Home Featured Story Blending Human and Artificial Intelligence to Navigate Markets
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Blending Human and Artificial Intelligence to Navigate Markets

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Dr. Alexei “Alex” Bogdan, Founder of Toronto-based Quantitative Alpha Trading, talks with the Opportunist’s Managing Editor Leslie Stone about his company’s proprietary securities trading systems.

For more than a decade, Quantitative Alpha Trading or QAT (formerly known as RTN Stealth Technologies Inc.) has been researching, developing and maintaining proprietary algorithmic securities trading systems that operate across numerous financial markets. Relying on behavioral science patterns, the Company’s proprietary systems use a linked series of computer programs to analyze securities market data in real-time and directly execute buy or sell orders over the electronic securities exchanges while monitoring the status of every trade within a given portfolio—without human intervention.

Dr. Alex Bogdan, founder, president, Chief Technology Officer and director is the lead scientist and developer behind the Company’s Stealth© software. He holds a PhD in artificial intelligence and cybernetics, a master’s degree in power electronics and a bachelor’s degree in mathematical psychology.

Opportunist: Your background differs from the other principals of the Company. Please tell us about it.

Dr. Bogdan: Well, I’m not from the financial industry. [Laughs] I was involved in many scientific projects in Europe, Canada and the United States and my previous experience lies in different areas of telemetric work and building cockpits for different vehicles. I have written more than 50 international patents on various devices and methods, some of which have been successfully implemented by private and public companies around the world.

Opportunist: What led you to found QAT?

Dr. Bogdan: I became interested in the mathematical psychology aspects of trading in the late-1990s and I developed a system, mostly for entertainment purposes, based on my research in mathematical psychology—the science of mathematical modeling of perceptual processes. In 2000 I formed Market Guidance Systems, which was later acquired by QAT. I’ve been at this for the past 16 years.

Opportunist: What exactly is Quantitative Alpha Trading?

Dr. Bogdan: I’m a scientist, so I must show some restraint or I could spill the beans and then everyone else will jump on the bandwagon. [Laughs] In brief terms, it is based on principles that I have been developing over the years—after lots of research and lots of models—with regard to herding behavior of massive groups of people.

Opportunist: What specific groups of people do you target?

Dr. Bogdan: We are obviously interested in the behavior of people who trade securities. There are numerous stable psychological patterns that could be observed in people who buy and sell futures, stocks, currencies and other securities. Any crowd of likeminded people is surprisingly synchronized.

Opportunist: Are their movements really predictable?

Dr. Bogdan: Yes, all the systems of the world experience this spontaneous synchronization. This phenomenon exists and persists in large colonies of people. We learned how to recognize those behavior patterns and we implemented computer models based on those behaviors in order to capitalize on them. We believe this gives us an edge.

Opportunist: Please tell us about the software programs that you have developed.

Dr. Bogdan: The Company has three major types of software—not just one—that should be clear. We are currently at the crunch stage with implementing the gray box, or Stealth System, and trying to launch our black box systems that would be completely automatic and would not require traders to operate them.

What our software does is sense—by means of reading the electronic books of the markets—the built-up pressure between buying and selling activity and then filters that data to extract the sentiment of a trading crowd toward a particular security.

Opportunist: That sounds like something right out of a Star Trek episode. Does it actually make buying decisions?

Dr. Bogdan: [Laughs] No. The software itself does not make buying and selling decisions. It is the intellectual duty of a trader to be the decision maker. What the software does is allow the trader to see hard-to-extract or invisible information. I equate it with night-vision goggles or a stock market GPS that actually tells you what the trading crowds are thinking and what they intend to do—what they will commit to and what orders they are placing in the book. If you’re sitting with a dozen or more people at a poker game, for example, you can win the game if you know your opponents well. This software extracts this information, which isn’t available anywhere else. It is sentiment-based software that can present what people rather than the securities themselves are doing.

Opportunist: What is involved in researching, developing and maintaining proprietary algorithmic securities trading systems?

Dr. Bogdan: Algorithmic trading assumes an algorithm that governs the decision-making process. That isn’t exactly what we do. We have a system that enables an operator to make the right decisions. It creates, out of existing data flow, something that no one else in the trading environment can see.

Opportunist: Who is your end-user?

Dr. Bogdan: Successful traders with proven track records. The software is used internally only and not available to the general public. There are about 10 traders currently active with the system that trade limited amount of capital and we obviously will look to grow that capital aggressively as the months pass. We believe it has potential for much larger operation and our hope is to have millions of dollars traded through many world markets with this system. We will be executing joint ventures with multiple organizations as well as developing investment funds to grow our company.

Opportunist: What types of licensing agreements do you have?

Dr. Bogdan: The details of our agreements are confidential but our partners are groups of investors or hedge funds whom we’ve identified and who are known quantities in the industry that we feel are going to benefit from our technology.

Opportunist: Who is your competition?

Dr. Bogdan: [Laughs] Nobody believes me, but we don’t really have any competition because nobody does what we do. The algorithmic trading world, on the other hand, has fierce competition. There are two big schools of thought: one is technical and it believes in chart patterns—a million black boxes trying to explore chart patterns. The second is traditional and involves researching the company and the industry. For example, it uses algorithms to analyze whether there’s going to be a drought in Florida that will impact the price of orange juice. This is outside the scope of our company. I don’t really see any competition.

On the battlefield, for example, soldiers get night goggles to enhance their visibility. Those goggles, however, do not dictate what the soldier does. That is a very important distinction. QAT is far reaching and the only system I know about that is truly security independent. Every other company is forced to constantly update their algorithms. Our ways of extracting information hasn’t changed for the past 10 years. The market can go from bullish to crisis and everywhere in between and yet nothing has changed. The system extracts the information as reliably as it did 10 years ago. It’s similar to driving a car or riding a bicycle; you kind of stop thinking about it. We are striving to make our trading system become part of the trader’s thought process—a seamless symbiosis between the trader and the computer patterns that we generate. No one has achieved this before.

Opportunist: What is your most memorable experience in developing this company?

Dr. Bogdan: The first time an individual trader agreed to participate in a 14-month trial of our system. We didn’t know what would happen, but we were pleasantly surprised when the result turned out to be much better than we had anticipated. The trader was following our system and the actual success rate was unbelievably high—more than 97%. That was one of the cornerstones of our development. It proved that we could deliver because it produced a practical result.

Opportunist: Tell us about a typical day in your line of work.

Dr. Bogdan: We have been in R&D for a long time. We experiment with actual markets in the morning, and then we go back and do our algorithms and begin to assess and develop new markets. The R&D never stops. New theories need to be proved. I have a wonderful group of young scientists and developers that I hand picked over the years, and we have an enjoyable time creating every day. If an idea hits me in the middle of the night, you might find me sitting at my computer at 2 a.m.—I get really bored at dinners and gatherings—my work is much more interesting to me. [Laughs]

Opportunist: What do you find most rewarding about your work?

Dr. Bogdan: It’s incredible to see this baby—after 15 years of development—actually producing results. Every day is fantastic. I think we are right where we need to be—we don’t need many changes; we have reached critical mass already. I was in New York City recently, to view the system in motion for the first time and get feedback. Seeing people coming in and getting curious and asking what we were doing and seeing their skepticism convert into excitement was priceless.

Quantitative Alpha Trading (QAT)
The Company trades on CNSX under the symbol QAT and in the United States on the OTCQB under the symbol RTNSF.

Visit QAT Online:
http://quantitativealphatrading.com

Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in the Orlando area.

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