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In this issue...
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Vote in the TASC Readers' Choice Awards
Technical Analysis or Stocks and Commodities (TASC) magazine is currently accepting votes for its annual Readers' Choice Awards. TradingSolutions is on the ballot in two categories, “Artificial Intelligence Software” and "Standalone Analytical Software, $500 and more." If you subscribe to TASC and enjoy working with TradingSolutions, we would appreciate your vote!
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TASC subscribers can vote online at http://technical.traders.com/Products/ballot.asp
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Hedge Fund Manager uses TradingSolutions to achieve 75% win ratio
Kevin Neville started his trading career as a prop derivatives trader for Natwest Markets, implementing various arbitrage strategies. He joined the Man Group to start a joint venture, Man Corpus hedge fund. He recently talked with us about the fund, his approach to modeling, and his use of TradingSolutions for pair trading.
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Using TradingSolutions, Mr. Neville has created pair-traded models to return consistent, impressive results for the hedge fund. In 2001 the fund returned 36% and in 2002 it returned 35%. As of 8/15/03, the year-to-date return is a little behind the pace at 12.5%, but this is still a very respectable gain given the relative low-risk of the strategy.
The Sharpe ratios of his models have ranged between 4.3 and 5.0. Another impressive feat is the 75% win ratio he achieved for this year. Although pair trading is common, the models Mr. Neville uses to time those trades are quite unique.
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More details about this interview are available in our new Customer Interview section, including more information about using TradingSolutions for pair trading, indicators he uses as inputs, and insights into choosing successful models. Read it now at: http://www.tradingsolutions.com/news/neville.html
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Indicator Development: Float Bars, Part 1
A TradingSolutions customer recently contacted us asking how to calculate the number of bars it has taken to trade a given volume. This is useful for determining how liquid a stock is in the current market. Specifically, it can be used to calculate the “Float Bars”, or the number of bars it takes for the entire tradable stock volume of a company to change hands.
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Determining How to Approach the Problem
Doing this by hand, one way to approach the problem would be to start at each bar and work backwards, adding volumes together until the total was greater than the given volume. This approach is not possible using TradingSolutions functions. However, there is another way to look at the problem which is actually easier to perform.
Instead of adding volumes working backwards, an easier way to approach this problem is to keep a running total of the traded volumes working forwards. Given this value, the current accumulated volume can be compared to previous accumulated volumes to quickly identify the number of bars needed to cover a specific volume.
Calculating a Running Total
To calculate a running total in TradingSolutions, let's create a function called “Accumulator” which takes its own current value (starting at zero) and adds the value of another field to it on each new bar.
Here are brief step-by-step instructions for how to do this. For more complete instructions on how to write functions in TradingSolutions, see the step-by-step tutorials.
- Select Define Functions... from the Processing menu.
- Select or create a function group to place this new custom function in.
- Press New... under the list of Function Definitions in the Selected Group.
- Enter a Display Name of "Accumulator" and a Short Name of "Accum" and press Next.
- Select the Add function.
- For Value 1 of the Add function, select the Input Field tab and create an input called Value, which can be a data series or constant.
- For Value 2, select the Function Definition tab and select Previous Value of Function (abbreviated as Prev).
- For Period of the Prev, select the Numeric Constant tab and insert 1.
- The formula should now read:
Add (Value, Prev ( 1 ))
- Press Next, then Finish to save this function.
We now have a function keeps a running total of any field. To keep a running total of the Volume field, simply use the Volume for the input called Value.
In the next TradingSolutions newsletter, Part 2 of this article will show how to create a function to determine the number of bars needed for the current accumulated volume to be larger than a previous accumulated volume by a specific size.
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Bull and Bear Balance Indicator
New this month in the Solution Library are the Bull and Bear Power functions introduced by Vadim Gimelfarb in his article "Bull and Bear Balance Indicator" in the October 2003 issue of Technical Analysis of Stocks and Commodities magazine (TASC).
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In his article, Mr. Gimelfarb presents calculations for the relative power associated with bulls and bears. The calculations are based on checking for a variety of “bull versus bear” conditions and returning the appropriate difference for the condition. The complete article is available in the October 2003 issue of TASC.
These functions can be downloaded from the Solution Library. They can then be imported into TradingSolutions using "Import Functions..." from the "File..." menu. The Solution Library is located at: http://www.tradingsolutions.com/downloads/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
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Neural 101 Website
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 newsletters@nd.com.
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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: newsletters@nd.com.
Have questions about TradingSolutions? Send your questions to: info@tradingsolutions.com
This issue and previous issues of this newsletter are available on the TradingSolutions web site at: http://www.tradingsolutions.com/resources/newsletter.html
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