Advanced trading software: technical analysis and neural networks

In his article “Modeling the Market = Building Trading Strategies”, John F. Ehlers illustrates the value of modeling the market while developing comprehensive trading strategies. By using the Tradecision Indicator Builder, one can create the Cyclic Component, Instantaneous Trendline, and Market Model indicators and use them to build trading strategies that combine the techniques with other indicator-based and money-management rules.

Note: You can use the Tradecision Optimization wizard to find the best parameters for your trading system.   

The following is the code for the above indicators.
 
Cyclic Component

Input
     Price: "Price", (H + l) / 2;
     Length: "Length", 20;
end_input

var
   Alpha := (1 – Sin (360 / Length)) / Cos (360 / Length);
   HP := 0;
   SmoothHP := 0;
end_var

if (HistorySize > 1) then
   HP := 0.5 * (1 + alpha) * (Price - Price\1\) + Alpha * HP\1\;
else
   HP := 0;

if (HistorySize + 1) < 4 then
   SmoothHP := Price - Price\1\;
else
   SmoothHP := (HP + 2 * HP\1\ + 2 * HP\2\ + HP\3\) / 6;
     
if HistorySize = 0 then
   SmoothHP := 0;

return SmoothHP;

Instantaneous Trendline

Input
     Price: "Price", (H + l) / 2;
     Length: "Length", 20;
end_input

var
   SMA := SMA(Price, Length);
   Slope := Price - Price\Length - 1\;
   SmoothSlope := (Slope + 2 * Slope\1\ + 2 * Slope\2\ + Slope\3\) / 6;
   ITrend := SMA + 0.5 * SmoothSlope;
end_var

return ITrend;

Market Model

Input
     Price: "Price",(H +l) /2 ;
     Length: "Length", 20;
end_input

var
   Sma := SMA(Price, Length);
   Slope := Price - Price\Length - 1\;
   SmoothSlope := (Slope + 2 * Slope\1\ + 2 * Slope\2\ + Slope\3\) / 6;
   ITrend := SMA + 0.5 * SmoothSlope;
   Alpha := (1 - Sin(360 / Length)) / Cos(360 / Length);
   HP := 0;
   SmoothHP := 0;
end_var

 

if (HistorySize > 1) then
   HP := 0.5 * (1 + alpha) * (Price - Price\1\) + Alpha * HP\1\;
else
   HP := 0;

if (HistorySize + 1) < 4 then
   SmoothHP := Price - Price\1\;
else
   SmoothHP := (HP + 2 * HP\1\ + 2 * HP\2\ + HP\3\) / 6;
     
if HistorySize = 0 then
   SmoothHP := 0;

return ITrend + SmoothHP;