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Here’s What New Investors Need to Know About Volatility – ReadWrite

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Andrea Unger


Most people think that investment gurus can tell which stocks will pick up in the coming days and weeks. In reality, most experts find it hard to predict how stocks will perform and are prone to giving bad advice. Before choosing whether to buy stocks, backtesting investment ideas is an excellent way to discern good advice from bad. If you are investing despite the high market volatility, backtesting is your best resort to navigate the existing crises. 

The Current Investing Climate is Volatile 

Trading stocks on a short time horizon, especially planning on recouping on investment at the end of the week, is becoming increasingly difficult for many investors. As a result, January 2022 is being described as the weakest January since January 2009 by many, including The Financial Times. 

The S&P 500 index fell by 5.3%, and the tech-heavy Nasdaq Composite index fell by 9%. Both have suffered from their worst one-month decline since the onset of the COVID-19 pandemic in March 2020. 

In 2021, the S&P 500 index ended with a 26.9% gain, while the average growth over time revolves around 10%. A recent Investing.com survey shows that first-time investors are younger (63% from Generation X, Y, and Z compared to 45% of other investors). Young investors were more likely to trade for short-term gain (37%) compared to others (21%), and new investors were overall fewer to report profits on their investments (67%) compared to experienced investors (87%). 

According to the survey, 86% of the new investors planned to put even more money in stocks in 2022. 

Should Investors Buy the Dip?

Many investors wonder if they should buy the dip when facing volatility for the first time.

Goldman Sachs strategists have advised investors to buy the dip. However, many remain skeptical since the Federal Reserve has indicated its intention to raise interest rates in March to control inflation. 

Backtesting systems should be equipped with volatility filters to indicate whether or not to enter the market. This will help investors know when it’s time to buy. But, before we talk about backtesting, let’s ask and answer another vital question: What are the sources of stock information that the new investors can trust to catch up with the experienced ones?

What Information Can Investors Trust During Times of Volatility?

The Investing.com survey reveals that both experienced investors and first-time investors analyze stocks based on fundamental values reported by the media. These include revenue, valuation, and industry trends. This strategy, however, applies best when investing in long-term capital accumulation. 

People engaged in short-term investing generally use charting as a tool in selecting entry and exit points for stock trades. The truth about technical charting is that the capacity to identify the right timing for buying or selling stocks depends too much on the people’s skills running analyses. Charting offers considerable and valuable insights into market behavior. However, it is also subordinated to too many market conditions that do not necessarily exist in the present. 

Remember, only a few of the tips found online are reliable.

An investor must access and assess the most reliable sources of stock information if they want to put themselves in a solid position to succeed. Information becomes crucial within a short time frame.

It can be complicated to determine if a stock is quoted at a fair value. An answer to this problem is backtesting. While it won’t give you an explanation about the value of a stock, it will provide you with a much better idea about its way to move and react to market conditions. 

Backtesting Provides the Opportunity to Seize Momentum

Many wonder whether they should buy the dip or wait for more stable conditions to trade. Backtesting provides a scientific method to eliminate doubts when picking stocks. It assesses the viability of a trading strategy by simulating historical data to analyze risks. It can be beneficial at the entry-level, especially when building customized portfolios incorporating specific rules and assumptions.

Trading ideas can be backtested if they are quantified. But how do you proceed with backtesting, given the current market volatility? 

Here are the steps to take to backtest a trading strategy: 

  • First, identify three investment ideas that show momentum in their profits in the most recent period. The investment idea can be backtested after meeting this criterion. We backtest to identify the best parameters to use when determining risks in terms of percentage of profits and losses over short and long periods.
  • To backtest, certain conditions must be met. This includes twelve years of history for commodities and a more extended period for currencies. You’ll need as much history as possible for indexes to incorporate bearish, bullish as well as violent, and choppy market crashes. 
  • Monitor the backtesting results. Remember that trend-following features are getting weaker by the year on many types of stocks, including the commodities markets. 

Historical data should cover all phases over an extended period, encompassing bullish, bearish, and choppy phases as well as wild crashes. It will help you discern the good advice from the bad and give you a better idea of when to enter the market and stop trading. Backtesting remains one of the most critical steps in developing a successful trading system. 

Image Credit: Karolina Grabowska; Pexels; Thanks

Andrea Unger

https://www.youtube.com/c/UngerAcademyENGLISH

Andrea Unger is a full-time professional trader, President of The Unger Academy and author of The Unger Method. Andrea is the only Four-Time World Trading Champion (2008, 2009, 2010, and 2012), he’s an honorary member of SIAT (Italian Society of Technical Analysis, a branch of IFTA) and speaks throughout Europe, America, Australia and Asia.

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Fintech Kennek raises $12.5M seed round to digitize lending

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Google eyed for $2 billion Anthropic deal after major Amazon play


London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from Kennek.io; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs

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Deanna Ritchie


As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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UK seizes web3 opportunity simplifying crypto regulations

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Deanna Ritchie


As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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