Method and system for visual analysis of investment strategies

• US 6,493,681 B1
• Filed: 08/11/1999
• Issued: 12/10/2002
• Est. Priority Date: 08/11/1999
• Status: Expired due to Term

• Current Assignee: Leonid M. Tertitski
• Original Assignee: ProxyTrader, Inc.
• Inventors: Tertitski, Leonid Mark, Goder, Alexey George
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): AKERS, GEOFFREY R
• Application Number:
  US09/372,507
• Time in Patent Office: 1,217 Days
• Field of Search: 705/36
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

The present invention relates to a system and method for generation of strategies of investment in publicly traded stocks and a method of choosing the strategy with capital gain greater than traditional buy and hold strategy. The system and method is capable of generating thousands of investment strategies finding the best strategy delivering the optimal capital gain. The visualization method gives investor ability to analysis dynamics and stability of chosen strategy versus time with the speed of animation. Using Ad the system on a PC with 200-300 MZ CPU the user can analyze 20-40 different views for 5-10 seconds, which otherwise with the traditional technique takes more then 10,000 plots.

Claims

1. A method for optimizing capital gain of investments in stocks of publicly traded companies, comprising:

(a) for a particular stock of a publicly traded company, normalizing open, high, low and close historical stock prices to the close price on the previous trading day,

(b) repeating step (a) for a period of analysis,

(c) forming a day capital gain multiplier for a first element among a plurality of elements of a strategy matrix using a day capital gain formula, wherein each element of the strategy matrix represents a trading strategy, wherein the strategy matrix is defined by a first axis associated with a rise in stock price and a second axis associated with a decline in stock price, and wherein the matrix comprises a set of such elements for each of a plurality of trading days,

(d) forming a normalized total capital gain for the element of the strategy matrix by multiplying the day capital gain multiplier from step (c) for each trading day within the period of analysis,

(e) repeating step (d) for all elements of the strategy matrix,

(f) finding maximum normalized total capital gain in the strategy matrix, and

(g) calculating a recommended stock sell order at the opening of a new trading day based on said formula for current day recommended order.

4. A method as recited in claim 1, wherein the day capital gain formula is defined as:

5. A method as recited in claim 1, further comprising the step of generating a graphical color display of the strategy matrix, wherein each color of the display is associated with a different magnitude of capital gain, and wherein each element of the strategy matrix is represented in the display by a different pixel having a color corresponding to the day capital gain multiplier of a strategy that is associated with that element.

6. A method as recited in claim 1, further comprising the step of generating a graphical color display of the strategy matrix, wherein each color of the display is associated with a different magnitude of capital gain, wherein each color of the display may be rendered in one of a plurality of brightness levels corresponding to a relative magnitude of capital gain, and wherein each element of the strategy matrix is represented in the display by a different pixel having a color corresponding to the day capital gain multiplier of a strategy that is associated with that element and a brightness corresponding to a magnitude of the day capital gain multiplier for that element as compared with all other elements in the matrix.

7. A method as recited in claim 1, further comprising the steps of:

generating a graphical color display of the strategy matrix, wherein each color of the display is associated with a different magnitude of capital gain, and wherein each element of the strategy matrix is represented in the display by a different pixel having a color corresponding to the day capital gain multiplier of a strategy that is associated with that element;

receiving user input specifying a different trading day;

refreshing the display by rendering color pixels for all elements of the strategy matrix that are associated with the different trading day;

repeating the steps of receiving and refreshing rapidly to result in generating an animation that graphically displays changes in capital gain magnitude for the stock for the period of analysis.

8. A method as recited in claim 1, wherein the strategy matrix comprises a first axis representing a rise in stock price and a second axis representing a decline in stock price, and wherein each axis is sub-divided into a plurality of level values, wherein each of the level values represents a recommended selling price relative to an opening stock price on a current trading day.

2. A method for fast visual evaluating dynamics and stability of strategy matrices versus time and selecting optimal strategies in a computer system, comprising:

(a) allowing a user to enter a date of evaluation,

(b) calculating a strategy matrix for the date of evaluation,

(c) assigning a color to each element of the strategy matrix using a day capital gain formula for transforming the strategy matrix into a color strategy matrix,

(d) repeating step (c) for each element of the strategy matrix to result in forming the color strategy matrix,

(e) displaying the color strategy matrix in a display window on a computer monitor screen of the computer system,

(f) repeating steps (a) through (e) for various consecutive dates at a rapid visualization speed making an animation effect (3 or more frames per second),

(g) allowing visual evaluation of dynamics and stability of the strategy matrix where significant movements of similar color spots versus time represent instability of strategies,

(h) receiving user input selecting optimal strategy where stable or growing same color spots color versus time represents area of optimal strategies.

23. A method as recited in claim 2, wherein the day capital gain formula is defined as:

3. A method of selecting stocks giving best capital gains when following said investment process, comprising:

(a) selecting a period of analysis equal to three years;

(b) defining the first year as a calculation period;

(c) selecting a stock from a list of publicly traded companies having stock price history longer than the period of analysis selected in step (a),

(d) calculating best strategy delivering maximum capital gain during the calculation period using said investment process,

(e) calculating capital gain for the same stock and calculation period without any trade activity (buy and hold),

(f) calculating ratio of the best capital gain (d) and a capital gain of a traditional investment strategy (e) for the same amount of initial investment value,

(g) repeating steps (c) through (d) for various publicly traded companies and calculating list of ratio values for each stock,

(h) selecting stocks from list (g) with ratio >

2,

(i) repeating steps (c) to (h) with second and third year as a calculation period and creating combined list of stocks, giving best capital gain.

9. A computer-readable medium carrying one or more sequences of instructions for optimizing capital gain of investments in stocks of publicly traded companies, which instructions, when executed by one or more processors, cause the one or more processors to carry out the steps of:

(a) for a particular stock of a publicly traded company, normalizing open, high, low and close historical stock prices to the close price on the previous trading day,

(b) repeating step (a) for a period of analysis,

(c) forming a day capital gain multiplier for a first element among a plurality of elements of a strategy matrix using a day capital gain formula, wherein each element of the strategy matrix represents a trading strategy, wherein the strategy matrix is defined by a first axis associated with a rise in stock price and a second axis associated with a decline in stock price, and wherein the matrix comprises a set of such elements for each of a plurality of trading days,

(d) forming a normalized total capital gain for the element of the strategy matrix by multiplying the day capital gain multiplier from step (c) for each trading day within the period of analysis,

(e) repeating step (d) for all elements of the strategy matrix,

(f) finding maximum normalized total capital gain in the strategy matrix, and

(g) calculating a recommended stock sell order at the opening of a new trading day based on said formula for current day recommended order.

10. A computer-readable medium as recited in claim 9, wherein the day capital gain formula is defined as:

11. A computer-readable medium as recited in claim 9, further comprising the step of generating a graphical color display of the strategy matrix, wherein each color of the display is associated with a different magnitude of capital gain, and wherein each element of the strategy matrix is represented in the display by a different pixel having a color corresponding to the day capital gain multiplier of a strategy that is associated with that element.

12. A computer-readable medium as recited in claim 9, further comprising the step of generating a graphical color display of the strategy matrix, wherein each color of the display is associated with a different magnitude of capital gain, wherein each color of the display may be rendered in one of a plurality of brightness levels corresponding to a relative magnitude of capital gain, and wherein each element of the strategy matrix is represented in the display by a different pixel having a color corresponding to the day capital gain multiplier of a strategy that is associated with that element and a brightness corresponding to a magnitude of the day capital gain multiplier for that element as compared with all other elements in the matrix.

13. A computer-readable medium as recited in claim 9, further comprising additional sequences of instructions which, when executed by the one or more processors, cause the one or more processors to carry out the steps of:

generating a graphical color display of the strategy matrix, wherein each color of the display is associated with a different magnitude of capital gain, and wherein each element of the strategy matrix is represented in the display by a different pixel having a color corresponding to the day capital gain multiplier of a strategy that is associated with that element;

receiving user input specifying a different trading day;

refreshing the display by rendering color pixels for all elements of the strategy matrix that are associated with the different trading day;

repeating the steps of receiving and refreshing rapidly to result in generating an animation that graphically displays changes in capital gain magnitude for the stock for the period of analysis.

14. A computer-readable medium as recited in claim 9, wherein the strategy matrix comprises a first axis representing a rise in stock price and a second axis representing a decline in stock price, and wherein each axis is sub-divided into a plurality of level values, wherein each of the level values represents a recommended selling price relative to an opening stock price on a current trading day.

15. A method of generating a computer graphical display that enables fast visual evaluation of dynamics and stability of securities trading strategy matrices over a period of time and selecting one or more optimal securities trading strategies, the method comprising:

(a) creating and storing in computer memory, a strategy matrix for a specified date of evaluation;

(b) assigning a color to each element of the strategy matrix based on a transformation of the strategy matrix, resulting in creating and storing a color strategy matrix;

(c) displaying the color strategy matrix in a computer display as a plurality of color spots; and

(d) repeating steps (a) through (c) for a plurality of consecutive evaluation dates at a speed sufficient to permit visual evaluation of dynamics and stability of the color strategy matrix, wherein significant graphical movement in the computer display of particular color spots over time represent instability of strategies.

16. A method as recited in claim 15, further comprising the step of (e) receiving user input that selects an optimal strategy from within an optimal strategy region of the display.

17. A method as recited in claim 15, further comprising the step of (e) receiving user input that selects an optimal strategy from within an optimal strategy region of the display, wherein the optimal strategy region comprises a plurality of color spots in the display that become similar in color over a period of time.

18. A method as recited in claim 15, wherein areas of the computer display having a similar color represent a similar level of accumulated capital gain.

19. A computer-readable medium carrying one or more sequences of instructions for generating a computer graphical display that enables fast visual evaluation of dynamics and stability of securities trading strategy matrices over a period of time and selecting one or more optimal securities trading strategies, which instructions, when executed by one or more processors, cause the one or more processors to carry out the steps of:

(a) creating and storing in computer memory, a strategy matrix for a specified date of evaluation;

(b) assigning a color to each element of the strategy matrix based on a transformation of the strategy matrix, resulting in creating and storing a color strategy matrix;

(c) displaying the color strategy matrix in a computer display as a plurality of color spots; and

(d) repeating steps (a) through (c) for a plurality of consecutive evaluation dates at a speed sufficient to permit visual evaluation of dynamics and stability of the color strategy matrix, wherein significant graphical movement in the computer display of particular color spots over time represent instability of strategies.

20. A computer-readable medium as recited in claim 19, further comprising additional sequences of instructions which, when executed by the one or more processors, cause the one or more processors to carry out the step of (e) receiving user input that selects an optimal strategy from within an optimal strategy region of the display.

21. A computer-readable medium as recited in claim 19, further comprising additional sequences of instructions which, when executed by the one or more processors, cause the one or more processors to carry out the step of (e) receiving user input that selects an optimal strategy from within an optimal strategy region of the display, wherein the optimal strategy region comprises a plurality of color spots in the display that become similar in color over a period of time.

22. A computer-readable medium as recited in claim 19, wherein areas of the computer display having a similar color represent a similar level of accumulated capital gain.