In this issue:
I. Commentary by Marge Sherald, CEO
II. We Need Your Vote for the 2013 Readers’ Choice Awards
III. An Interesting Use of the Time Flag Option in ChaosHunter
IV. New “Gee Whiz” Example Charts Available for Download
V. Office Closed November 22 and 23
VI. Our Version of a Black Friday Sale
VII. How to Stop This Newsletter
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I. Commentary by Marge Sherald, CEO
1. 2013 TASC Readers’ Choice Award
As Thanksgiving comes around another year, one of the things I’m grateful for are the loyal customers we’ve attracted over the years. When we issue an upgrade to one of our products like we did last month with ChaosHunter 3.0, I get to talk to folks when they place an order. It’s a chance to catch up, often with people I’ve known for 20 years or longer. It’s also nice to chat with brand new customers and hear how they trade and would like to use our software. Sometimes I ask them how they heard about us.
Often they tell me they have seen our ads in Technical Analysis of Stocks and Commodities magazine for years, and they mention our #1 rating in the Readers’ Choice Awards. We’ve been ranked #1 in the Artificial Intelligence Software category for the past 10 years in a row. When they buy our software, that new revenue enables us to develop better software and we all benefit. Please take a few minutes of your time and vote for us. Detailed instructions are below.
2. New products during 2012
We’ve had a productive year releasing new products. In January, we announced ChaosHunter Trader, which allows you to obtain data directly from your Interactive Brokers account in order to build ChaosHunter models. Once you have created the models you want, you can execute them in real time through your Interactive Brokers account with the ChaosHunter Trader. Later in the year we worked closely with John Ehlers to update his MESA91 indicators and with Richey Enterprises to introduce the InterChart Tools 2 indicators. Last month we released ChaosHunter 3.0, which was very well received by existing users. If you haven’t had a chance to learn about these new releases, you might want to check them out. They’re on sale until Monday, November 26. Details are below.
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II. We Need Your Vote for the 2013 Readers’ Choice Awards
The inside back cover of the November 2012 issue of Technical Analysis of Stocks & Commodities magazine announces that you can vote for the 2013 Readers’ Choice Awards. Here’s how you cast a vote:
1. Get your copy of the Stocks & Commodities magazine and visit www.Traders.com (any issue will do; it doesn’t have to be the November one). Look on the right side of the web site for the 2013 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. (If the copy comes in the name of your company, leave the last name blank and you can still vote.)
2. After you are logged in, look for the Standalone Analytical Software, $1000 and more category on page 2. Be sure to mark you ballot for NeuroShell Trader Professional (Ward Systems Group Inc.)
3. Do the same for the Artificial Intelligence Software (Expert, Neural) category on page 3. Look for NeuroShell Trader Professional (Ward Systems Group Inc.). THIS IS THE MOST IMPORTANT VOTE!
4. Also in the Artificial Intelligence Software category, we’d appreciate a second place vote for GeneHunter, the genetic algorithm optimizer that is included in NeuroShell Trader Professional.
The staff at Ward Systems Group Inc. extends a very heartfelt thanks to all of you who take the time to vote before the December 31, 2012, deadline.
The winners will be announced in the 2013 Stocks & Commodities Bonus Issue that will be mailed in late February.
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III. An Interesting Use of the Time Flag Option in ChaosHunter
Often when building intra-day trading strategies in ChaosHunter there is a desire to come up with a strategy that trades as frequently as possible and that does not carry an open position for a long time. The definition of “long time” can vary greatly. We heard from users who limit the maximum time span of an open position to as few as several 5-min bars. Other users suggest not holding a position for more than a day. One way to achieve that is by using smaller bar sizes such as 1- or 5-min and set commissions to a very low number or even to zero. In many cases this helps to increase the frequency of trades, but what do you do when you stick with the 1 hour bar size and want the model to close your positions in less than 24 hours? It can be a challenge to create a model that trades that frequently.
The solution is to use the time flag option in ChaosHunter. It allows you to set time segments (one or more) during certain hours when the trading is allowed. For other time intervals trading is disallowed. One important feature of the time flag option is that ChaosHunter automatically exits an open position when a trading segment ends.
You designate trading segments by placing in your data file an additional column called “Time Flag” filled with ones and zeroes. Mark all of the bars in a “trading is allowed” segment with the number one; mark all of the other bars with the number zero. When a ChaosHunter model holds an open position and “sees” a transition in the Time Flag column from 1 to 0, it automatically issues either a sell long or cover short signal thus closing the position and returning to neutral.
Here is an example. You trade a Forex pair on a chart with 1-min frequency and would like to unconditionally exit by midnight, but also would like to allow trading once the position is exited. To achieve that, create a time flag column in the data file that contains the number 1 on all bars from 12:01 am through 11:58 pm. The two bars at 11:59 pm and 12:00 am should contain zeros in the time flag column. Suppose your model has an open long position at 11:59 pm. ChaosHunter detects a transition from 1 to 0 on the 11:59 pm bar and issues a sell signal on that bar. The sell signal is then executed on the following 12:00 am bar and the position is closed. The next trading segment starts immediately with the 12:01 am bar and trading is allowed once again.
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IV. New “Gee Whiz” example charts available for download
We’ve updated the Gee Whiz examples on www.NeuroShell.com and now you can download the charts from www.ward.net if you own NeuroShell Trader. These charts show the kind of results that are possible and that you could see with our neural nets and genetic algorithm optimizer using just simple inputs. In every case the screen shots you see on the web site are from the “out-of-sample” time period, which is the period in time just after the neural net was trained or just after optimization took place. In other words, the system did not “see” this data when the model was being built; the backtest simulates trading that would have occurred had you built the model earlier and then traded it during the dates shown on the chart.
COST (Costco) This neural network used three different Linear Time Regression Slope indicators as the basis for the prediction of the percent change in close 1 trading days into the future from the next open for Costco.
PNRA (Panera Bread) This model used Average Crossover Above and Below for the Long and Short entry conditions, but instead of simply crossing the close we let the optimizer choose between an RSI indicator and a Volume Weighted Average.
LL (Lumber Liquidators) In this prediction for Lumber Liquidators we used the following standard indicators as inputs to a neural network: CCI, RSI, Stochastic %K, and the difference between two Exponential Averages. The net was trained to predict the percent change in open 1 bar ahead from the next open.
E-Mini (S&P 500 E-Mini) Here is a simple moving average crossover strategy we applied to one S&P E-mini contract on 5 minute bars. You can pay thousands for software that just does crossover strategies like this from other vendors. This one took less than 5 minutes to build with no previous experience with this type of strategy. We crossed our built-in adaptive moving average over a traditional moving average, and did no optimization.
Disclaimers: The Gee Whiz models might not provide good results very much longer than shown, so there is no guarantee that a model that performed well “out-of-sample” will not lose money later. It happens. Furthermore, the same inputs will not necessarily work as well with other ticker symbols and in different time periods. However, the inputs and models are not specific to one type of instrument, meaning that a stock model is just as likely to work for a futures or Forex contract as another stock. Not all of the models we build work this well, and therefore your results may vary as well.
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V. Office closed November 22 and 23
The Ward Systems Group Inc. offices will be closed on Thanksgiving Day, November 22, and Friday, November 23, to allow employees to spend some time with their families. We will reopen on Monday, November 26, at 9 am eastern time.
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VI. Our version of the Black Friday sale
We’re offering ChaosHunter, ChaosHunter Trader, and all of the Ward Systems Group add-ons for sale at a 20% discount until close of business on Monday, November 26. The add-ons include the following:
-Fuzzy Pattern Recognizer
-Adaptive Net Indicators
-Advanced Indicator Set 1
-Neural Indicators
-Adaptive TurboProp2
-Cluster Indicators
-Advanced Indicator Set 2
-Turning Points
-Fuzzy Sets
-Pattern Matcher
-Advanced Indicator Set 3
We’ll also offer MESA91 and InterChart Tools 2 at a 20% discount.
Details on each add-on are available from www.NeuroShell.com, Product Info tab, and the Add-Ons link. Scroll down a little bit farther on the Product Info tab and you can find a link for the product manuals for the Add-ons. For details on ChaosHunter and ChaosHunter Trader, visit www.ChaosHunter.com and go to the information tab. Just below that is a link for both program manuals.
To order at the discounted prices, please go to xxx link.
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VII. One way to stop this newsletter
It is really easy. Just change your E-mail address and don’t tell us.
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