NeuroStrategy FAQ
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NeuroStrategy offers its strategic trading recommendations in two different modes: off-line and on-line. In off-line mode, the strategy recommendation is determined on the basis of the latest available closing price. Hence, we also refer to this mode as the EOD (end of day) mode. In on-line mode, by contrast, NeuroStrategy issues the recommendation on the basis of the latest available intraday tick. Accordingly, these signals are only available during the trading hours of the respective market.
Now it would seem natural for the user to fall back on intraday signals (on-line) during normal trading hours. Such a procedure is problematic, however, as Fig. 1 demonstrates. NeuroStrategy operates on the basis of a time horizon of one trading day. For such a trading day, merely four data points are available for the analyses (open, high, low, close). From these four data points, various time series and indicators are modelled and evaluated for the purpose of analysis. Hence, one could say that the system merely "sees" one bar per day, as represented in the Signal Bar Charts, for example. Thus, in off-line mode, the system works with precise values, for after the trading floor has closed, the open, high, low and close values of the instrument are fixed for that trading day. During the trading day, however, this is not the case. Only the opening price is fixed, while the values for high and low are merely "intermediate values". Likewise, the current price can sometimes differ substantially from the closing price at the end of the trading day.
Fig. 1 clearly illustrates this problem. While the red bar (A) shows the course of the price development over the entire day, the blue bar (B) reveals the development during the first five ticks of the day represented in the chart. In on-line mode, NeuroStrategy must fall back on this "preliminary" data. The less time has passed during the day of trading the more imprecise is the description that the bar provides of the daily development.
Now, what effects does this phenomenon have on the strategic recommendation? Let's imagine a continuous strong trend with comparatively high volatility. And let's further imagine that NeuroStrategy is now confronted with a bar such as Bar B. The conclusion will most probably be that the trend has sagged considerably. In such a case, NeuroStrategy will very likely recommend a strong reduction of the allocation in the relevant security or even a closure of the position. This recommendation, however, would be mistaken, as the actual daily bar (A) shows. It reveals that volatility and trend continue unbroken. Hence there is at least no obvious reason to close the position.
Fig. 1: The chart shows a hypothetical course of the intraday price development of a stock. Next to the chart there are two intraday bars as used in bar charts. The horizontal line leading to the bar on the left represents open (or the entry price). The bar itself describes the fluctuation within the time period represented (high-low margin). The horizontal line leading away from the bar to the right marks the closing price (close). Bar A describes the intraday course in its entirety as it is represented in the chart. Bar B, on the other hand, describes the course between Tick 1 and Tick 5. It is clear that these bars differ substantially.
Now, when should you as a user employ which type of signal for your positioning? Essentially, two scenarios should be considered:
In any event, even if your trading behavior does not match one of these scenarios, it is important to bear in mind that on-line signals can be relied upon only after the passing of about 2/3 of the trading day.
