Generate an Optimal Signal Wizard: Signal Parameters
Modify Field Dialog: Signal Parameters
This dialog appears in several forms. The Generate an Optimal Signal Wizard allows you to generate an entry/exit signal by analyzing the price of the commodity a given number of days into the future for a data series or for all data series in a portfolio or group. The Modify Field Dialog allows you to modify the properties of a previously created field. This page allows you to select the parameters to use when generating this entry/exit signal.
This type of field is typically used as a desired output for predictions. It can also be useful for displaying key trading points in charts.
Ä Note: Fields that are currently being used by the Solution Service cannot be modified.
Parameters for the Optimal Signal
To set the parameters for how the optimal signal is generated, modify the following values.
¨ Trading Style to use for simulating trades.
This value specified the trading style that should be used when generating the optimal signal. It is used primarily for investment and commission values, but is also used to determine if stops will be a factor. To create, view, or modify the styles, press the Edit Styles… button. This will display the Define Trading Styles Dialog.
Ä Note: The optimization values for the trading style are not used in the calculation of optimal signals.
Ä Note: If the current setting indicates WRONG MARKET, this field was last optimized using a market type which is not the same as the current market type of the data.
Ä Note: The Trading Style setting Types of Trades is ignored during optimal signal generation. In other words, optimal signals with trading styles set to "long trades only" can still generated both long and short trades. This preserves the strength of a move in the wrong direction for predictions using the optimal signal as a desired output.
& For help with market types and the associated settings, see Understanding Market Types.
þ Override trading style settings.
This setting indicates that a custom trading style should be used for this optimal signal. To modify the trading style press the Style Settings… button to display the Modify Trading Style dialog.
Ä Note: The optimization values for the trading style are not used in the calculation of optimal signals.
þ Use original settings of…
This option appears when this field was created using trading settings which are not the same as the trading settings for the current data. Removing the check from next to this option will cause the field to be recalculated using the current settings for the data.
¨ Minimum profit per trade
This value specifies the profit requirements required for a signal to be generated. Specifically, entry signals are only generated if they will result in a trade which generates this amount of profit within the given number of bars.
Ä Note: For Futures and FOREX markets, percentage values indicate a percentage change in the value of the trade, which equates to a percentage change in the price.
Ä Note: See below for notes on this parameter.
þ Maximum drawdown before profit
This value specifies the maximum amount of drawdown from the initial investment that a trade can have. Specifically, entry signals are only generated if they will result in a trade which does not produce the maximum drawdown prior to achieving the minimum profit.
Ä Note: Checking for drawdown can be turned off completely. Optimal signals created in TradingSolutions v2.1 or earlier did not have this option, so it will be turned off.
Ä Note: For the FOREX market, this value is calculated from the initial sale price when the trade is entered. In other words, the price cannot fall by this amount after the bid/ask spread is applied to the entry price.
Ä Note: For Futures and FOREX markets, percentage values indicate a percentage change in the value of the trade, which equates to a percentage change in the price.
Ä Note: See below for notes on this parameter.
¨ Maximum number of bars to look into the future for profit
This value specifies the number of bars into the future that can be included to determine if a trade is profitable. In other words, entry signals are only generated if they will result in the given profit within this number of bars.
: Example: If you would like to analyze the next two weeks from a data series with end-of-day trading data, this value should be set to 10.
Ä Note: See below for notes on this parameter.
¨ Express profit targets as:
This value indicates whether the profit and drawdown values will be expressed as percentages or as price units. This is typically used for Futures and FOREX markets where the movement of the price is more important than the value of the price.
p Advanced Settings…
This button will display the Optimal Signal Advanced Settings Dialog where you can modify additional settings associated with the optimal signal.
Selecting Parameters for the Optimal Signal
When generating any type of optimal signal, the two most important parameters for an optimal signal are the Minimum Profit Per Trade and the Number of Bars. In general, for each bar, TradingSolutions looks ahead the specified number of samples to determine if the specified minimum profit can be reached, either by entering long or by entering short. Exits are generated if the price does not increase (or decrease) in the specified number of samples.
& For more information on how an optimal signal is calculated, see Generating an Optimal Signal.
A good general rule for setting these two parameters is that the more signals or overall profit you generate, the harder the signal may be to model. Here is a case-by-case description of how adjusting these parameters affects the generated optimal signal.
· Decreasing the Minimum Profit
Decreasing the minimum profit will increase the number of signals since less profit is required to generate a trade. This will increase the overall profit of the signal. However, the lower the value, the more likely that any noise in the price will be included in the signal. This may make the signal harder to model.
· Increasing the Minimum Profit
Increasing the minimum profit will decrease the number of signals since more profit is required to generate a trade. This will reduce the overall profit of the signal, but may make the signal easier to model since only highly profitable trades are highlighted.
· Decreasing the Number of Bars
Decreasing the number of samples will decrease the number of signals since less time is available to reach the minimum profit. This will reduce the overall profit of the signal and concentrate more on quick price changes.
· Increasing the Number of Bars
Increasing the number of samples will increase the number of signals since more time is available to reach the minimum profit. This will increase the overall profit of the signal, but may make the signal harder to model since it increases the likelihood that the minimum profit is reached due to cycles that begin in the middle of the samples, rather than before the start.
The other parameters can also affect the predictability of the optimal signal.
· Selecting the Trading Style
Using a trading style with stops and limits may reduce the number of signals and profit. However, since stops and limits increase the complexity of the underlying rules associated with when to enter or exit, this signal may be harder to model.
· Decreasing the Maximum Drawdown
Decreasing the maximum drawdown will typically delay entry signals so that they start closer to the bottom (or top) of any cycles or trends. This results in more profitable signals, but may make the prediction harder to model if the lowest price is set by noise in the price data.
· Increasing the Maximum Drawdown
Increasing the maximum drawdown will cause entry signals to be started farther from the bottom (or top) of any cycles or trends. This results in less profitable signals, but may make it easier to predict larger cycles and trends.
What Do I Do Next?
If you are creating a new field, press the Next button to continue on to the Select Name page. If you would like to exit the Wizard without creating a new field, press the Cancel button. If you would like to create a different type of field, such as a calculation or prediction, press the Back button to return to the Create a Field Wizard: Select Type page.
If you are finished updating the properties of a previously created field, press the OK button to save your changes or select another property page. If you would like to exit from this dialog without performing any changes, press the Cancel button.
Additional Property Pages
The Modify Field Dialog has many different property pages that will be displayed as is appropriate for the type of field being modified. For information on the other property pages available, see the help for the Modify Field Dialog.
How Did I Get Here?
The Generate an Optimal Signal Wizard appears when you select to generate an optimal entry/exit signal from the Create a Field Wizard: Select Type page. It also appears when you select the Add Optimal Signal Field button from the Fields toolbar.
The Modify Field Dialog appears when you select to modify or analyze the selected field from the Modify Data Series Dialog or the Modify Portfolio/Group Dialog. It is also displayed when you select Modify Field… from the context menu for a field in a chart or spreadsheet.