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Determine which user-defined parameter values produce the best results in trade signals. Trade System Optimizer.

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Presentation on theme: "Determine which user-defined parameter values produce the best results in trade signals. Trade System Optimizer."— Presentation transcript:

1 Determine which user-defined parameter values produce the best results in trade signals. Trade System Optimizer

2 Summary Commonly Viewed Statistics Statistics Glossary Opening the TSO Setting the TSO TSO Setup Window Trading System Alerts Trade System Optimizer

3 Summary Test results with optimum sets of user-defined parameter values. The Trade System Optimizer (TSO) is a feature that tests the results of trading systems running different settings and parameters included in trade signals. The selected parameter combinations are evaluated and then reported on the TSO window. Traders can determine which set of user-defined parameter values produced the best result (expressed as the best value for the selected Optimize On statistic) on a specific trading system applied to a defined historical chart data. The TSO functions with trade systems that contain user-defined parameters. These parameters are required to test combinations and return optimal values.

4 Commonly Viewed Statistics How the TSO run results are divided, gauged, and calculated. Profit to Maximum Drawdown: Divides the end profit figure by the largest open drawdown in the sample:  The Profit to Maximum Drawdown does not take the highest profit point and divides it by the largest drawdown after that point. It is possible that a drawdown ratio could be worse than the figure shown.  A top-quality system that could be sold and results published or reviewed by hedge fund publications would need a ratio above ten, which indicates a maximum drawdown of less than 10% of equity.  More aggressive traders could use ratios above five, indicating a 20% fall. The open drawdown and the draw amount should be compared to the closed draw amount. There should not be a large difference between the two. For most systems, except short-term scalping systems, any difference of more than two times the closed drawdown indicates that the money management and stop-loss rules might be too loose. Maximum Draw Duration: Gauges the tolerance of how long a trader should continue trading on a particular system. This is often overlooked and should be linked to the Consecutive Losses. In the absence of a very high Percentage Remove to Neutral number (above ten), traders must take every trade. Otherwise, signals that consequently prove to be successful could be ignored. The figure is calculated on the number of calendar days.

5 Commonly Viewed Statistics (continued) How the TSO run results are divided, gauged, and calculated. Maximum Consecutive Losses: Calculates losses while being on the highest instance. When using the TSO, the Maximum Consecutive Losses, while being the highest instance, could have been repeated many times. For example, four consecutive losses could have occurred on ten separate occasions. Profit/Loss Ratio: Divides average wins by losses on intraday, scalping, and short- term systems. A ratio of over three is necessary to prevent profits from being eaten away by slippage and commission. Percentage Remove to Neutral: Calculates the percentage of the best trades that would need to be removed to bring the trader back to a zero profit. This figure needs to be greater than ten on intraday and scalping systems. On historical systems, this figure must be greater than five.

6 Statistics Glossary Terminology of profits and losses. Total Net Profit: The cumulative profits and losses of open and closed positions. On a chart, green lines indicate profits and red lines indicate losses. Closed Net Profit: The total profit on closed trades. Total Trade Count: The total numbers of buys and sells. If there are multiple exits to a trade, CQG will treat each exit as a trade. Open Position: The number of long or short contracts. If the number is zero, the total net profit and the closed net profit will have the same value. Percent Long: The percentage of the total trades that were long trades. Average Duration: The average number of bars a trade is open. Average Profit: The average gain of all trades. Average Wins: The average of all winning trades. Maximum Wins: The biggest winning trades. Average Loss: The average of all losing trades. Maximum Loss: The biggest losing trade. Max Closed Draw Down: The maximum loss for any string of losing trades (the worst case of a vertical drop between winners). Max Draw Amount: The largest accumulated loss in equity at any time. Max Draw Duration: The longest peak-to-peak interval represented on the profit curve.

7 Statistics Glossary (continued) Terminology of profits and losses. Max Consecutive Losses: The largest number of consecutive losing trades. Profit to Max Draw Down: The total net profit and maximum draw down amount. The higher the figure, the more desirable the outcome. A negative indicator indicates a zero profit. Profit Loss Ratio: The average gain on winning trades and the average loss on losing trades. Percent Winners: The percentage of profitable trades. Remove to Neutral: The amount of profitable trades that would have to be removed to equal a zero profit.

8 Opening the TSO Optimize the TSO when a trade system is applied. When the trade system is applied to a chart, right-click the trade system, and then select Optimize.

9 Setting the TSO Specify optimization details and learn the details of a TSO run. When the optimize view is opened from a chart, a new TSO run is created. By default, the run is titled Trade System Optimizer - unknown x, and it is based on information taken from: The chart (symbol, trade system, time interval, time range, and base expression). The trade system (user-defined parameters and values). The TSO Setup Window: To specify optimization details, click the Specify button.

10 TSO Setup Window Select, create, copy, or delete a TSO run. The optimizer runs are listed on the Runs window. To remove a run from the list, highlight a run and click the Delete button. To set up parameters, select the Use boxes on the Trade System Parameters window. Traders can also adjust chart and data information by clicking the Chart type or Chart parameters drop-down menus. To edit the bar range, click the Edit button on the Bar Range window, and then enter the range.

11 TSO Setup Window (continued) Select, create, copy, or delete a TSO run. Optimizer Runs Trade System Parameters Statistics Chart Information Data Information

12 Trade System Parameters The Trade System Parameters window displays all user-defined parameters associated with the selected trade system. The Start Value displays the figures that were initially set in the trading system. Traders can select the order to run the parameters on the TSO Setup window. The order is noted on the Use field check boxes that are selected. The Start Value and End Value determine the range to test each parameter to find the best combination versus the statistic value. If the Start Value and the End Value are integer numbers, a step of one indicates the optimizer will test every value between the values. A step of five indicates that the optimizer will check start values with an increment of five until an end value is reached.

13 Trade System Parameters (continued) Access all user-defined parameters associated with the selected trade system. The optimizer changes only one parameter at a time, therefore, all combinations of values are tested in Exhaustive Mode. The Step field determines how the TSO increments change the parameter value.

14 Statistics to be Optimized Select a statistic to measure the success of the trade system on the Optimize on drop-down menu. On the TSO Setup window, the default statistic on the Optimize on drop-down menu is TotalNetProfit. The Optimize on statistic is always the first statistic column displayed in the summary result table. Traders may want to select Profit to Max Draw from the menu.

15 Statistics to be Optimized (continued) Choose from Exhaustive or Genetic algorithms to effectively test parameters. Algorithms: Exhaustive: Evaluates trading system effectiveness for each possible combination of all parameters. The best-found parameter combination reflects the maximum effectiveness. One disadvantage of this calculation is the high request of resources on the network. Traders can select Exhaustive from the drop-down menu if they are using a narrow range of values for their parameters. Genetic: Evaluates a subset of every combination of parameters. This algorithm searches the most effective combination, according to biological laws. Results are not guaranteed, but the Genetic algorithm takes less time to run than the Exhaustive algorithm. Traders should choose a wide range of values for their parameters, and then select Genetic from the Algorithm drop- down menu.

16 Chart and Data Information Select an interval from the Chart parameters window. On the Chart parameters window, the Bar Range determines the period of time traders want to use the trade system and optimize it. Click the Edit button, and then select the number of bars or the period from a specified date to the ending date. When applicable, traders can also select all sessions. Chart types include: Bar Candlestick Constant Volume Bar Fill gap No Gap Percent bar TradeFlow Yield

17 TSO Results Table Settings Customize the display of TSO run results. The Table tab options include: Sort By: Sorts results by any of the parameters or statistics. The default Sort By value is the same as the Optimize on selection. Max Best Results: Limits the number of rows included in the results table. If the set number is lower than the total number of steps, only the best results will be shown. The default is set to 100.

18 TSO Results Table Settings (continued) Customize the display of TSO run results. The Display Chart with drop-down menu options include: No Update: Does not update the chart with optimization results. The display remains idle while the TSO is running. Current Value: Displays the chart with the value for a particular row. Best Value: Updates the chart with the best value (if the value changes). Best for Refresh: Displays the best value within a series of steps. Best for Refresh updates after a series of additional steps. After Steps: Determines how often the chart is displayed or updated with the results table data. If No Update is selected, After Steps will be grayed out.

19 TSO Results Table Settings (continued) Customize the display of your TSO run results. After setting the parameters on the TSO Setup window and the table settings, click the Setup button. The TSO run results are displayed on the main window.

20 TSO Results View run results in a chart by double-clicking a cell. The best combination of parameters is shown in the first row. The first row is the current step result, regardless of the table sorting preferences. After the run is completed, the current line is no longer visible. As each step runs, the TSO’s progress is reported on the top section of the window, and rows are added to the table. To view specific run results in a chart, double- click a cell. The trade system graph at the bottom reflects the values on the results table.

21 Customize TSO Results Order and adjust the parameters and statistic columns. Traders can customize the display to view specific columns by right-clicking the top of one of the columns and then by clicking the Customize Columns button.

22 Customize TSO Results (continued) Order and adjust the parameters and statistic columns. From the TSO results table, trades can call a chart with optimized parameters to be applied on the active trading system. To set up a trade system with a preferred combination of parameters, right-click a TSO run row and then select Launch Chart with Parameters.

23 Saving TSO Results Save results as a.txt file or as a clipboard. To save your TSO results, click the Setup button, and then choose from Save Results to TXT File or Copy All Grid to Clipboard.

24 Contact Us CQG, Inc. is the industry’s highest-performing solution for integrated trade routing, global market data, and advanced technical analysis. CQG partners with more than thirty-five futures clearing merchants and provides Direct Market Access to more than thirty-five exchanges through its worldwide network of collocated CQG Hosted Exchange Gateways. CQG's market data feed consolidates over a hundred sources, including exchanges worldwide for futures, options, fixed income, foreign exchange, and equities as well as data on debt securities, industry reports, and financial indices. CQG is headquartered in Denver, Colorado with sales and support offices worldwide. For more information about CQG, please call 1-800-525-7082 or visit Customer Support: US: 1 800-525-1085 UK: +44 (0) 20-7827-8270 Australia: +61 (0) 2-9235-2009 France: +33 (0) 1-74-18-07-81 Germany: +49 (0) 69-6677-7558-0 Japan: +81 (0) 3-3286-6877 Russia: +7 495-795-2409 Singapore: +65 6720-3165

25 Disclaimer Trading and investment carry a high level of risk, and CQG, Inc. does not make any recommendations for buying or selling any financial instruments. We offer educational information on ways to use our sophisticated CQG trading tools, but it is up to our customers and other readers to make their own trading and investment decisions or to consult with a registered investment advisor. © 2009 CQG, Inc. All rights reserved worldwide. CQG®, DOMTrader®, SnapTrader®, TFOBV®, TFOBVO®, TFVOL®, TradeFlow TM, and TFlow TM are trademarks of CQG, Inc.

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