Beat the Stock Market

Nick Van Wie developed an algorithmic stock trading app that takes the human emotion out of trading.

Student research project creates algorithmic stock trading app

The stock market can be intimidating. It is subject to sharp swings that can significantly build or erode a stockholder’s portfolio in a single day. This leads to investors making rash or emotional decisions.

Nick Van Wie, a finance major in the School of Business and Management, spent his summer trying to change that.

“I created an algorithm with code that takes the human emotion out of investing,” said Van Wie, describing his work in SUNY Brockport’s Summer Undergraduate Research Program.

“To me this was an interesting idea because of the type of stock market that was created after the COVID-19 crash. At that time, you could basically throw money into any stock and look like a genius – especially with events such as the GameStop short squeeze. These types of events made me interested in the psychology of retail traders and how their mindset affects their trading.”

Van Wie examined herding behavior and loss aversion theory as part of his process. Herding behavior is when people follow the crowd in fear of missing a potential opportunity. Loss aversion is just as important. Van Wie says that losing can be two times as emotionally powerful as winning. Both lead to irrational decisions — the kind of decisions Van Wie wants his algorithm to help people avoid.

Initial testing shows Van Wie may be onto something. He’s tested his algorithm with historical data to figure out which components generate the best return.

When run during what he describes as a “bad market” (January 1, 2022 to the present), Van Wie’s algorithm has shown a 90-95 percent profit. When run during a “good market” (January 1, 2013, until the COVID crash in March 2020) it showed a 25 percent annualized profit.

Van Wie’s next step is to take the leap from using historical data into trading with real money.

“I was thinking of putting in $1,000, watching it for a year or two and see how it goes from there,” he said.

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Author: John Follaco

Posted: September 12, 2022