Using Trading Styles
TradingSolutions uses a concept called "Trading Styles" to help you to analyze and optimize your entry/exit signals based on the way you trade.
Understanding Trading Styles
Trading styles are named collections of settings that you use to indicate how you like to trade. Here is an overview of the types of values they include.
· Broker Settings
These values indicate the settings defined by your broker for this type of trading.
Ä Note: Additional broker settings may be required to be specified for individual futures and FOREX data series.
· Position Types and Sizing
These values indicate the amount money you have at risk, as well as whether you want to trade long, short, or both.
· Entry/Exit Strategy Settings
These values indicate any limits or stops you use as part of your trading.
· Signal Optimization Values
These values indicate the factors to consider when evaluating optimized entry/exit signals. In addition to optimizing the overall profit, statistics such as the volatility, length, and frequency can be optimized.
· Analysis Fields
These settings allow you to specify alternate fields to use for calculating values such as the price shares are trading at.
Multiple trading styles can be used to try new ideas. For example, if you normally perform simple long trades and want to see how short trades or stop orders might affect your profitability, simply create a new trading style and use it for your calculations.
Creating Trading Styles
New trading styles can be created by selecting Define Trading Styles… from the Tools menu. This will display the Define Trading Styles Dialog, where you can add new trading styles, copy or modify existing ones, or delete ones you no longer need.
Using Trading Styles
Trading styles are used in several locations in TradingSolutions. Here is a brief listing of where they are used.
· Signal Analysis
Trading styles are primarily used during the automatic analysis of each entry/exit signal. A default Trading style is available for the entire portfolio. In addition, defaults can be set for each data series, as well as being selected for each entry/exit signal. These trading styles can be set from the Modify Options Dialog: Signal Analysis page and the Signal Analysis Options Dialog.
· Signal Analysis Fields
Signal analysis fields use trading styles in the same way as automatic signal analysis. The Trading style for signal analysis fields can be modified from the Modify Field Dialog: Trading Parameters page.
· Optimal Signal Fields
Optimal signal fields use trading styles to determine the conditions under which the signal will be traded. The trading style for optimal signal fields can be modified from the Modify Field Dialog: Signal Parameters page.
Ä Note: Optimal signals are based on profit only. They do not use the evaluation settings associated with the selected trading style.
· Optimization of Entry/Exit Systems and Committees
Entry/exit system fields and committee fields use trading styles to rate the fitness of each potential solution during optimization. The trading style for optimizing these types of fields can be modified from the Signal Optimization Settings Dialog.
· Optimization of Predicted Signals
Models and predictions of signals use trading styles to rate the fitness of each potential solution, both when optimizing the neural network settings and when optimizing the postprocessing of predicted signals. The trading style for optimizing predicted fields can be modified from the Signal Postprocessing Settings Dialog.
Ä Note: It is recommended that the same trading style be used for optimal signal, the optimization of the prediction of the optimal signal, and the analysis of those signals. This will typically improve the profitability of the modeled signal and the accuracy of the analyses.
& For more help with entry/exit signals, see Creating and Analyzing Entry/Exit Signals.
Overriding Trading Styles
Trading styles associated with the creation or analysis of specific fields can be overridden with field-specific values. To override a trading style, select the Override Base Trading Style option next to the selection of the trading style.
Overriding a trading style gives you the ability to try new settings without having to create and manage new trading styles for each new setting combination. It also gives you the ability to optimize the trading styles certain types of signal fields.
Optimizing Trading Styles
The trading style settings for entry/exit systems, committees and predictions of signals can be optimized along with the inputs and settings for these fields. To do this, use the Modify Field Dialog: Trading Style page. Select Override Base Trading Style, then select Include trading style in optimization.
When the field is optimized, the values selected on the Modify Trading Style: Strategy Optimization page will be optimized. At the end of the optimization, the updated values will be stored in the overridden trading style for the field.
Ä Note: The selection of which values to optimize can be set as part of the overridden trading style settings. This allows you to select which values are optimized for each individual field.
Using "Next Open" for Analysis
By default, trading styles use the Next Open price as the Trading Value. This means that each entry or exit signal will be traded using the Open price for the bar after the signal. There are a few things to consider when analyzing signals based on values in the net bar:
· Basis for Current Equity
The Basis for Current Equity setting is used for determining the price to use when calculating the current equity and percent gain. If this value is set to "(Trading Value)" or "Next Open", the current equity will be based on the Next Open. This means that the current equity will NOT be available for the last bar since the next opening price is not yet available.
· Basis for Limit Order
The Basis for Limit Order setting is used for determining the price to use when entering new trades with limit orders. If this value is set to "(Trading Value)" or "Next Open", the limit price will be based on the Next Open. This means that the current limit price will NOT be available as a display field since the next opening price is not yet available.
Ä Note: Using other values from the next bar may not be physically tradable. For example, it is not possible to set an entry limit for the next bar based on that bar’s high, low, or close.
· Basis for Trailing Stop
The Basis for Trailing Stop setting is used for determining the price to use as a trailing stop. If this value is set to "(Trading Value)" or "Next Open", the trailing stop will be based on the Next Open. This means that the current trailing stop value will NOT be available as a display field since the next opening price is not yet available.
Ä Note: Using other values from the next bar may not be physically tradable. For example, it is not possible to set a trailing stop for the next bar based on that bar’s high, low, or close.
· Buy/Hold Starts on the Second Bar
The Buy/Hold analysis in TradingSolutions uses a trading style to determine the amounts to be traded and which values to use for pricing. If "Next Open" is used as the trading value, the initial buy will take place on the bar after the start date since the entry signal will be generated on the first bar and the purchase will occur on the next open.
Ä Note: The Buy/Hold analysis that appears in the Modify Data Series Dialog: Entry/Exit Signals page uses the default trading style for that data series.
Migrated Trading Styles
TradingSolutions may generate trading styles called "Migrated Trading Styles" when it is processing fields that were created with a previous version of TradingSolutions. This can occur when a trading solution created with a previous version is used to create new fields. It can also occur when an existing work directory is migrated to a new version of TradingSolutions.
Ä Note: Trading styles were introduced in TradingSolutions Version 1.2. Therefore, migrated trading styles will primarily be seen when dealing with portfolios and trading solutions created with Version 1.0 or Version 1.1.
Ä Note: TradingSolutions will reuse an existing trading style if it matches the settings for the field being migrated.
Migrated trading styles can be used just like other trading styles. They can be modified or renamed to fit your own preferences.
Ä Note: If you modify a migrated trading style that was created by applying a trading solution, the trading solution will not be updated. To update a trading solution, you will need to update the processing. This will cause its current trading style settings to be saved. You can do this from the Modify Trading Solutions: Source Field page.
Since versions of TradingSolutions that did not have trading styles optimized signals on profitability, the evaluation values of migrated trading styles are set to optimize using annual profit only.