In this issue:

I. Announcing the Cybernetic Analysis add-on

II. Setting up costs for FOREX

III. Book Explains How to Build Trading Systems

IV. eSignal 7.6 problems

V. If you email us….

VI. AI College class extended again

VII. Make sure you continue to get the news

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I. Announcing the Cybernetic Analysis add-on

John Ehlers and Ward Systems Group created the Cybernetic Analysis indicators as a companion to the indicators detailed in John’s excellent new book “Cybernetic Analysis for Stocks and Futures”, published by John Wiley & Sons; (March 19, 2004), ISBN: 0471463078. This add-on also includes more than 10 example charts.

Ehlers’ book develops and demonstrates effective new trading tools through the application of modern digital signal processing techniques. “These tools have proven in real-time use to consistently provide traders with razor-sharp buy and sell signals in virtually any market–meeting or exceeding the performance of commercial systems which cost hundreds or even thousands of dollars,” according to Ehlers.

Modernizing popular trading procedures to take advantage of the incredible computing speed and power available to today’s trader, Ehlers introduces:

. The Fisher Transform–ensure that the density function of any indicator is Gaussian, creating sharper trading signals

. The Relative Vigor Index–a responsive oscillator in which movement is normalized to the trading range of each bar

. Improved Hilbert Transform–a more responsive method to accurately measure market cycles

. The Sinewave Indicator–a non-causal filter that gives entry and exit signals 1/16 of a cycle period in advance of the turning point

. The Laguerre Transform–a new tool to address the smoothing versus lag problem more effectively and create better smoothing filters

. Super Smoothing Filters–provide more smoothing with less lag

. Simple Moving Average Computations–two new ways to compute the simple moving average with unprecedented ease

“Advances made in computer technology in the past two decades have clearly outpaced advances in trading software and practice. Cybernetic Analysis for Stocks and Futures seeks to restore the balance between computational power and user proficiency,” according to Ehlers. “Combining new indicators with tested systems for forecasting stock and futures markets with surgical precision, it will drive your systems to new levels of predictive accuracy, trading effectiveness, and overall profitability.”

NeuroShell Trader Professional and DayTrader users can further enhance Ehlers’ work by combining his indicators with the power of the NeuroShell Trader’s optimizer to produce trading systems with a winning edge.
The Cybernetic Analysis add-on is available now and costs $399 by Internet download. Although there is a help file with the add-on to assist with mechanics, the add-on is a companion to the book, and the theory and usage of the indicators are explained only in the book. You should not purchase the add-on without purchasing the book, which is currently discounted 32% to $54.37 at Amazon.com.

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II. Setting up costs for FOREX

Foreign Exchange (currency) trading has gotten so hot that we wanted to make sure that everyone knows a convenient way to enter FOREX costs:

Suppose you are trading 1 lot worth $100,000 and your margin is $1000. Suppose a pip is $10 and your broker sets you back 4 pips on every trade (often called a spread instead of a commission to make you feel better). Enter 1 contract, and make the point value $100,000. Make the margin $1000, and put an entry commission in of $40. Don’t bother with spread. That should give accurate costs. If it trades too frequently, don’t be afraid to raise commissions to penalize excess trading – it is more important to get the trading signals right than to be precise with the profit calculation.

At the current time, the only one of our three intraday vendors offering forex data is eSignal. However, don’t expect prices from eSignal to exactly match prices of your broker because there are many entities

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III. Book Explains How to Build Trading Systems

DIY (Do It Yourself) Portfolio Management by Lyle Wilkinson was written with the premise that with a little independent work, you can beat the returns of indexes and mutual fund managers. This book certainly shows you how.

We found the book to be a comprehensive summary of the steps required for building successful trading systems. The book is well written, clearly explains common trading terminology, and displays the information in a clean and simply layout. In the book Wilkinson creates a Trend Regression Portfolio Strategy and then proceeds to explain market timing, regression, back-testing, stock-picking, entries and exits, paper trading, optimization, risk, cycles, a real action plan and more, including fine tuning the model. He describes some of his favorite indicators from the NeuroShell Trader and backtests his systems in the Trader. Even if you want to build trading systems different from those in the book, this is an excellent cookbook for evaluating any trading system. It is also beautifully printed.

For more information, refer to
Wilkinson, Lyle, “DIY Portfolio Management”, Selact Publishing, Post Office Box 3182, Wailuku, HI 96793-3182, http://www.diyportfoliomanagement.com. The price is $29.99.

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IV. eSignal 7.6 problems

Our programmers have now convinced eSignal that they introduced a problem in their release 7.6 that affects certain vendors’ interfaces to eSignal (including NeuroShell’s). However, since eSignal had so many problems with multiple 7.6 releases, they have refused to correct the problem in yet another new 7.6. Unfortunately, therefore, if you had problems interfacing with eSignal 7.6, you will continue to have to use 7.5 until 7.7 is available (although they may offer a beta of 7.7 earlier if you are not afraid of betas). If you are irritated with this situation, please let eSignal know!!!

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V. If you email us…

Since we (like many others) receive a large amount of SPAM on a daily basis, it is sometimes hard to determine what is email from our users and what is junk. Many times emails from spammers and our users have blank or generic subjects like “Hi”, “Your Reply”, etc. We sometimes find ourselves deleting these as 99% of the time these messages are SPAM. So please, help us out and make the subjects of your emails something that can easily distinguish it from SPAM. Ideally it would be nice to have your subject in the following format: