Advanced trading software: technical analysis and neural networks

You might know that smoothing historical data improves a neural net's ability to forecast, but how smooth should the data be? The flow chart shows six stages of trading system development. Making money with sophisticated technology is a dual-edged sword. To keep life simple, analysts assume all traders and investors are risk averse, rational and react in similar fashion. Apply WAV to the above indicators, in order to compress the most recent L values of each indicator into a much smaller number of values.

50# Jurik Scalp Net is based on the jurik filter, jurik ttm ssa bars and jurik MACD. Jurik Scalp Net Trading System - Forex Strategies - Forex Resources - Forex Trading-free forex trading signals and FX Forecast.

Empowering wise traders

Set the Take Profit value to 60 points or higher. At the moment when the trading position is opened, install a pending reversal order. It can minimize the risk of possible losses working with a single transaction. The opening price should be equal to the Stop Loss indicator of the initial operation.

When the Stop Loss is 30, the Take Profit should be at the level of 70 or more. If you notice that the profit still accumulates, then cancel the pending order, or set the Stop Loss of the 1st transaction at a level of 0.

If you receive a benefit at the levels from 30 to 49, then move the Stop Loss of the very first deal 5 points higher. If the profit exceeded 50 points, the Stop Loss level should be increased by 10 points, and so on. The most significant advantage of the JMA is that the work of the tool is smoothed, which allows you to analyze the situation on the market quickly.

The program fixes all the price changes in time, so it's often used by traders, who consider the high accuracy of the trading signals quite important. Most other indicators such as Kaufman, Kalman, Savitsky, etc.

The JMA indicator reduces the possibility of moving through the price range at the stage of the trend reversal. Unlike the other indicators, the JMA will never give false signals when the market turns sharply. All the price changes are tracked quickly and on time.

Working with the Jurik's Moving Average program, pay attention to the following point: The situation on the Forex can change anytime. As you can see, it's easy to cooperate with the JMA indicator. Download the program and start earning right now. Follow the instructions, and you will reach the success! When all models are in strong agreement, increase your risk. When they are in strong disagreement, lower your risk. Consider how many variables, constants and lines of code you are tweaking optimizing.

Each one is a degree of freedom you are playing with. When backtesting, use sufficient market data for the system to create trades for each degree of freedom. Be mindful about optimizing trading systems. Undisciplined and excessive conjuring of code may lead to over-optimized spaghetti logic, a nightmare to maintain. Also, too much optimization will yield great performance on your current data set, but miserable performace on future data.

A system that trades well on both historical data and future data is most desirable. During live "paper trading", keep an eye out for how quickly the system degrades. This suggests how frequently the models need to be updated. It may also suggest poor trading logic.

One example of a neural network enhanced trading system that ran well, without retraining, for many months after its development, is described in the December issue of Futures Magazine. Although the test and verification procedure used by the author was not the best, the result proved to be profitable nonetheless. You really do not need to optimize the heck out of your trading system as long as you employ good risk management. It addresses the question: Like an expert poker player, with proper money management you evaluate how much to invest and how much you are willing to lose on each gamble.

Therefore, the basic principle of money management is risk management. Opening positions with risk covered is fundamental to successful trading.

In other words, manage the risk first and profits will follow when your bet is correct. It's amazing how much this discipline can improve your system's overall profitability. Over a period of years, this technique can improve trading profits more than ten-fold! Some books on money management are listed HERE. The "Composite of Leading Economic Indicators" is valued by the Federal Reserve and long term investors for its forecast potential.

In contrast, speculative investors prefer to use technical and fundamental indicators with short term forecast potential. The rarity of good short term leading indicators tells us that they are difficult to produce, and more importantly, because so few investors exploit them, these indicators can yield a significant trading advantage. But why are they so rare? What's so difficult about creating a short term leading indicator?

The reason for their rarity is due, in part, to the nature of markets. In the past, when trading was not dominated by computers, most financial analysts used macro and micro economic theory as well as classical "linear" modeling techniques. Traditional market models, based on linear theory and techniques and their simplifying assumptions, are making forecasts increasingly inaccurate each year.

Wall Street analysts have consistently missed every major turning point in the market for the past 30 years. For example, six months before the recession, 34 out of 40 economists agreed "the economy will probably avoid a recession".

Also, just two weeks before the huge bull market in , the consensus of these 40 economists was: Traders and investors using systems based on classical analysis will also suffer serious losses when market conditions change too quickly for their models to "comprehend". Jurik Research believes the problems with traditional market models stem from their assumptions, which I divide into three categories Linear models work best when their input variables are independent not correlated with each other.

Highly correlated input variables can lead to models that appear to work well on historical data, but which will fail miserably on new data. Such interdependencies do exist e. Today the market moves faster and more chaotically , exhibiting disjointed, nonlinear relationships between market forces. To keep life simple, analysts assume all traders and investors are risk averse, rational and react in similar fashion.

In reality, floor traders, short and long term traders, fund managers, hedgers, program traders and market makers all use different levels of risk and react in different time frames.

Clearly, we need a new family of models that can simulate nonlinear relations and players thinking in different timeframes. Consequently, efforts to find and exploit profitable niches in the markets are foregoing classical techniques for more powerful trading methods.

New tools using artificial intelligence methods are increasing in popularity. These tools include neural networks and genetic algorithms. Now that easy-to-use versions of both paradigms are currently available as add-ins to Microsoft Excel, the public is quickly catching on: A neural network or NN is composed of a large number of highly interconnected processing elements neurons working in unison to solve specific problems.

Each element executes a mathematical formula, whose coefficients are "learned" when given examples of how the NN should respond to various data sets. Applications include data pattern recognition or classification.

During a "training" session, the NN produces a collection of simple nonlinear mathematical functions that mutually feed numerical values to each other in a way that vaguely resembles neural brain cell activity. The interaction between neurons can become so complex that that knowledge of the mathematical formulas offers little to no insight into the model's overall "logic".

Consequently, as long as the neural network performs well, its user rarely cares to know what exact equations are inside. Be careful not to confuse neural networks NN with another artificial intelligence paradigm called expert systems ES. ES programs are designed to mimic rational thinking as described by experts. However, if the expert cannot express his logic in a way that reliably yields correct decisions, the ES paradigm cannot be effectively employed. In contrast, a NN is not concerned with emulating human logic.

A NN simply tries to map numerical input to output data. The mistaken belief that NN and ES paradigms are similar inevitably leads to the incorrect argument that if ES models perform poorly, then so will NN models. Fortunately, NN models are performing well in the real world. In the commercial world neural networks are being used to NNs must be coupled with traditional technical analysis, and best results come from experienced traders. That's because they understand which market indicators are more significant and also how to best interpret them.

The flow chart shows six stages of trading system development. In this stage, neural nets are trained to model some aspect of the market, to classify either current or future market conditions, thereby telling the investor when to get in or out of the market. When forecasting future conditions, they are technically a "leading indicator".

There are many neural net packages available commercially. Many interact with the Microsoft Excel environment. Because our standards of integrity are very high, at the risk of losing a sale, we feel compelled to mention the following.

We do not imply that developing a neural network is an easy one-night stand. It will take time, and not everyone has the time to do so. Nor is a neural net by itself a trading system. Proper system development still requires the usual human effort, including: Details on issues and considerations when getting started is provided in this report , submitted to us by William Arnold, a contributing author to The Journal of Intelligent Technologies. Lastly, questions arise as to how much a trader should trust a NN model.

It will be difficult to trust your computer's decision to buy when fear in your mind cries out "Sell! After all, the whole purpose of building an artificially intelligent system is to avoid the same trades as the crowd, who on average, loses money in the market. One money management firm worked intensively with neural networks since They use neural nets, one for each stock they trade. They use both neural networks and genetic algorithms to separately predict the behavior of individual stocks.

Although recommendations from both "experts" substantially narrow their selection, they are further refined with the aid of portfolio analysis, in an attempt to limit overexposure to any one stock or sector.

Their research has paid off well as they were, at one point, managing a half billion dollars. Here are some articles on neural net for financial applications you can probably find in a library: In contrast to standard linear regression models, NNs perform nonlinear regression modeling, which is orders of magnitude more flexible and powerful.

When a user wisely decides on a NN's task and feeds it market data needed to perform that task, the model has potential to perform well because it Making money with sophisticated technology is a dual-edged sword.

Without careful data preparation, you can easily produce useless junk. The first mistake made by novices using neural networks, is they fail to search for the most relevent data. A few top notch indicators will deliver better results than a few hundred irrelevant ones. The second common mistake is to think that feeding a neural net indicators will deliver better results than feeding it only ten. But large numbers of inputs require a large model which is difficult to train and maintain.

Reducing data to its most compact form and thereby reducing the NN model to its most compact form greatly improves chances of success.

Two critical ways to compress data are sparse historical sampling temporal compression and redundancy reduction spatial compression. Many market indicators are redundant because they reflect the same market forces at work, so eliminating redundancy is purely advantageous. As for sparse historical sampling, it is important to find representative values for past points in time, but done in such a way so as not to let important price patterns be skipped.

Jurik's WAV performs sparse historical sampling temporal compression. The result is a new generation of technical analysis tools clearly superior to classical indicators. Tools for superior technical analysis. Tools for creating leading indicators.

Historical and live data sources. Books, audio tape, and tutorials. I checked the results and was excited to find I had 14 out of 15 winners! Jurik tools are great to use. When lag is removed and clarity restored, a new world of possibilities emerge. Jurik's analytical tools are fast, clear and smooth. You get better timing, better accuracy and better signals.

After reviewing the tools listed below, we recommend you If you had ever tried to smooth a noisy signal, you probably learned there is no free lunch: Many systems use price momentum as an indicator. However, up to now, momentum charts were exceedingly jittery, triggering bad trades.

Dominant cycle analysis is a popular way to measure the strength of a trend, but it has obvious flaws. For example, what if no cycle exists in the data? The classic RSI indicator is both noisy and laggy.

Additional Information

Jurik's Moving Average (JMA) The Forex trading is risky enough, so professional traders use various tools to analyze the situation on the market. a trading system with profitable expectation, sound money management principles, the psychological fortitude to trade consistently, and; succeed in making an effective trading system. Jurik tools are compatible with many software products. Our satisfied customers agree! Entry Short: When the Jurick STC is red and Breaks down Overbought levev. No Entry if the price is out the Lower band. Exit Position: For buy if the Price is above EMA exit when Jurik STC is red, if the price is below EMA exit at midlle band BB.