To better understand the information presented on the dashboard about the trend for the German stock market, we should first explain what artificial intelligence (AI) actually does.
In the future, our artificial intelligence will take over your securities account with your broker or your bank, which you selected during registration. At the moment still with accounts at JFD Bank and play money, but with real price data. In the current stage, the AI continuously analyzes the German stock market in order to achieve an outperformance against this stock market by means of a so-called long & short strategy.
What does German stock market mean for us and what does long & short mean? We mean the German Stock Index (DAX), which is calculated daily in Frankfurt by the German Stock Exchange (1). So, in general, when people say that the German stock market has fallen today, they mean that the DAX has fallen or lost value. "Going long" in stock market jargon means that one has or will position oneself accordingly by purchasing financial products that increase in value when stock prices rise. "Going short" means acquiring financial products that increase in value when stock prices fall (2). By the long & short strategy of the AI it is possible to act also in difficult market phases at the stock market quite profitably, since by the so-called "short go" also with falling share prices the depot can gain nevertheless in value. It is therefore possible to act independently of crises and is not subject to economic cycles. During the Corona crisis, we were able to observe exactly these effects and, at least in our extended simulations, use this difficult time profitably.
You have probably already asked yourself whether we trade individual shares or other financial products that track an index. Such financial products could be ETFs or certificates on the DAX, for example. However, due to the strategy of the AI, we have initially decided on the so-called Contract for Difference (CFD) on the DAX as a financial product. This tracks the price of the DAX and thus through the purchase a participation in the price movement of the underlying index is possible as well as a long & short strategy, since the CFDs are tradable in "both directions". CFDs are mostly offered with a leverage, which means, for example, with price changes of the DAX by 1% and a CFD leverage of 20, that the CFD rises by 20%. On the other hand, the financial product also costs only 1/20 of the DAX price. Thus, we use the leverage effect of CFDs to offer the AI already from an account volume of 3,000NeoEuro. We minimize the increased risk due to the leverage effect by our sophisticated risk competence of the AI, which recognizes safe and uncertain market phases and consequently stops trading, as well as closes all positions very promptly.
In summary, the AI uses CFDs and a long-short strategy on the DAX in your portfolio. In addition to the mentioned risk competence, the time series competence of the AI continuously gives predictions (long or short) whether the price of the DAX will move up or down in the next hours. If, for example, a rising stock index is predicted, then the AI buys a long CFD on the index and participates in the rising price movement for you. Your AI makes up to 20 trading decisions a day this way. The CFD is also sold based on the position management of the AI. Currently, the average holding period is 10 hours. At the moment, the AI risks 0.33% per trade of the entire portfolio and has also been limited in advance by us to not allow any "momentum" of the AI.
Now that we have shown what the AI actually does for you, let's get back to the initial question of what the tendency is all about. The tendency is a summary of the predictions, which the AI continuously delivers. It should represent an estimation of the AI, where the DAX will move in the next hours.
Figure 1: Excerpt from dashboard showing the trend for the German stock market, own illustration
Falling rates: The majority of the AI predicted in the last hours for the next trading hours of the DAX that it would stand lower than at the current time.
Rising rates: The majority of the AI predicted in the last hours for the next trading hours of the DAX that it would stand higher than at the current time.
Due to the shown topic, the tendency or the needle of the AI can be set to "falling prices" and with short CFDs the value of the portfolio can be increased in this period.
Try to see for yourself how high the hit rate is and check whether the tendency of the AI is actually correct. The best thing to do is to check the AI in the morning when you get up and again in the afternoon or early evening to see whether the tendency of the morning has come true. Your AI does this of course almost around the clock, fully automated and managing according to the adjusted risk your portfolio with CFDs on the DAX for you. So you don't have to worry about anything anymore, you can sit back and relax and consider the AI as your extended arm on the stock market.
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