TradingSolutions FAQ

Q.  I've been reading and hearing a lot lately about artificial intelligence, neural networks and genetic algorithms. I'm confused. Could you please explain the differences between them and how each work?

A. Because there have been many significant advancements lately, artificial intelligence and neural networks are making quite a few headlines - and will continue to do so as they impact more aspects of our lives. While the math and science underlying each are fairly complicated, understanding the basics and applying them in user-friendly programs such as TradingSolutions, is relatively simple. Here's an overview of each:

Artificial Intelligence
Artificial intelligence is a term used to refer to a broad category of technologies that allow a computer to simulate learning or subjective reasoning. It includes neural networks, genetic algorithms, expert systems and other approaches that you may have heard of. Each of these technologies has different strengths and weaknesses that make them good at solving particular problems.

Neural Networks
Neural networks offer some exciting prospects because they can actually learn from data to train themselves to perform more effectively. Neural networks try to model how the biological human brain works by simulating the basic functions of natural neurons. Artificial neural networks consist of layers of artificial neurons, which are then connected to each other with varying parameters that represent the strengths of these connections. The networks "learn" when they adjust these strengths to cause the overall network to improve its results.

Sound complicated? What's important to understand is that a neural network allows your computer to sort through large amounts of data and recognize and match complicated, vague or incomplete patterns. For this reason, neural networks are well suited for projecting what will most likely happen next. TradingSolutions makes it easy to utilize this benefit of neural networks without requiring you to understand the details of the work being done behind the scenes.

Genetic Algorithms 
Genetic algorithms are specialized computer programs that are able to efficiently solve a problem by intelligently searching through a large number of potential solutions for that problem. They are typically able to find good solutions to a problem much faster than traditional search methods. The idea behind genetic algorithms is to simulate the way nature uses evolution by applying the "Survival of the Fittest" principle to small sets of its potential solutions. The good solutions reproduce to form new and hopefully better solutions to the problem, while the bad solutions are removed.

Genetic algorithms can be combined with neural networks to enhance their performance by taking some of the guesswork out of choosing the best neural network parameters and inputs. They can also be used to maximize the profits of your trading signals.

Q.  I've been using technical analysis software for some time now to determine when to buy and sell my stocks and would like to find a new tool to help improve my results. How can neural networks give me an edge in predicting future movement of the stock market?

A. Neural networks can recognize otherwise hidden relationships between related financial markets and spot trends in huge amounts of data that wouldn't be apparent to visual examination or traditional technical analysis methods. Because of this, professional traders and money managers commonly use neural networks in stock market forecasting with astonishingly accurate results. TradingSolutions levels the playing field by making this remarkable technology available to all.

Q.  Could you give me an example of how I can use TradingSolutions' neural networks to determine the best time to buy and sell my technology stocks?

A. Here are a couple of examples to illustrate how you could use neural networks:

The common way to use neural networks in financial markets is to predict a specific value, such as the closing price of Microsoft stock, and base a buy and sell strategy on that predicted price. First, you download a set of data for Microsoft, such as a historical list of prices it has traded at. Then, you allow the neural network to analyze the data for relationships between the closing price and other factors, such as the prices for the preceding days. Once this is done the neural network can be used to predict future closing prices, allowing you to identify buying opportunities.

In addition to this method, TradingSolutions also has a unique feature that allows you to analyze historical data to determine when the best buying and selling opportunities would have been. TradingSolutions calls this the optimal signal. The neural networks can then be used to analyze this buy and sell information for relationships with other factors, such as the prices for preceding days. Given these relationships, the neural network can help to determine what position you should currently be in for optimal profits. The idea is that if you can model where you should have been in the market throughout history, you can predict where you should be in the market right now.

Q.  What type of information can be fed into neural networks when searching for relationships in the data?

A. Whether you are predicting the future prices of a stock or modeling the optimal signal, TradingSolutions neural networks can identify their relationships to any date-based information. This includes basic trading information (e.g., high and low prices and trading volume for each day), technical indicators (e.g., moving averages and number of days since a new high was reached), and broad market conditions (e.g., the Dow Jones Industrial Average). Whatever you think is relevant can be fed into the neural networks to improve the predictions.

Q.  I'm convinced that neural networks are the tool I need for improving my trading results. But do I need the knowledge of a mathematician or scientist to figure out how to effectively apply neural networks?

A. Not at all! While the theory behind neural networks is rather complex, the interface in TradingSolutions makes it simple for anyone to apply them to their trading. In fact, after completing the step-by-step tutorial, you'll immediately be ready to use the prediction wizards to start making more intelligent trading decisions. But you don't need to take our word for it. You can download a free copy of TradingSolutions, complete the step-by-step tutorial, and experience the power and simplicity of neural networks risk-free.

Q.  What if I am already familiar with neural networks? Does TradingSolutions prohibit me from manipulating the neural network algorithms?

A. Not at all! While TradingSolutions' prediction wizards make it easy to create predictions without having to know anything about neural networks, nothing prevents you from looking under the hood and fine-tuning the settings to your satisfaction. Advanced panels are available to allow you to directly change settings such as the number of processing elements and learning rates. You can even implement your own neural network designs using our NeuroSolutions and Custom Solution Wizard products.

Q.  Can you tell me what the potential accuracy of neural network systems is for predicting future stock market movement?

A. When testing on out-of-sample data (which means data that has not been previously used for modeling), the majority of neural network models that we trade have an accuracy rate of 60 to 85 percent. Please see our sample models at (www.tradingsolutions.com/products/sample.html) to check out the performance of some of the models we have created using TradingSolutions.

Q.  I trade a variety of financial markets. Which markets can I trade using TradingSolutions ?

A. TradingSolutions can be used on any date-based financial data (i.e., stocks, futures, options, bonds, mutual funds, etc.). This makes it compatible with data from any financial exchange, including both the U.S. and foreign markets.

Q.  How does TradingSolutions compare to other neural network software packages?

The differences are immediately apparent the first time you run TradingSolutions - professionalism, power, and ease of use. No other package makes it so easy to manage the analysis of all of the stocks you want to keep track of. Easy-to-understand wizards guide you through each task. Built-in charting and spreadsheet tools allow you to view the data without having to switch to other software. And, comprehensive helps and tutorials answer everything you want to know about the package when you need to know it.

Underneath the hood, TradingSolutions incorporates something you won't find in other packages -- time-lag recurrent neural networks. These networks were conceived as a result of years of research into the prediction of future values using historical time-based data. Furthermore, exclusive to TradingSolutions is the ability to model optimal trading signals as discussed in a previous answer. Other unique features include the ability to create committees of successful trading signals, the ability to work with the neural networks at any level of expertise, and an advanced correlation analysis wizard to assist you in selecting informative inputs for your predictions.

Q.  I'm impressed with the advanced capabilities found in TradingSolutions. But does that mean the program will cost a lot more than other neural network programs?

A. Although you may think the cost of a program with such advanced features would be out of reach for the average investor, this is not the case. Big fund managers spend tens of thousands of dollars on software to obtain the features similar to those found in TradingSolutions, but TradingSolutions is very competitively priced -- especially when you consider how quickly it could pay for itself through increased trading profits.

Q.  I'm interested in using neural networks to increase my trading profits, but I still want to use a wide range of other technical analysis tools. Does TradingSolutions offer additional tools besides neural networks?

A.   Absolutely! In fact, TradingSolutions is one of the most complete financial analysis programs available. Along with neural network and genetic algorithm technologies, it features a wide range of popular technical analysis tools. Check out TradingSolutions' extensive Features List on our website at (www.tradingsolutions.com/products/features.html).

Q.  Because neural networks are so advanced and powerful, do they require all the latest hardware to run them?

A.  As with any software program, the more advanced your system, the faster it will run. But you don't need a high-end machine to put neural networks to good use. In fact, TradingSolutions will even operate on a 486, although we recommend a 200 MHz computer or faster.

Q.  If TradingSolutions is so powerful, why are you selling the software rather than making a living using it?

A.  Actually, several members of our staff use TradingSolutions on a regular basis, and quite successfully. We in turn use our trading experiences to enhance the software, and this benefit gets passed along to you. Our specialty is creating high-quality, cutting-edge software. The fact that we can use this software to increase our own trading profits shouldn't be a reason to keep others from sharing in the rewards.