Random Walk Simulation in Reinforcement Learning

Stock purchasing behaviors for large number of investors could be model after a Gaussian Normal distribution curve.

Investors are like sensors in an engineering system that collect true or false information about publicly traded companies from all available sources. These different sources of information results in the buy or sell behavior of the company stock leading to the stock price to swing up or down.

The stock price behaves like a random sampling result. The random sampling could be up or down far away from the true Mean with a certain standard deviation or volatility rate.

However, eventually with enough informed investors participating in the trading of the publicly traded company stock over many trading sessions, the Random Sampling result will match closely with the True Mean or True Value of the company.

The stock market is like a data collection truth finding machine that ultilizing thoundsands, millions or billions of trading transactions to calculate the True Value of its trading assets basing on all available past, present and future projection data.

The accuracy of the company performance information as well as the estimation method of each investor results in random swing of stock price in short term.

When there are inaccuracy information in the public about the company or investor price estimation method is bias, overly optimistic or overly persimistic then there is money making opportunities.

The Random Walk simulation model closely the behavior of sensor data in an engineering system as well as the stock market.

Drone engineer can build in dynamic throttle control system to stabalize the drone by applying throttle in the right direction to gradually compensate for the random turbulance in the air via wind pattern.

Stock market engineering trader can build automated trading system that make money in miliseconds from Random swing in the stock price beyond the True Mean 30 Days Moving Average trend line.

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