December 2010 Newsletter – MESA 9 add-on for NeuroShell

In this issue:

I. Special NeuroShell Holiday sale for existing users

II. Commentary by Steve Ward, CEO

III. Announcing the MESA 9 add-on for NeuroShell by John Ehlers

IV. Office closure

V. One way to stop this newsletter


I. Special NeuroShell Holiday sale for existing users

If you already own the NeuroShell Trader Pro or DayTrader Pro, we will sell you a second or subsequent license for the same version at half price. That means you will be able to run NeuroShell on two or more computers simultaneously. Call or place your order online before the end of the year. If you place it online put the following in the comments section: “Please apply 50% Holiday Discount for existing users”.


II. Commentary by Steve Ward, CEO

Help us keep helping you. Once you purchase from us, we don’t ask for much else as we provide you with free help and free incremental software upgrades. Not many companies keep a staff of experienced analysts available to provide that kind of free assistance. All you need to do to keep that going is vote for us if you are a subscriber of Technical Analysis of Stocks and Commodities Magazine. If you are not a subscriber, why not subscribe now so you can vote for us, and receive the monthly articles from which we code our monthly Trader’s Tips (trading systems)?

Here’s how to vote:

1. Get a copy of the Stocks & Commodities magazine and visit Look on the left side of the web site for the 2011 Readers’ Choice Awards and click on the Vote Now! link. On the page that is displayed enter your subscriber ID from your magazine address label (look at their example to see which numbers on the label are the subscriber ID). Next enter your last name.

2. After you are logged in, look for the Artificial Intelligence Software (Expert, Neural) category on page 3. Vote for NeuroShell Trader Professional (Ward Systems Group Inc.) for first place. THIS IS THE MOST IMPORTANT VOTE!


III. Announcing the MESA 9 add-on for NeuroShell by John Ehlers

MESA Software has announced the release of the MESA9 indicator set, which designer and programmer John F. Ehlers describes as “the first major change in the MESA algorithm in over 30 years.”

MESA9 is as easy to use as any of the indicators built into NeuroShell Trader. MESA9 is sold by Ward Systems Group for $499. It is separate from, different than, and does not interfere with MESA8. In fact, if you have already purchased MESA8 for NeuroShell, the cost of MESA9 is only $249 for you.

MESA9 is a collection of dynamically tuned indicators that derive their adjustments from the high resolution Maximum Entropy Spectral Analysis (MESA) measurement of the spectral content of market data. A low lag, accurate measurement of the dominant cycle is extracted from the spectrum. The MESA9 collection of indicators are not only dynamically adjusted by the dominant cycle, but advanced Digital Signal Processing (DSP) techniques are used to produce low lag and non-causal anticipatory signals.

The premise of MESA is that market cycles are the one characteristic that can be scientifically measured. The MESA algorithm makes a high resolution estimate of the entire range of potential cycles. Experience has shown that there is typically only one tradable cycle in the market at a time. This is the “dominant cycle” that is extracted from the spectral estimate by using a center of gravity approach so that the dominant cycle is the one containing the majority of the cyclic power.

Indicators in the Mesa 9 add-on:

MESA9 Adaptive CCI, RSI and Stochastic

The MESA9 Adaptive versions of the CCI, RSI, and Stochastic indicators are to the conventional form of these indicators except that the MESA9 versions are tuned to the full MESA-measured Dominant Cycle period.

MESA9 Bandpass

The MESA9_Bandpass Indicator is a bandpass filter tuned to the MESA-measured Dominant Cycle. Its amplitude is plotted to reflect the cyclic swing of the input time series. The MESA9_Bandpass filter removes both low frequency and high frequency components from the input time series.

MESA9 BandStop

The MESA9_BandStop Indicator removes the Dominant Cycle component from the time series while retaining cyclic components that are both longer and shorter than the Dominant Cycle.

MESA9 Detrend

The MESA9_Detrend Indicator subtracts a trendline from the time series and displays the difference scaled to the plus and minus one standard deviation from that trendline. This display enables an easy estimation when a swing peak or valley is reached and therefore a higher probability of reversion to the mean.

MESA9 Dominant Cycle

This indicator displays the MESA-measured Dominant Cycle. The Dominant Cycle can be used to dynamically tune other indicators to maintain consistency with changing market conditions.

MESA9 Sine and LeadSine

MESA9 offers a solution to the lag problem by offering the MESA9_Sine and MESA9_LeadSine indicators. The market is coherent in the cycle mode, meaning that the Dominant Cycle has existed for a short while in history. It is further assumed that the dominant cycle will continue for a short time into the future. Since the dominant cycle is known, and its phase can be computed, we can advance time by advancing phase of the coherent dominant cycle. The MESA9_LeadSine Indicator is computed simply by advancing the phase of the dominant cycle by 45 degrees. This creates an indicator that produces a crossing signal 1/8th of a cycle ahead of its turning point, indicated by the MESA9_Sine Indicator. For an 16 bar cycle, the crossing occurs 2 bars ahead of the cyclic turning points – just right for making a timely trade entry.

MESA9 Smooth

MESA9_Smooth is an adaptive 2 Pole Super Smoother Filter that is tuned to a fraction of the MESA-measured Dominant Cycle. The degree of smoothing is altered by the Mult input parameter, which is the fraction of the Dominant Cycle to which the filter is tuned.

MESA9 SNR (Signal to Noise Ratio)

MESA9_SNR measures the Signal-to-Noise Ratio in the price data in decibels. “Noise” is the average daily price range (High – Low) taken over the period of the MESA-measured Dominant Cycle. This definition may not be strictly true, but it suffices as a qualifier of uncertainty of the intraday prices. For the purpose of this indicator, Signal is the peak-to-peak amplitude of the Dominant Cycle. When the wave amplitude of the Signal is twice the Noise amplitude the SNR has a value of 6 dB. This ratio is the threshold below which it is not advisable to swing trade on the basis of cycles.

MESA9 TrendLine

MESA9_TrendLine is an adaptive 2 Pole Super Smoother Filter that is tuned to a multiple of the MESA-measured Dominant Cycle, assuring that all cyclic components shorter than the Dominant Cycle will be attenuated. This results in an indication of the trend. The degree of lag produced by the MESA9_TrendLine Indicator is controlled by the Mult input parameter, which is the multiple of the Dominant Cycle to which the filter is tuned.

MESA9 TrendVigor

The MESA9_TrendVigor Indicator measures the slope of the time series across the period of the Dominant Cycle as a ratio to the peak-to-peak amplitude of the Dominant Cycle. If the ratio is greater than one, then the uptrend is swamping the Dominant Cycle and it is not advisable to use the Dominant Cycle for swing trading.

The MESA9 indicator set includes seven example charts that you can examine inside of NeuroShell Trader.


IV. Office closure.

Ward Systems Group offices will be closed Friday December 24 in order that our employees may celebrate the Christmas Holiday with their families. We will reopen December 27. We will also be closed December 31 to celebrate the New Year’s holiday.


V. One way to stop this newsletter

It is really easy. Just change your email address and don’t tell us.


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