Novice, uninformed, and uneducated investors purchase stocks. They look at metrics such as the stock’s price and how it has moved this past week. Then, based on those patterns, they make a guess on how they expect the stock to move next week.
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This is a decent strategy IF AND ONLY IF you are trading for the short-term. And even then, if you’re just using the stock’s price to inform your decisions, when the price moves against your prediction, you have no real rationale on why. Your next decision: holding the stock until calmer waters or cutting your losses early, might as well be a coin flip.
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Profitable traders, especially algorithmic traders, do not purchase stocks. They purchase shares of a company. There is a subtle difference. The uninformed investor purchasing stocks is looking at metrics for the stock’s price, such as its market cap, its simple moving average, and its volume. The smart investor and the algorithmic trader, purchase shares of a company. They look at the company’s revenue, how much their revenue has grown, profitability metrics, and other facts that determines whether the business has a solid foundation and whether it’s likely to grow (or shrink) in the near future.
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In order to become a smart investor, you need to learn to interpret financial statements and use them as input for your investment decisions. Thankfully, thanks to the advent of Large Language Models (LLMs), this is extraordinarily easy, and I will show you how to do so in less than 5 minutes. No exaggeration.
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The rest of this article will use the AI-Powered investing platform, NexusTrade. NexusTrade streamlines the process of doing financial research by allowing users to interact with an AI-Powered Chat Assistant, named Aurora. Aurora can test different trading algorithms, answer questions about algorithmic trading, and most importantly, perform detailed financial analysis.
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Analyzing a single company’s financials
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I will start by analyzing Nvidia’s Q3 2023 earnings. Nvidia has been on a monstrous rampage recently, standing tall at $1.35 trillion ($535/share) as of Jan 11th. Does Nvidia’s last earnings report has insights on why this is the case?
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