Presentation on theme: "Software for Traders real tools for real life September 2003-9 ITC Software. All Rights Reserved."— Presentation transcript:
Software for Traders real tools for real life September ITC Software. All Rights Reserved
11 September Software for the Stock Market Virtually every software company marketing stock market prediction tools creates unsubstantiated hype. As a result customers are rightfully wary of new ideas. And they are mostly right.
11 September Software for Stock Market Prediction In fact, most tools based on a degree of trading automation claim to be killer apps and winning solutions. This is doubtful. Let us first examine the killer apps claim. Then the more interesting one regarding winning solutions.
11 September Software for the Stock Market As matters stand, every successful trader has a unique strategy to predict market behavior; to recognize optimal moments to buy and sell. The primary ingredients for success are: knowledge, talent, experience, intuition, and a quantum of luck. However, successful traders often describe their methodologies as scientific insights. This is a trap: Even if we disregard luck, talent and intuition are still crucial.
11 September Software for the Stock Market All attempts to create an infallible winning software solution for the stock market are based on the false premise, that successful traders base their decisions on scientific knowledge. That is why a winning software solution is a plain myth.
11 September Correct positioning Now what? Should we forget about software tools for traders? Certainly not. We just need to position them correctly.
11 September Correct positioning Every trader uses technical analysis methods in his work. Thus, software tools which automate technical analysis (TA) procedures are very useful. This can be illustrated by a slider with the manual treatment (MT) of all traders activities on one side of the scale and fully automatic (FA) operations on the other: TA MT FA
11 September Correct positioning Now that we understand that the FA end of the scale is unachievable, let us, nonetheless, attempt to move the slider to the right hand side.
11 September Traders Methodology Every trader follows several steps to choose the stocks of interest to him. The 1 st step is based on technical analysis. This analysis provides software users with a set of universal tools for the initial filtering of stocks. The ensuing steps are unique to each traders methodology. Initially they may be formal, understandable (and formally repeatable!), however then progress to a realm which is impossible to adequately describe, i.e. the steps become less formal.
11 September Neural Networks Finally, each traders methodology rests on the problem of recognition. It could be the recognition of a special pattern or the recognition of some hidden values. It is a known fact that one of the best methods of solving problems of automatic recognition is with neural networks (http://www.inns.org/). (http://www.inns.org/)
11 September Neural Networks One of the main advantages of neural networks is that you can train them to recognize a pattern without describing how to do that. If you build a neural network properly and then give it the sufficient number of representative examples, it could be trained to recognize non-obvious relations.
11 September 2003(c) Inreco LAN, Neural Networks for Traders Once more: Nobody has ever designed a software product that can recognize non-obvious stock market parameters better than a successful trader can. However, neural networks can be used for complex filtering of stocks and thus substantially reduce a traders work. Therefore, the application of neuralnet analysis (NNA) moves the slider to the right hand side: TA NNA MT FA
11 September Neural Networks for Traders Now the question is where to get NNA software for traders? Some software products already use neural networks for stock market operations, e.g.: However, these are merely universal tools and not NN applications or solutions. By analogy: They are the screwdrivers, hammers, nuts and bolts to assemble a car; not the operational vehicle.
11 September Neural Networks Limitations There is no ultimate winner among existing NNA software tools. Building and training a neural network is narrowly tailored to a very specific task. You can develop a good neural network, but it will be only be good for the precise task that you have trained it to do.
11 September Our Experience We have our own proprietary algorithms to build and train neural networks for stock market applications. These algorithms have successfully recognized patterns recommended by William J. ONeil (http://www.investors.com/about/WJO.asp).http://www.investors.com/about/WJO.asp These proven algorithms were embedded in a custom software system for one of our clients.
11 September Software for the Stock Market Our algorithms could also be used to train Neural Networks determining Warren Buffett's intrinsic values for different companies, thus significantly saving time for a trader who uses Warren Buffetts methodology.
11 September The Challenge In any case, the task of building and training neural networks is a kind of research work, which requires both the developer and the customer to share their knowledge and experience. However, if it is done perfectly, the customer obtains his own unique instrument none of his business rivals have.
18 For more information please contact ITC Software Tel.: September 2003 ITC Software. All Rights Reserved