Artificial Neural Networks (ANN)

The world's most boring TV station. Or a way to set up a computer system that structurally matches the set up of neural system of the human brain.

In an ANN, as they are sometimes called, there are simplified units, known as nodes. These nodes are connected to each other to form a network. The structure resembles the way neurons are arranged inside the brain.

The benefit of the ANN is its flexibility, which allows the system to mimic a simple form of what we might call learning. Given individual examples of something, the system can compare similarities and differences in order to come up with criteria for future comparison.

In terms of finance, artificial neural networks can contribute to the modeling used for quantitative trading. Past market data can be fed into the network, which can then identify possible trading triggers. These flags can be used in algorithms to make future decisions.

Artificial neural networks are used by traders to make predictions. They deploy algorithms to detect patterns and meaningful changes in the markets. That’s a really important thing if you consider that this was once done by a whole bunch of nerdy math gurus sitting around a table, running calculations in long-hand form. Imagine how long that would take in today’s connected global marketplace.

Artificial neural networks are changing the world of trading because they’re linking market data together so granularly that essentially all markets are becoming ‘one’ (not like U2’s song). They can help to predict daily closing prices of stocks, patterns that stocks will take, and even currency valuation changes. Way better than the crystal ball they used to use.