The relationship between computers and the stock market is a deep relationship. According to https://www.investopedia.com 70 – 80% of trades on the stock market are made by automated systems. This means that most trades that happen are made from computers being triggered to buy or sell. This is just the automated trades, I would imagine every individual or money manager is also using a computer to manually decide when to submit a trade.
With the recent developments in machine learning and deep learning using neural networks, the possibilities for stock selection and buy/sell triggers using a trained network have greatly increased. Training a network to identify stocks or funds that are most likely to return the highest yield is very tempting. One idea would be to take historical data of stocks that showed great returns and use that stocks data just prior to its rise to train a network to identify such stocks that are currently about to rise. If we treat each stock that rose in price as type of signature and train our model to identify such signatures, maybe we can identify stocks that have greater potential to rise in the near future.
The idea of creating an automated process to generate money from the stock market is very alluring and challenging at the same time. I think it is easy to think that using mathematics and statistics to try and create some sort of logical framework will prevent us from losing money if things go bad. I think being very cautious about taking unnecessary risk is a good way to prevent money loss, but also is a good way to prevent gains. My personal philosophy is instead of trying to constantly make good decisions and average out the bad decisions, invest all ones time and effort into make three or less good decisions for a duration of a few years. Spend most of your time isolating a good idea from bad ones and then trust your work and put a lot of funds behind that idea.
I think when people use algorithms and computers to create a buffer between themselves and the real danger of losing money, we create a false sense of security. The power money has over the mind can not be exaggerated. We should acknowledge this and instead of trying to create a sense of security for ourselves using computers, we should instead understand that people are the ones pulling the levers behind the scenes. Computers don’t actually care about anything, it’s the emotions of the humans that own those computers and algorithms that determine what really happens and also …. when it happens. With this is all taken into account, we should make as few decisions as possible and focus all of our discipline and research into those decisions. The best way to make money in the stock market is to make a good decision of what to buy, buy it, then leave it alone until your goal is met. This may take a few months, years or even decades. Making money in the stock market is about buying the correct thing, then having the discipline to not let emotional swings affect the execution of a plan.
A great thing to do is to make a contract with yourself about what you are buying and what price you are going to sell it at. Sign this contract, and then go do something else for a few years and let the good decisions you have already made bring you wealth.