Articles about Forex All traders are doing it

How to increase the effectiveness of various technologies used by the trader-practitioner? Vice President of Business Development <Franklin & Grant> begins a series of articles designed to help understand this delicate matter.
Control theory
What strategy game stock take, all the traders, one way or another, solve very similar problems. If you try to classify them, we find that the main types of problems is not so much - just three.
1. Selecting stocks that are best suited to your game strategy.2. Forecast future price movement in the interest period.3. Putting the specific orders.
These tasks correspond to the three main stages, a well-known in control theory: information gathering and analysis, forecast of the situation, management decisions for the correction in case of deviation from the predicted dynamics. On this similarity could not help but pay attention to the producers of analytical software. For example, to select the purchased shares have gained wide popularity Stock screener or simple filters - from the database they have chosen only the given parameters the action. For the price forecast used by the widest set of tools. These include traditional methods of extrapolation, and fairly sophisticated (and expensive!) Solutions based on neural network algorithms.
Orders to be placed on the market, there are many trading systems. Most of them can be programmed decision rules for the automatic placement of orders. But the rules themselves should ask the user! Work to make such rules automatically take over the mechanical trading system, but most of them prove to be unfounded.
What kind of picture emerges? Software producers and Internet services are based on management theory, but also the impressive effect that accompanies its use in traditional areas in investment management is clearly not observed. What's the matter?
Easy worse than stealing
A deeper analysis of the proposed tool shows that in most cases based on the analytical programs laid unduly simple algorithms for the solution. This simplicity does not match the sophistication of the object - the market. Judge for yourself. For example, what are the stock-screener? This is just one query to the database with the correct <profile>. For market professionals who know exactly what they want, such a tool would certainly be useful.
But it is much more relevant, in my opinion, would be a tool to determine the allowable ranges of values ​​for each parameter, which characterizes the action, for specific purposes. For example, the user indicates that he is interested in weekly growth companies. In what range should be based on the value of its interest rates, the probability of such an increase was the highest? Now on the market there is no tool to answer this question.
Or an aspect. To set up stock-screener, you need to know what at this point the value of a particular group of companies, for example, drug manufacturers, in general there. How many companies fall into a particular range of specific indicators? Unfortunately, this issue is resolved satisfactorily. Recently, attempts to build such a <map> market, but not on all resources and only one or two indicators, for example, profitability and capitalization. What to do when you want to monitor multiple indicators?
How to predict?

As for the prediction methods, there is observed a pronounced polarization approaches: either the method catastrophically simple or as complex and demanding that their practical use for the trader is difficult. The former include the conventional methods of extrapolation and to the second - the model that are based on neural networks and fuzzy logic. These two large areas on their sebe have a lot of subtle nuances and settings, install adequate to the task that only by specialists. Thus, the important role played by the method of forming a training set. There is a problem with choosing the perfect moment when you want to stop learning. A feature is a self-adaptive systems, or the ability to adjust its internal parameters for the dynamics of the projected series. Education can be <without a teacher "and" the teacher>: in the first modify the model is in accordance with the internal algorithms used in the model, and in the second case, you need a clear indication of what change is better or worse.
Often, as a <teacher opinion> supports the value of the prediction error, called the objective function, and purpose of education - to adjust the settings so that it is minimal. Data set on which the minimization is called a training or learning set. With this method of learning there is one very serious problem - overfitting. This phenomenon is associated with a random selection of the training set. First, when the first steps of learning, the model begins to capture the required relation, which reduces the error - the objective function. However, with further training in an effort to reduce the error, the parameters adjusted to the features of the observed training set. This model is not law describes the dynamics of the series, and features specific to a subset selected as the training set. Naturally, with a decrease in the accuracy of prediction of the real (outside the training set).
The proposed system does not provide an answer and questions about the number of channels for learning, the amount of data required for each channel, as well as the principle of predictability of a price series. Should we, in the context of predictability associated with the specific action or not?
The efficiency of prediction of complex systems depends on the level settings on all issues, and this, in turn, is determined by the skilled person.
The last step

However, the most difficult moment is finishing the process of analysis and forecasting to take concrete steps. In order to justify a decision, you need statistical information about how, with what degree of probability holds rule found or set of rules. No matter how catchy acronyms such as entering money management, the basis for any such newfangled <paradigm> for practical success must be <sewn> reliable theory, rather than myth-making about the dubious miracle of leading indicators of the market. And every time - new ones.
In the next articles we will tell you about the problems of predictability of the market, the means of analyzing the market situation and support management decisions when playing the stock markets of the modern concepts of money management, risk and try to dispel the veil <secrecy> above the theoretical foundations of these new-fangled paradigm.