by Bret Rosenthal | @bretrosenthal

This is the age of the machines.

Computer algorithms dominate the investing landscape. Ninety (90) percent of all trades executed now are directed by computer algorithms. Developing an investment portfolio driven by fundamental analysis (the preferred and most successful way for decades) has never been more difficult.

The reason for such trouble can be described in one word: volatility. Computer algorithms are designed to take advantage of human emotion and execute at speeds far beyond human capability.

Can you fundamentally invest in a company with a 5-year time horizon and succeed? Of course.

But the volatility you must endure during that 5-year stretch has increased exponentially.

And the typical human brain can’t deal with the swings.

Computer Algorithms: Strategy Focus

Our goal is to employ our proprietary Index (S&P500 (SPY), NASD100 (QQQ) & Russell Small Cap (IWM)) and Group ETF algorithms, designed over the last 5-years and vigorously tested over the last 10-years, to aid the human brain by dramatically reducing volatility.

Our computer algorithms are individually calibrated to capture major moves higher in the markets while limiting exposure during major declines.

The computer algorithms’ core function: Assessing the optimal time for capital to be invested where the potential for immediate and sustainable profitability is greatest. This potential is otherwise known as “the best risk vs. reward scenario.”

Investing Risk

Whenever capital is deployed risk is taken. In a strategy where Stop Loss rules are followed one can safely say the risks are always going to be relatively equal.

The key then is to determine when reward possibilities are at their highest and expose capital only at those optimal times. This process will result in an equity curve that stair-steps higher at a 45-degree angle. This means our capital will be growing at a steady clip while dramatically reducing the drawdowns. This creates an experience much more suited to the human brain than the wild volatility of this algorithm driven world.

We have created an algorithmic platform and an investing process to help navigate the seas during a time of ever increasing storms.

Algorithmic Investing Platform

We call our computer algorithms platform Compass Rose. 

This Captain’s Log will be dedicated to chronicling the navigation of our investing course throughout the year. Whenever Compass Rose suggests a new bearing we will reveal the course direction here for our crew (clients / partners).


Crew members may find Compass Rose course bearings to be beneficial when managing portfolios comprised of individual stocks. Three (3) out of four (4) stocks (75%) follow the direction of the big indices and the groups in which they are aligned. Initiating an investment during an optimal risk vs. reward time as determined by Compass Rose should improve the overall decision making on a traditional individual equity portfolio.

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The Rosenthal Capital Management blog explores how algorithmic trading strategies help individual investors get better returns.

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