NeuroStrategy FAQ
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NeuroStrategy distinguishes between two classes of assets: risk-free investments and high-risk investments. All of the investigated stocks, index certificates and currencies are regarded as high-risk investments, where the development of value is uncertain. Securities with a return that is fixed (within certain narrow limits) are treated as risk-free investments. This includes money market rates and Treasury bills, for example.
The aim of the strategy to be developed by NeuroStrategy is to split an investment between the two classes of assets in such a way that the expectations of risk and return are as balanced as possible.
In its recommendations, the system always considers the particular security. The question of how a large investment sum is to be weighted within a portfolio is left to the experience and creativity of the portfolio manager. However, we are working on strategy models that are formed according to the findings of modern portfolio theory and that will make strategic recommendations for the weighting of the titles within the portfolio. NeuroStrategy's current trading recommendations always refer to the investment volume allocated to the respective instrument.
Although NeuroStrategy states its trading recommendations in plain English, the basis of the recommendation is a value between 1.0 and -1.0 issued by the strategy model. The absolute amount of this value (disregarding the sign) states the distribution between the two classes of assets in percent. A recommendation with an absolute amount of 0.7, for example, means that 70% of the investment sum are to be put into the high-risk investment (for example, the stock), while the remaining 30% are to be invested risk-free. Hence, for 30% of the investment, the return is low but secure. For the part of the investment invested into the stock, the return will be uncertain.
The sign of the signal indicates the form in which the high-risk share of the investment is to be invested. A positive sign constitutes a recommendation to take a long position, i.e. to buy the relevant security. In case of a negative sign, a short position is recommended. In this case, the entire investment sum - minus margin or deposit - can be invested risk-free.
If short positions are not possible due to legal provisions or practical circumstances, the risk-free investment is suggested in case of a negative sign. In this case, NeuroStrategy signals 0 (stay out).
At this point, we explicitly wish to emphasize once more that the equity curves shown in the charts do not take the return from the risk-free investments into consideration. The equity curves show the development of the investment, taking into account exclusively the positioning in the high-risk class of assets. Hence, the actual performance of the models is still open to improvement through a consistent approach on the basis of the model described above.
