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Re: Neural Networks for trading



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Hi Paul,

With Neuroshell Trader, you decide what to predict, be it the next bar's 
close, or the next bar's high/low, or the next bar's mov avg, or 
stochastics, anything. As long as you feed the net *predictive* inputs, it 
should pick up patterns from the inputs that may not be so obvious to you, 
and predict the output. The trick to building good neural models lies in the 
choosing of a good value to predict and good choice of useful inputs. You 
may treat Neuroshell as a black box to aid you in your trading, and not you 
yielding to Neuroshell's models, 'cos you build the model, not Neuroshell. 
The example in the Neuroshell website shows trading systems built with 
Neuroshell's rather rudimentary strategy builder (which is a far cry from 
TS). The strategy builder uses the predicted output from the prediction 
module to build systems. So, this means you do not have to use Neuroshell's 
built-in strategy builder. What I do with Neuroshell is to import in 
Neuroshell's prediction into TS2000i and use the predicted value as I would 
any indicator, eg a predicted value of tomorrow's stochastics. My TS2000i 
system would then make use of this future value of the stochastic indicator 
and make trading decisions on it. I still have total control over the money 
mgt, risk size etc portion of my system, as I would any other TS2000i system 
that I build. So you see, I am not using Neuroshell as a black box trading 
system, but merely just a component in my overall system which I have total 
knowledge of the rules, risk etc. I think this is the better way of using 
Neuroshell Trader. Hope this helps.

regards
JM



>From: Paul Altman <paulha@xxxxxxxxxxxxx>
>To: omega-list@xxxxxxxxxx
>Subject: Re: Neural Networks for trading
>Date: Tue, 08 Aug 2000 00:25:18 -0400
>
>Does anyone have anything to say about how to position size for neural
>network trading?
>
>Yes, I admit I've salivated at the examples on Neuroshell's website, but as
>I prepare to put my children in debt with Neuroshell Trader, I'm pondering
>how you can know how much to trade on one of these "black box" stop&reverse
>systems, since you don't know what your maximum risk per trade is until you
>get there.
>
>Without knowing your exit price, or something about your exit price, you
>don't know your risk, so how can you know your trade size?  Sure, you could
>add a trailing stop, but is there some more free-form, self-adjusting way
>of thinking about this, that lets the net dictate the trades while
>position-sizing according to risk?
>
>       Paul
>
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