Group or Committee of Indicators

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Group or Committee of Indicators

Postby JLG » Thu Apr 01, 2010 11:52 am

The number of suggestions to improve useful software tools like StrataSearch is often beyond productive investment. So while I am reluctant to post, this might be worthwhile.

A lot of research has been published outlining the effectiveness of a group of "voting" indicators. StrataSearch offers a wide array of indicators and other proprietary indicators can be imported as a time series index. But it seems use is limited to unanimous "and" and veto "or" operators. An operator that returns true for a collection of trading rules that is more than X% true (or false for more than X% false) could be powerful. The X% hurdle could be a parameter.

Using a larger group of trading rules risks curve fitting, but this may be mitigated if a single indicator is used with each type of data. In addition to price: volume, open interest, fundamentals, breath, volatility and perhaps event interest rates, exchange rates, commodity prices could be tested (this has already been of some value to me in StrataSearch). Of course in the end we would pursue a small collection.
JLG
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Re: Group or Committee of Indicators

Postby Overload » Thu Apr 01, 2010 1:50 pm

All suggestions are welcome, even though you're right that we can't implement all of them.

If I'm understanding correctly, you're suggesting that a user could have a group of trading rules and trigger a buy (or sell) when a certain percentage of those trading rules is flagged. Is that correct?

I've actually been referring to this as a "swarm" approach, and a number of StrataSearch users have done something similar. One method currently being used is to run Daily Signals for a large collection of unique systems. When a stock is listed as a buy on a significant percentage of those Daily Signals, then the stock can be bought. The basic idea is that it's great if a stock shows as a buy signal on any given system, but if the stock shows as a buy on 80 out of 100 approved systems, then it carries a much greater weight.

Unfortunately this approach is very manual at the moment, although implementing some full swarm capabilities remains on the list as a future enhancement. However, because it is currently based on the Daily Signals Listing, this manual approach is of limited use for backtesting.

As for your own idea, I'm curious if something similar could currently be done using a Custom Formula. For example, suppose you had something like this:

total = 0;
total = total + if(close > mov(close, 5, simple), 1, 0);
total = total + if(close > mov(close, 20, simple), 1, 0);
total = total + if(close > mov(close, 90, simple), 1, 0);
result = if(total >= 2, 1, 0);

In the above example, if any 2/3 of the trading rules is triggered, the resulting value is 1 (i.e. buy). Otherwise it is 0. Could something like this be used?

Pete
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Re: Group or Committee of Indicators

Postby JLG » Thu Apr 01, 2010 4:20 pm

Thanks for the suggestion. I think your code would be fine if the trade rules had already been determined and it could be used for back or walk forward testing. But actually I wanted to do automated searches with an operator like this.
JLG
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Re: Group or Committee of Indicators

Postby Overload » Fri Apr 02, 2010 10:01 am

But actually I wanted to do automated searches with an operator like this.

Right, I thought that would probably be the case. As mentioned, something similar to this is being considered with the "swarm" processing, but I'll make sure that anything that gets implemented will be able to be back tested and used in the automated search.

Pete
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Re: Group or Committee of Indicators

Postby marcd » Mon Oct 18, 2010 12:08 am

This is being done in the following commercial products (I have no affiliation- I have just used them in the past)

http://www.ultrafs.com/i_ultra.htm

Ultra uses optimization on 'baskets' of systems each usually optimized for a particular market (bonds, gold, NDX etc) . Each system is given a 'weight' and you trade when the weight of all positive systems > threshold.

So you would have a file like

systemx 3
systemy 1
systemz 2

and trade when sum >= 4
exit when sum < 4

so basically 2/3 systems would have to be in BUY mode for you to enter a buy in the example above (and systemx would always have to be in BUY mode).

http://www.nirvanasystems.com/OTI/Softw ... Trader.asp

Omintrader does this each day by backtesting systems daily on baskets of stocks and popping to top of list which stocks might be in a timeframe for profitable trading with a particular basket of trading strategies.

I am just getting into StrataSearch- I will post more info on its differences with the above products when I have used it.

Thanks
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