| TRAITS is a sophisticated computer program that makes daily trading decisions for a long/short equity hedge fund in an entirely automated way. It uses state-of-the-art techniques from machine learning and artificial intelligence, which enable it to continually learn from the latest market data and thereby cope with changing market conditions.
TRAITS obtains daily data, creates unique trading signals, and formulates buy/sell and limit orders, all without human intervention. It employs an evidence-based approach, continually formulating trading strategies and evaluating them, trusting only those that acquire a strong record of being right despite having lots of opportunities to be wrong.
Different strategies may be discovered for different stocks, and for any given stock there may be several successful strategies that operate in tandem to identify differing opportunities to go long or short. TRAITS also keeps track of the elements of previously successful strategies in order to be able to respond quickly to changing market conditions.
TRAITS also handles:
- transaction costs
- interest
- dividends
- stocks denominated in different currencies
- corporate actions such as splits or de-listing
- portfolio management
At present, TRAITS trades contracts for difference. It functions without human intervention, obtaining data and making decisions, generating daily Excel spreadsheets that describe new orders, limits and the performance of currently open positions. An initial version has been running unattended since mid-2007.