Trade Vantage Neural Networks Explained

By Ron T Daulton

If you’re a FOREX trader, you want to make more money. Everyone does, that’s just human nature. That’s why you should be employing Neural Network intelligence in your trading. It helps us make smarter trading decisions. But before you can understand how to use Neural Networks in your trading, it helps to have a basic understanding of what they are. The human brain is the Neural Network that we know best. Its purpose is to analyze massive amounts of information coming in from our five senses, and analyze this raw information for patterns, and then interpret these patterns so that we perceive order, in the form of images, sounds, scents tastes, and tactile sensations. Computer programmers over the last few decades have made great strides forward in creating artificial neural networks (ANNs), which are now successfully used in:

— System identification and control (vehicle control, process control)

— Game-playing and decision making (backgammon, chess, racing)

— Pattern recognition (radar systems, face identification, object recognition)


— Sequence recognition (gesture, speech, handwritten text recognition)

— Medical diagnosis

— Data mining (knowledge discovery in databases)

— E-mail spam filtering

— Financial applications and analysis tools

— Weather pattern analysis, hurricane path forecasting, etc.

Neural networks are a type of computer program that mimics the function of the human brain, and neural networks try to find order and logic within the data. The vast amounts of data that the FOREX markets generate are similar to the raw information that the human brain has to process. Neural networks make sense of it all, and help us see clearly. As we know, there is much useful information, and much garbage information within the chart data. We want to see what is useful, and ignore the rest. The best ANNs emulate how the human brain works, so it takes into consideration all of the data available at any given time with which to make the decision. This is why ANNs are a lot like professional traders, they can make good trading decisions in just seconds by taking a quick look at the whole market picture, including all possible patterns, indicators, prices, and so on. So ANN’s analyze large amounts of data just like a brain, and make sense of it, and then ideally they will give us trading advice. ANNs can make deep data analysis in just a second, and gives us empirical decision, based on its own ‘memory’ and experience. Like the most effective traders, the accuracy rates of those decisions can achieve 87%, based on our long testing and our current customer’s feedback. But no two human brains are alike, every individual thinks a little bit differently than everyone else, yet most brains work well enough to successfully navigate life. ANN’s create models, and models can be thought of as different ways of thinking and analyzing. A model is roughly analogous to a new human personality or brain: lots of potential, but with very little real life experience. Experience is needed, and as more experience is gained, as more knowledge is absorbed, the brain becomes better and better at making predictions. TradeVantage uses ANN’s to create trading models. Which are unique ways of thinking and analyzing. Once a model is created, the software then interprets all market data through the model. At first the model is a lot like the brain of newborn child. It does not have any knowledge, or memory, or experience, and therefore cannot perform well in Forex trading. So like a newborn baby, a model has to be trained. With enough training, it will behave and function much like a professional trader; a professional will try to achieve the highest results possible by maximizing the accuracy and profitability. The model will try to become an outstanding trader for you. This is called the ‘learning process’ in which the model gets familiar with all of the data patterns for a selected pair, and all of market conditions that can be used as triggers in making decision to either buy or sell a particular currency pair, to maximize the profits. Very quickly, a model will develop its own memory, personality, character, and experience. It will not talk to you, but it will definitely indicate the best time to enter or exit a trade for any given currency pair. The software analyzes the market to learn what combinations would have been profitable over the time period being used for the learning process. Once this happens it will show you every single trade that it would have taken based on the strategy it designed during the learning process and give you signals going forward using the strategy it created during the learning process. In the case of TradeVantage, the software makes clear recommendation for how to trade your favorite currency pairs the next day. At the end of the day, TradeVantage analyzes the date from the previous day to help you make trading decisions for tomorrow. The software will actually analyze historical data going back as long as you want. After the learning process is done for the models you create, the result is that you will have a unique system in your hands, one with its own well defined rules, patterns, triggers, and expert system parameters. Next it will take a look at the current market picture and give you recommendations to either buy (enter a position), to sell (exit the position) or to stay away from the market. So to successfully implement Neural Network intelligence in your trading, run TradeVantage by selecting the currency pair you are interested in trading, create a neural network model (which is easy to do and is explained in the instructional videos that come with the software), let the model analyze the market in its ‘learning’ phase, and then ready to go, providing you with a recommendation! After your model is ready, you just need to update it with the new data once a day, and then you will get a new daily recommendation to buy, sell, or to not trade at all for that currency pair for that day. We hope this explanation of Neural Networks and how you can use them in your trading was clear and helpful. TradeVantage has proven itself as one the best FOREX neural network software tools in existence. Here’s a screenshot of the TradeVantage interface. The image shows you recent history for a single currency pair, and all of the instances where the TradeVantage software indicated that we should Sell, and then when we should close out each trade. You can also see how clearly the software indicates which action you should take when the market opens the next day. In this case, the recommendation is a BUY, as indicated in GREEN.

Trading the Forex market can be a scary place when you are all by yourself. With TradeVantage you are not alone. You have a system behind you that will be supporting everything you do going forward.

About the Author: Ron Daulton Forex System Software Developer


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