Copyright © 2015
Let your systems learn the wisdom of age and experience
Ward Systems Group, Inc.
Charts contain data streams, which can be plotted or hidden. Of course, the first data streams loaded will be open, high, low, close, volume, and possibly more raw data for the target instruments. You can also insert other data streams called other instrument data that will be available in each chart page, like indexes or raw data for other stocks.
This other instrument data is information you want to use to create trading signals. For discussion, let's say you believe that the Dow Jones US Computer Index ($DJUCR on ESignal) and INTC will be useful for deciding how the target computer stocks should be traded. You would then load these as other instrument data so that they will be available data streams in all chart pages.
Optimized Equity Curve
Paper Trading Equity Curve
Out of Sample Equity Curve
NeuroShell Trader is software for building trading systems. It is not a trading system in its own right, it is a toolkit of both traditional and Artificial Intelligence (AI) techniques you can combine to form computerized trading systems.
NeuroShell Trader will build trading systems for stocks, FOREX, futures, commodities, options, indexes and more. You can build trading systems for exchanges all over the world, like the NYSE, AMEX, FTSE, DAX, ASX, TSX, SFE, and many more.
The trading systems can consist of standard technical analysis indicators and rules like traders have used for years, artificial intelligence techniques like neural networks, or hybrids of both. The trading systems you build will automatically back-test, and continue to give signals into the future as new data arrives.
Trading models generally are built using technical analysis indicators based upon the raw data and other instrument data. Let's say you believe that the following indicators will be useful in models that will produce stock market trading signals:
Therefore, the next thing you might do is insert the indicators above into your chart using the Indicator Wizard. The Indicator Wizard contains over 800 standard indicators from which to choose.
Why use a neural network? If you have a set of favorite indicators but don’t have a set of trading rules to create a profitable trading system, neural networks can build the trading rules for you. Neural networks can help you find patterns in your data. They are an indispensable tool for predicting and forecasting future values.
We do our own neural network research. Our newest neural network type, Turboprop 2, is probably the best neural network on the planet. It is very fast. Most neural networks train in 5-20 seconds. No neural network based on the now very old backprop paradigm can come close to our neural networks. Why is speed important? Because when you are optimizing, you may be training hundreds or even thousands of neural networks, which would literally be impossible with the old backpropagation neural network algorithm.
The Turboprop 2 neural network is very accurate (assuming you have relevant inputs of course), and it gives you a numeric contribution value for each input, so you can intelligently decide amongst inputs. Our genetic algorithm optimizer will also help you decide. Turboprop 2 also has mechanisms to help prevent overfitting. You don't need a "test" set plus a "validation" or "evaluation" set to prevent overfitting with the Turboprop 2 neural network. Turboprop 2 can also train on the basis of increasing profit as well as reducing error.
Turboprop 2 has no parameters whatsoever to tweak to make the neural network run. No need to be a neural network expert; inserting a neural network prediction or forecast is as easy as inserting an indicator.
Today's markets are tougher than ever to analyze. NeuroShell Trader gives you an edge with three different genetic algorithm based optimizers to fine tune YOUR trading ideas. You can optimize your trading systems to maximize profit, minimize drawdown, or choose from the more than 30 other objectives.
Speed is essential when you’re evaluating a large number of trading systems. Our Genetic Algorithm, Evolution Strategy and Swarm Optimization techniques are all capable of fine tuning a large number of trading system variables in far less time than traditional brute force optimizers (also included) that try every possible combination. The genetic algorithm based optimizers can find the time periods for indicators and at the same time determine which rules should be used in the trading strategy. The Trader can also search for optimal stop and limit prices for your trading systems.
Charts are the major component of NeuroShell. You may open many charts at one time, either new ones or ones you have previously built and saved. When you create a new chart, you specify their periodicity with which you want to see and process the data, as well as how far back in time you want to load the data. Next you specify the related instruments whose historical data should be loaded into the chart. They are the target instruments for which you wish to create trading signals.
Multiple instruments in the chart show up in their own chart page. For example, let's say you load IBM, DELL, HPQ, and AAPL as your target instruments. (They don't have to be stocks; they can be FOREX pairs, commodities, E-minis, options, etc). Note that you can insert several different models in a chart. Once you insert a model, it automatically applies to all chart pages.
Upgrades to the NeuroShell Trader Power User and NeuroShell DayTrader Power User versions are available which allow the software to distribute the optimization processing of complex financial models over your local area network. The result is a significant decrease in the amount of time it takes to create and update trading systems as market conditions change.
Let’s say your local network has three computers attached, a 12 core machine and two quad core machines. That is a total of 20 cores, all of which can be searching for your optimum trading model simultaneously. The faster computers will handle a higher share of the load. You have control over which of the computers on the network you want to participate, and which you do not want to participate.
Choose from three different network versions of NeuroShell Trader depending on the power and speed you require:
Once the chart loads up with the requested data, you are ready to define one or more models in the chart. Any model that you build in the chart automatically applies to all instruments in the chart. Your model can be optimized the same for all chart pages, or custom optimized for each chart page. Models can be either Trading Strategies or Predictions. Note that you can insert several models in a chart. Once you insert a model, it automatically applies to all chart pages.
You may or may not have a clue about how the indicators you have chosen work. If you do, you probably have some idea about how they would be used to generate trading signals, rules like "Buy when the relative strength between the stock and the $DJUCR is high, and the spread with INTC is low." In this case you will want your model(s) to be Trading Strategies, even if you are unsure what values should be considered high and low above. The genetic optimizer will find the values for you. If you either have no clue about how the indicators work, or no clue about appropriate rules for them, you will probably want to build a Prediction with a neural net for your model(s), because neural nets find their own rules.
The Trading Strategy Wizard is a fast mechanism for entering trading rules without having to type messy formulas or write in some algorithmic programming-like language.
The Wizard is all point and click. You just list the rules for long entry, long exit, short entry, and short exit (cover). Each of these rules is in fact an indicator you build just like any other indicator - with the Indicator Wizard. You can also enter indicators for stop and limit price levels, including trailing stops.
If you want to optimize your trading strategies, the genetic optimizer will do these things for you:
When the Trading Strategy is complete, it will show you historical buy and sell signals. As new data is added to the chart, those buy and sell signals will continue to appear with each new bar. You can insert a variety of indicators to plot how your profit is growing.
Predictions are neural nets made with the Prediction Wizard. That's what our standard neural nets do, they make predictions about the future value of a data stream, usually a price or change in price, but any data stream can be predicted. Here is basically all you have to do to make a prediction model:
If you want to optimize your prediction, the genetic optimizer will do these things for you:
When the prediction is complete, it will show you historical buy and sell signals. As new data arrives in the future, those buy and sell signals will continue to appear with each new bar. You can insert a variety of indicators to plot how your profit is growing.
Sometimes when you build traditional trading systems, neural network models, or optimized models of any type, it is possible to make a model so good that it does not hold up with future market conditions. This is called overfitting. NeuroShell lets you hold some data outside of the system building process (called out-of-sample data). Therefore, NeuroShell contains facilities that will automatically backtest with out-of-sample data for you, so you can gain confidence that your model will hold up in the future.
Our optimizer also works in a mode we call "paper trading". In this mode, the optimizer keeps the trading system that works better in a period of time after the optimization period, rather than the optimal (peak) model. Paper trading automatically gives you a trading system that is less likely to be overfit, and more likely to work well into the future.
Trader Power User and Trader Professional allow you to create end of day charts with daily, weekly, and monthly charts.
DayTrader Power User and DayTrader Professional works with both end of day, weekly and monthly charts and intra day charts that have hour, minute, second, volume and range bars.
NeuroShell lets you take almost any condition, not just trading signals, and define an alert to let you know when that condition has just occurred.
Once you have developed a model that you are happy with, you can specify that trades be sent to your broker’s account for execution, with the fill price being returned to NeuroShell. The trades can be sent automatically, or only after you approve them. As an alternative, NeuroShell will email your trades to email addresses of your choice.
Currently NeuroShell Trader has Interactive Brokers, FXCM and TradeStation integrated and other brokers are available from ZagTrader.com. Direct connections to more brokers are being developed.
Your charts can mix and match multiple time frames in data streams, indicators, predictions, and trading strategies as well as other instrument data. The NeuroShell Trader Power User mixes daily, weekly, and monthly timeframes, while the NeuroShell DayTrader Power User can include multiple intraday timeframes as well. For example, the Trader Power User lets you combine daily and weekly bars in the same trading system. The DayTrader Power User version can create a single trading system with minute, hour, and range bars. Think of the possibilities.
You can select from over fifteen different sizing methods. If you don’t know how many shares, contracts, or units to buy with each trade, let the optimizer decide the most profitable method
Pyramiding and scaling options add the ability to either enter or exit trades with more than one order. If you’re uncertain which of the pyramiding or position sizing methods to use, the Trader’s optimizer can assist in your decision process.
If you want to evaluate your model’s performance on a Trading Strategy that is re-optimized regularly on newer data, and then applied to out-of-sample data, you can use the Walk Forward Optimization feature.
For example, you can backtest reoptimizing a Trading Strategy every week for the past 10 weeks. After each reoptimization, the Trading Strategy is applied to data for the following week. The NeuroShell Trader Power User will perform 11 total optimizations in this case, each shifted by one week. Ten of those optimizations will show the “actual” trading results had you traded the reoptimized model for the week following the optimization period. The final optimization is optimized up to the very last date so you can go forward into the future trading a model that has been optimized on the very latest data in the same manner as the prior 10 simulated optimizations.
This feature can also be applied to intraday bars if you own the NeuroShell DayTrader Power User version.
The Power User versions include a “batch” mode of reoptimizing and backtesting models you’ve created previously.
Simply save the model as a chart template. Save templates for ALL of the models you wish to incorporate in this batch process. To begin the batch process, simply select all of the templates you wish to include in the batch on the first page of the Trading Strategy wizard. You’ll have the option to modify the dates, costs, and optimization parameters that you wish to use during optimization of all of the templates. You DO NOT have to rebuild each model.
After the models are backtested and you have analyzed the results, you can check the templates you wish to see displayed in a chart.
NeuroShell Trader allows you to distribute optimization processing across multiple computer cores and multiple hyper threads on a single computer.
As an example, if you have an Intel Core i7 processor, which has 4 processing cores each with the ability to process two simultaneous hyper threads, the NeuroShell Trader optimization processing could be spread out to 8 different threads. Theoretically, you could realize up to an 8x speed increase in optimization on a Core i7 computer, however due to the overhead of controlling, setup, and communication with each distributed thread, the speed increase may approach, but will never reach 8x. (You also have options to limit the number of cores/hyperthreads utilized during optimization if you want to use other programs during optimization without any processor sharing.)
For even faster optimization, see Network Distributed Optimization described below.
Use YOUR rules, indicators, and formulas to analyze today’s volatile markets, without writing any code. Instead, use our point and click “wizards” for indicators, predictions, and trading systems. For example, create multiple variations of the same indicator, such as 9 and 13 period moving averages, in one pass through the indicator wizard.
The indicator wizard allows you to build complex indicators by combining a number of the 800 included indicators. You can save these “custom” indicators for use in other trading systems. The prediction and trading strategy wizards also allow entire systems to be combined, so you can build “ensemble” systems with more power to find profitable trades. Save your favorites as templates for later use.
Use NeuroShell Trader's multi-layered wizards to quickly build complex trading logic
When the 800 standard indicators are not enough, you can easily build some pretty complex indicators without programming or using a special language simply by combining NeuroShell Trader's built in indicators.
The Indicator Wizard uses "point and click" to construct new combinations of market indicators, rules, and math functions so that you never have to worry about a missing comma or unmatched parens. Save the indicators you build as custom indicators for later use with the ability to change parameter names, defaults, display order and even visibility.
Take your trading to another level when you purchase add-ons that let you apply everything from moon cycles and advanced neural network architectures to John Ehler’s MESA9 frequency and phase analysis.
The resultant speed increase is dependent on the speed of the processors and clock speed on all computers as well as the overhead of controlling, setup, and communication with each distributed thread. It is recommended that network optimization only be used on larger trading models that have a larger number of parameters and which take more than a minute or two to optimize on a single computer. Smaller trading models can optimize more slowly across a network due to the control, setup and communications overhead and might not utilize all the available processing cores if more cores are available than needed for genetic optimization of smaller models.
In order to purchase any of the network versions of NeuroShell Trader, you must already own either the NeuroShell Trader® Power User or NeuroShell DayTrader® Power User for the server computer.