant leap forward. Sergey Savastiouk, Ph.D., CEO and Founder of Tickeron, unveils their latest feature designed to simplify quantitative stock analysis. Tickeron stands at the forefront of algorithmic AI trading, catering to both individual investors and developers of proprietary neural networks. Their newest addition, the Trend Trader Long-Only Profitability Models, incorporates advanced strategies focused on various stock categories, including mid-cap and small-cap stocks, leveraging sophisticated profitability analysis. These models aim to identify the best market opportunities through comprehensive financial metrics and trend analysis, making them ideal for both novice traders and those managing their IRA accounts independently. By providing user-friendly tools, educational support, and a robust framework for diversification and risk management, Tickeron ensures accessible and effective trading strategies for a wide range of investors.

 

Conclusion

Tickeron's Trend Trader Long-Only Profitability Models exemplify the powerful integration of AI and sophisticated financial analysis in the world of stock trading. Through meticulous evaluation of profitability metrics and strategic diversification, these models provide traders with the tools necessary to navigate the complexities of the market. By focusing on mid-cap and small-cap stocks, Tickeron not only caters to a diverse investor base but also opens up significant growth potential. As trading technologies continue to evolve, Tickeron remains at the forefront, ensuring that both novice and experienced traders can achieve their financial goals with confidence and precision.

Disclaimers and Limitations