How IDT Software Works

broker dealer, advisor, money management

Investment Decision Technology

is a cutting-edge collection of algorithms that can be considered the beginning stages of artificial intelligence. There have been many naysayers that believe that no technology can manage investment portfolios. With what we understand about the algorithms that hedge funds and other large institutions use, we can understand why someone would come to the conclusion that algorithms do not work. This is because these money managers use the same pool of investments and the same algorithm. Therefore, when one institution gets a sell or buy signal, all of them get a sell or buy signal. This, in many instances, is what makes the markets have major market swings. IDT Software has taken a different approach.

 Each investment advisory firm using the IDT Software will have a unique pool of investments, completely different from anyone else’s. When an advisor receives a buy or sell signal, it does not mean that other advisors are receiving the same buy and sell signal at the same time. Therefore, one advisor that receives a sell signal for a particular investment asset will have few, if any, competing advisors receiving that same signal. Thus, the risk of having major losses due to not being able to sell out at an appropriate level is greatly reduced. The opportunity to buy that investment at an appropriate level should not be lost due to other advisors using IDT software.

The breakdown of how the investment decision-making technology algorithms work is very complicated. The short version of how the IDT Decision-Making program works is as follows:

  • As the Investment Advisor your most important role in this process is the selection of the assets for the investment pool you want the investment decision-making technology algorithms to use. The old adage – garbage in, garbage out – applies here. If your objective in a growth portfolio is to beat the performance of underlying benchmark, you must provide the algorithms assets to use other than money markets. Each asset you select should be in the top quartile of its peers in performance. We recommend you select assets filling the asset category list provided by MorningStar and choosing as many sector assets as you desire.

  • Determine how many open positions you normally would hold in a portfolio. Most advisors use between five and ten but you can use more if you want. The entire investment pool should consist of between five and ten investments for every open position in the portfolio. You would send us the symbols by email.

  • The more open positions allowed in each portfolio will produce more transactions over time. On average, with a ten-position limit, there will be one transaction per month per portfolio. Using the IDT program, you will normally spend around thirty minutes per day managing your clients’ portfolios while eliminating the time needed performing investment and market research.

  • We will run a three-year performance and benchmark back-test for up to five portfolios. You will receive an email with the results. 

  • When you subscribe to the service we will build out up to twenty portfolios which is our basic package.

  • The five algorithms that the IDT program uses will begin to run nightly after downloading the closing price and other asset data for them to use in making the investment selection and sell decisions.

  • The ranking algorithm will rank all of the investments in the pool from best to worst based on the performance of three time periods, moving average, volatility, weightings for each and some proprietary tweaking factors for each portfolio.

  • If there is a position to be filled in a portfolio, the selection algorithm will choose the best investment from the ranking list. However, it will kick out any investment that is classified as violations, such as category limits met, overbought, performance, volatility or moving average violation. This algorithm also takes into consideration whether the market is overbought or oversold. Just like in the individual investment selection process, we don’t want to buy into an overbought market or sell out in oversold market. We want to buy low and sell high. This algorithm also protects the performance of a portfolio in a bear market yet avoids getting whipsawed in short-term market swings by following the algorithm rules without the human emotions of fear and greed that normally hindesr the invest management process.

  • The profit-taking algorithm protects the profits of an investment that may have reached its peak. For instance, if an investment has become overbought based on its RSI level and has turned down and reached a set RSI level, this algorithm will produce a sell signal. The reason an investment is being sold will be displayed in your daily performance report.

  • The sell algorithm determines an outright sale. A stop loss point, moving average or performance violation may have been reached. IDT creates its own volatility calculations and our stop loss points are determined by this calculation. It’s not a standard guess.

  • The replacement algorithm kicks in when an investment position is not performing as well as another investment asset in the pool. This algorithm will not only determine the selling asset but also the investment asset in the pool to be purchased. Again, all the selling reasons will be shown in your daily position report.

  • All the algorithms operate using the reasoning rules that we share with our active clients as they occur. The objective of sharing these reasoning rules with you is so that you can explain to your clients why and what the algorithms are doing.

The algorithms used by the investment decision-making technology program are successful at producing investment returns equal to or exceeding the underlying benchmarks of the portfolio for several reasons.

  • It does not try to predict the future

  • It does not rely on past performance

  • It makes its decisions, without emotions, based on what is happening in the present relating to each investment and the overall markets

  • There are pre-determined investment rules that dictate, without emotions, what and when to buy along with what and when to sell

  • The only thing that is lacking to produce the results needed for your clients is your list of quality investment assets – mutual funds, stocks and/or ETF’s

All you need to get started with your back-testing is sending in your list of symbols to   


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