Intermarket Trading Strategies

Appendix B

Neural Network Systems

There are two primary ways we make money trading; catching a big price move with a small position or having a large position and catching a small move.

-Bill Meehan

 

The following is a detailed procedure for recreating the neural network systems described in Chapter 14, using NeuroShell Trader.

 

 

B.1 ROC

 

All neural network systems were developed using Ward’s NeuroShell Day Trader Professional v. 5.4 (www.neuroshell.com).

To recreate this test open the FTSE chart and load data from 27 April 1993 to 27 February 2008. Then load data for the French CAC 40, the Amex Oil Index (XOI) and the S&P Bank Index (BIX).

Next, from the Insert menu select New prediction and add the following inputs that the neural network is going to use for the prediction. Press Add Input/Indicator and select Change/Percent Change (%) from the change category.

To modify the input’s default parameters click on the small “+” beside the input. This will cause it to expand to show the parameters and range of variables that are going to be tested. In this case modify the Time Series to CAC 40 Close and the Periods search space from 1 to 10 and click on Finish.

Repeat the above procedure for the XOI and the BIX. You should now have the following inputs for each intermarket security.

 

%Change(Time Series,Periods)(Time Series, Periods) Time Series Search Space = CAC 40 INDEX Close Periods Search Space = 1 to 10 %Change(Time Series,Periods)(Time Series, Periods) Time Series Search Space ...