Adrian Reid explains why macroeconomic data like interest rates and inflation can improve trading systems, while societal trends like AI adoption are too slow-moving to trade on. Stock-price momentum usually dominates anyway, and systems need constant tuning as the world changes.
There's two types of data in that question. There was a thing, macroeconomic, things like interest rates, things like inflation, things like.
The broader market trend.
All of those are time series data that we can incorporate and create objective rules around.
So those we can definitely incorporate into our systems. So you might have a rule based on how the exchange rates are working, or the rules based on whether interest rates are going up, interest rates are going down, or whether inflation is higher, inflation is low.
Now I want to spoiler alert.
Many of those things don't matter nearly.
As much as just the stock price. Stock price going up, stock price going down is a pretty solid signal because.
Momentum really does persist in the markets. However, having some of those other things can improve systems in some instances. What we can't do so easily is.
Incorporate subjective data like the rise of AI or the trend for people to.
Escape major cities because of COVID or things like that.
We don't have daily data that we.
Can draw into our system and run a rule on. They're the things that are harder to incorporate.
So for the things that we can bring the data in and use it.
And actually the data source that I use has a lot of the macroeconomic type stuff in it already.
We can just add those as normal.
Rules and back test them for the other ones.
You've really got to monitor the performance of your system to make sure that.
The system keeps working as expected as society trends change.
And so that's where, you know, we don't just kind of blindly apply a.
System and then just keep trading it. No matter what happens with our eyes closed. We have to actually monitor the performance of the system and make sure it keeps working. And so every now and then it might need a bit of a tune.
Up, bit of an adjustment, or you.
Might retire some systems and bring in some new systems. So it's a little bit dynamic over.
The, over time, but not, you know.
That might, the changes are generally pretty slow, like pretty gradual.
SA.
