Frequently Asked Questions: The AI Super Portfolio

What is The AI Super Portfolio?

The AI Super Portfolio is an automated, rotating, five-position portfolio.

The trades are picked by Predictive Alpha, TradeSmith’s proprietary artificial intelligence-powered trading algorithm.

The Predictive Alpha algorithm recommends trades based on rigorous screening, including the highest historical directional accuracy rate and the highest target accuracy rate. This means how likely a stock is to trend in the right direction, and how often a stock has hit its Projected Target by its Prime Projection Date.

What is the “Projected Target” and “Prime Projection Date”? 

The Prime Projection Date refers to the projected target date associated with the most reliable or optimal Predictive Alpha projection for a stock. It marks the date when the model expects the stock to reach its most trustworthy forecasted price move within the available horizons. This projection is considered the best estimate among multiple timeframes. 

The Projected Target is the predicted adjusted stock price on its Prime Projection Date. It shows where the model expects the stock price to be at that time, helping investors understand potential price moves. This target includes adjustments for splits and dividends for accuracy.

Where can I find the model portfolio?

You can access the model portfolio at any time through TradeSmith Finance. Click this link to log in.

After you are logged in, select Invest from the top navigation bar. From there, select Model Portfolios. Then, from the drop-down menu on the left, select The AI Super Portfolio.

Is there a buy-up-to price for the stocks in the model portfolio?

At the time this Frequently Asked Questions page was written, there were no buy-up-to prices included in the model portfolio stock recommendations.

However, in November, “buy between” prices will be added. It will be a range from the lowest you should pay for a recommended stock in the model portfolio to the highest you should pay it.

The low end of the “buy between” range will prevent you from trying to “catch a falling knife.” Testing shows that buying a stock while it’s declining leads to losses.

The high end of the “buy between” range will prevent you from chasing a stock recommendation and overpaying for it.

Should I use a limit order or a market order?

Whenever you open or close a position, we recommend using limit orders. A limit price between the bid and ask is often filled quickly. When using this order type to sell, you must be sure the order is executed. That may require you to adjust the price lower if the order isn't filled within 15 minutes.

What should my stop-loss order be for a stock in the model portfolio?

We do not have stop-losses built into the model. When it was tested using stop-loss orders, it hurt returns. This is because stop-losses are more beneficial for long-term investors – not short-term traders.

Should I sell the stock when it hits the Projected Target even if it’s before the Prime Projection Date?

In the testing phase, we tried selling when the Projected Target was hit and selling when the Prime Projection Date was hit. The problem with selling at the Projected Target is that, while you will increase your win rate, you will also risk giving up the bigger winners.

There were significant winners in the backtest, and many of the winners were larger than the Projected Target. So, by selling at the Projected Target, you don't get the kind of returns we saw in the backtest.

Why did the Projected Target go away for one of the stocks in the model portfolio?

The Predictive Alpha reading on a stock went away because of the volatility in the stock. That means that the model cannot make a projection going forward. But the prior projections are still tracked, and we did find accuracy there. It is out of an abundance of caution that the readings are turned off amid volatility. This does not change our instructions, and we will continue to hold to the Prime Projection Date.