Greetings
from NeuroDimension!
The World Leader in Neural Network Software
This issue
of the TradingSolutions newsletter highlights the ability to perform long-only
trading in TradingSolutions, as well as other news and highlights from the
Solution Service.
In this issue you’ll find:
What’s New
and News?
* Newsletter Index Added to
Website
Solution
Service Recap
* Trading Long-Only Positions
Note: You are
receiving this newsletter because you requested to stay informed concerning
information about TradingSolutions from NeuroDimension. If you would like to
stop receiving these newsletters, please see the bottom of this newsletter for
removal instructions.
=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=
Trying to find more information about a particular topic in
TradingSolutions? Check out the new Newsletter Index added to the
TradingSolutions website. All of our previous TradingSolutions newsletter
topics are now listed by volume for easy reference. Plus, a special topic index
has been added to quickly find every issue that addresses individual topics.
Visit the new newsletter index today at http://www.tradingsolutions.com/resources/newsletters.html
=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=
The Solution Service is a free service that provides
daily trading signals and commentary for a select group of stocks. These models
can be used directly as part of your trading strategy or used as examples of
how to generate your own winning signals. To access it, simply press the
“Update Solution Service” button in the toolbar of either the evaluation
version or registered version of TradingSolutions v2.0.
The continuing market downturn and recent recovery attempts have
produced an interesting time for the Solution Service models. Unlike the month
of June, July and August have shown several attempts to rally that have
produced a few opportunities for the models to recover from previous losses.
Since the last newsletter at the end of June, the
NASDAQ has dropped around 12% and the S&P 500 has fallen around 10%. During
this time, about half of the Solution Service models produced profits. In fact,
the Computer Sciences model gained over 20%. The Electronic Arts model
also gained over 10%. Although a few of the models posted double-digit losses
during this time, the composite loss of the Solution Service models was less
than 3%, far less than the losses in the broader markets.
=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=
This Issue: Trading Long-Only Positions
Many TradingSolutions users trade only long positions with
TradingSolutions. In some cases, this is because their trading account cannot
be used to trade short positions, such as when they are using IRA accounts. In
other cases, they are new to swing trading and want to stick to simple buys and
sells until they are more comfortable with swing trading as a whole. Whatever
the case, there is definitely still money to be made trading only long
positions.
Defining Your Trading Style
The first thing you will need to do is define your own
“Trading Style” in TradingSolutions, which will combine the individual settings
of investment, commission, and trading type fields into one named object. Let’s
say that you typically trade $5000, pay $5 in commissions, and only are able to
make Long trades. You could wrap all of these settings into one style called
“IRA Trading Style”. Here are the steps you would perform:
1. Select “Define Trading Styles…” from the Tools menu.
2. Click the “Add New…” button.
3. Change the “Trading Style Name” to “IRA Trading Style”.
4. Change the “Types of Trades” to “Long Trades Only”.
5. Change the “Investment” to “5000”.
6. Change the “Minimum Charge Per Trade” to “5”.
7. Click the OK button to save the trading style.
Analyzing Existing Signals Using Your Trading Style
The first thing you can try is to use this new trading style
to analyze the profitability of an existing model that was designed for short
and long trading. It is important to understand that the model itself does not
change when using a different trading style within the Signal Analysis settings
-- it simply interprets the signals differently when analyzing the trades. For
a trading style that trades longs only, any “Enter Short” signal will get
interpreted as an “Exit Long” signal. Let’s look at one of the Solution Service
models:
1. If you have not yet signed up for the Solution Service,
select “Update Solution Service” from the File menu and follow the
instructions.
2. Right-click on “Computer Sciences Cp” (under the “Active
Solutions” section of the portfolio) and select “Analyze Signals…”
3. Select the “Sample Model” row and click the “Analyze…”
button.
4. Click the “Change…” button (to the right of “Signal
Analysis Settings”).
5. Change the “Analysis Trading Style” to “IRA Trading
Style”.
6. Click the “Copy Range from a Prediction…” button.
7. Leave the default of “Accuracy Testing Set Only” and
click the OK button.
8. Click the “End with Last Available Data” button.
9. Click the OK button.
You are now looking at the out-of-sample (i.e., data after
the beginning of the Accuracy Testing range) performance when trading only the
long positions of the Computer Sciences model of the Solution Service.
Analyzing on 8/12/02, the percent gain would have dropped a little in
comparison to trading both longs and shorts (from 50% down to 43%), but this
model still did well considering the stock itself dropped by 13% over this time
frame.
Creating New Models Using Your Trading Style
When creating your own models for long-only trading, there
are two different approaches you can use. One approach is to start with
existing long-short models and modify them, but analyze them for use long-only
trading as described above. This method is often the easiest to begin with
since there are many long-short trading solutions to work from, through sources
such as the Solution Service, the sample models, and other users.
A slightly more advanced approach is to start from scratch,
creating a new optimal signal based on a long-only trading style. Any new
models created based on this optimal signal will default to being optimized for
long-only trading. This is theoretically preferable to optimizing for both
types of trading and analyzing for long-only. However, users have reported
mixed results with this approach, possibly due to the long-only emphasis being
more aggressive about being long in more situations. Therefore, more
experimentation may be required to find robust models in this case.
More information about trading styles can be found in the TradingSolutions help in the chapter called “Creating and Analyzing Entry/Exit Signals” under the topic “Using Trading Styles”.
=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=
Many TradingSolutions users read Technical Analysis of
Stocks and Commodities (TASC), the Traders’ Magazine. It’s a great way to
trade smarter with detailed information on trading strategies, charting
patterns, indicators, and computerized trading methods. As a free service to
our users, we arrange for the “Traders’ Tips” section of the magazine to
include tips and techniques for implementing many of the indicators found in
the magazine in TradingSolutions.
Each time a tip is included in the magazine, we also include
the implemented functions in the Solution Library on our web site. These
functions can be imported into either the full version or the evaluation version
of TradingSolutions and are completely free. Visit the Solution Library now at:
http://www.tradingsolutions.com/download/solution.html
If you aren’t familiar with Technical Analysis of Stocks
and Commodities, we encourage you to visit their web site at: http://www.traders.com
Neural 101
is a free educational web site on trading stock and futures markets with neural
networks. It includes message areas, links, trading indicators, systems and
scans. The message areas include special forums on building trading systems,
using neural networks, and even discussing tips, tricks, and ideas for using
TradingSolutions.
NeuroDimension
encourages the use of this free resource to foster discussions between people
interested in TradingSolutions. You can visit Neural 101 at http://www.neural101.com. The
TradingSolutions message forum can be located using the “Message Forums” link
from the left-hand menu.
Have an event or product you would like to announce? Contact
us at submissions@nd.com.
=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=~=
We appreciate your feedback! Please send us your comments or
suggestions concerning this newsletter, our web site, or part of the
NeuroDimension product line. Write to us at: feedback@nd.com
Have questions about TradingSolutions? Send your questions
to: info@tradingsolutions.com
Some mail readers may display an attachment at the bottom of
this newsletter. This is typically caused when the mail reader is set to
display text only. The original, formatted version is sometimes included as an
attachment.
This issue and previous issues of this newsletter are
available on the TradingSolutions web site at: http://www.tradingsolutions.com/resources/newsletter.html
If you would prefer not to receive these newsletters or
subsequent product updates from NeuroDimension, please reply to this letter
with the subject heading changed to the word REMOVE.
Thank you again for your support of NeuroDimension products!