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September 17, 2015
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by Marge Sherald
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Recent market volatility has a lot of people examining their trading systems to see if they’re up for the challenge. Last month we talked about using a neural net with inputs based on two different sized time bars and letting the optimizer select the best time bar. This month we’re going to share another method for choosing the best bars for your trading systems.
InterChart Tools21 Bars
The InterChart Tools 21 add-on for NeuroShell Trader offers several different options for choosing bar size. We created a prediction much like last month’s example, but instead of using different time bar indicators based on a single data stream such as close, we used 10 minute and 15 minute versions of the TimeBarsHLC3 indicator, which computes the average of the high, low and close of virtual higher time frame bars on a lower time frame chart. We used both indicators as inputs to a prediction on a 5 minute chart and restricted the net to only 1 input. The net chose the 10 minute version of the TimeBarsHLC3 indicator
Faster Bar Updates
The 10 minute TimeBarsHLC3 indicator doesn’t have to wait the entire 10 minutes to calculate the indicator. For our neural net example, a virtual 10 minute version of the high/low/close average updates every 5 minutes. You have the advantage of a longer term view of the data which is updated as often as the data in the base chart. A study by developer Richey Enterprises discovered that the highest and lowest values of a 10 minute bar often occur before the end of the 10 minute bar. You can trade these “early” highs and lows and send in your trades prior to traders waiting for the close of the 10 minute bar.
 Letting the optimizer choose the best TimeBars or Consolidated Bars could also be used in the Trading Strategy wizard by choosing Rule Selection Optimization on the Long and Short rules tabs.
Select Time and Price Combinations
If you don’t know which price stream to use in your calculations, InterChart Tools21 includes a TimeBars indicator that let’s you use a higher time frame virtual bar on a lower time frame chart,but also lets the optimizer choose which price stream is used in the calculations.
The TimeBars indicator computes all of the data streams described in the Display parameter (see below), but only the data stream selected in the Display parameter is graphed on the chart. If you don’t know which data stream you want to use in your Trading Strategy or Prediction, you can let the optimizer select the Display parameter. For example, if the optimization chooses 2 as the Display parameter in a Trading Strategy rule, value of the (High+Low) / 2 will be used to compute the rule. Available data streams include the following:
(1) Close
(2) (High+Low)/2
(3) (High+Low+Close)/3
(4) (Open+High+Low+Close)/4
(5) Open
(6) High
(7) Low
More to Explore
The InterChart Tools 21 add-on also offers Consolidated Bars, which compute a virtual bar which is formed from the combination of the most recent number of bars identified in the Bar Count parameter. You can optimize the number of bars that are consolidated. Unlike a moving average, there is no lag when computing Consolidated Bars. Consolidated Bars may be used on time, range, and volume bars.
Adaptive Consolidated Bars indicators also combine the information from the most recent bars on a chart, but unlike the original Consolidated Bars, Adaptive Consolidated Bars treat rising bars and falling bars independently. Adaptive Consolidated Bars may combine a different number of bars for rising prices as contrasted to the number of bars for falling prices. Since the function of a consolidated bar is to absorb noise and rising price jitter is often different from falling price jitter, the Adaptive Consolidated Bars permit an asymmetrical definition to accommodate this.
For more information on the InterChart Tools21 add-on, visit our web page NeuroShell.com.
Click here to download the chart used in this example. You must own the InterChart Tools 21 to view the indicators in the chart.
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Volume weighted average price, or VWAP, is the average value of a stock traded over a period of time. Normally the indicator is calculated over a single day in an intraday chart and is used by traders to execute a trade when volume is high in order to minimize the effect on the market.
You can easily create a VWAP indicator in NeuroShell Trader using the Indicator Wizard.
Divide: Cumulative Sum (Volume * Price) by the Cumulative Sum (Volume)
The Divide indicator belongs to the Arithmetic category and the Cumulative Sum indicator comes from the Basic category.
Make sure both Cumulative Sum indicators start with an initial value of 0 and be sure not to optimize this value. You also need to check the option “Don’t calculate indicators across day boundaries”. (This option is only available for indicators created with intraday bars.)
Since the VWAP indicator includes volume twice in the calculation, there’s a technique you can use to simplify indicators when you save them as custom indicators. If your indicators also include copies of the same parameters this tip will save optimization time.
When you click on the button to save an Indicator, the screen displays an button labeled Advanced. If you click on this button, you see the screen below which lists the parameters included in both indicators. Note that there are two indicators labeled as “Volume”, one for parameter 1 and the other for parameter 4. If you click on the one for parameter 4 and click on the drop down box for “Display as Parameter Number” and change the parameter to 1. When the indicator is displayed on the chart volume will only be listed once.
Initial value appears twice in the list, but since you always want this value to be 0 so the indicator starts fresh every day, click on the option “Hidden from user” and the parameter will not be listed when you insert the indicator on a chart and it will not be optimized.
 Click here to download the chart that includes the original version of the VWAP indicator (VWAP Basic) and the one with mapped parameters (VWAP).
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