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Working Papers

The P^2 Next Bar Forecast System

Previously we presented a trading system, called "The Next Bar Forecast System". That system fit a straight line, through "N" past prices, and then used the straight line coefficients to forecast the next price.. The Next Bar Forecast curve was constructed by calculating the forecasted next price (Pf) at each bar and plotting it under the price chart. In general what the system did was to follow the plotted curve of Pf . When the curve increased by a percentage amount pctup from the previous prior low of the curve the system goes long. When the curve fell by the percentage amount pctdn from the previous prior high of the curve the system went short.

The problem with the least squares straight line Pf curve is that many times it doesn't turn fast enough to follow fast moving price changes. Here we will use a use a 2nd order polynomial, to fit N past prices and generate a curve based on the next bar forecast of the 2nd order polynomial. The resultant curve, because it is a higher polynomial order will change direction faster than the straight line curve when the price series changes direction. The mathematics for finding the least squares 2nd order polynomial coefficients is the same, though more complicated, as finding the coefficients of a straight line fit.

The equation for the parabolic line is P2est(t)= b0 + b1*t + b2*t2. Where P2est(t) is the price estimate of the least squares fit at time t .

The forecast of the next bar's close, P2f ,using the least squares fit parameters b0, b1 and b2 calculated above is given by the equation: P2f = b0 + b1*(N+1) + b2*(N+1)2 .

The least squares 2nd order polynomial forecast curve is constructed by calculating P2f at each bar using the previous N bars of prices and plotting it under the price chart. A super fast algorithm for computing the least squares coefficients at each price bar is used that cuts the computation time by 80% and avoids floating point overflow. In general what we will be doing is following the plotted curve of P2f . When the curve increases by a percentage amount pctup from the previous prior low of the curve we will go long. When the curve falls by the percentage amount pctdn from the previous prior high of the curve we will go short.



The 2-P Next Bar Forecast System Input Parameters
  • Nt2 = The number of prices in the lookback period to calculate the P2f .
  • pctup = The percent amount the curve has to increase from a previous prior low of the curve to issue a buy signal.
  • pctdn = The percent amount the curve has to decrease from a previous prior high of the curve to issue a sell signal.
  • XOpn = Used only for Intraday bars. Prevents buys or sells until XOpn bars have past since the open. 0 = Ignore. Note, this input parameter avoids many opening gap whipsaws.
  • Xtime, = Used only for Intraday bars. Exit position before or at the close. If XTime= 1610 then exit at 4:10pm EST. 0 = ignore

Product Description

The 2-P Next Bar Forecast system is orientated to short term trading in all bar ranges (1 tic, 1 min, 5min, etc., daily) and with any tradeable price series. This system can also be used on futures, stocks, options, and mutual fund data.

For TradeStation, Multicharts all of the EasyLanguage strategy and indicator codes are directly importable into your choice of TS9 or MC and are fully disclosed. There are no locks of any kind on the EasyLanguage source code. The C++ DLL code is not disclosed. The Input parameters to the strategy and indicator are changeable and optimizable so that the user can develop his own parameter set on his price series and time frame of interest. Although the system results will give parameters for the intraday or daily futures the system was tested on, the user can easily use this system on any tradeable or on any time frame.

For NeuroShell Trader/DayTrader Pro, the Trading Strategy and Indicators are directly imported into NeuroShell via a special setup exe file and are fully disclosed in the Indicator wizard "MA_KeyTrSys" category and in the Trading Strategy Wizard "MA_KeyTrSys" directory. The C++ DLL code is not disclosed. The Input parameters to the strategy and indicator are changeable and optimizable so that the user can develop his own parameter set on his price series and time frame of interest. Although the system results will give parameters for the intraday or daily futures the system was tested on, the user can easily use this system on any tradeable or on any time frame.

The accompanying page manual consists of:

  • A short tutorial on the details of performing walk forward optimization with out-of-sample testing using TradeStation and how I look for the "best" parameters in a TS combinatorial optimization run(available in the TS Manual only).
  • A complete description of the 2-P Next Bar Forecast system, it's derivation and it's input parameters.
  • The walk forward optimization method used and a table of the walk forward results for the system.
  • The input parameter test ranges
  • A chart printout with the Strategy and it's associated Indicator with all the system buy and sell signals displayed on the chart.
  • Performance Summaries for the test period and the out-of sample period segments.

In addition The 2-P Next Bar Forecast system has its exact duplicate in indicator form which is displayable on the price chart, so that the user can visually see how the buy and sell signals occur.

For TradeStation, MultiCharts The 2-P Next Bar Forecast System is one of the 9 systems included in the  Key Daily &Intraday Trading Systems package. The Key Daily &Intraday Trading Systems package is being offered through Meyers Analytics L.L.C. for $395. Shipping via Email consists of a zip file containing the Manual in Adobe PDF format, ELD file and DLL file.

For NeuroShell Trader/DayTrader Pro, The 2-P Next Bar Forecast System is one of the 6 systems included in the  Key Daily &Intraday Trading Systems package.. The Key Daily &Intraday Trading Systems package is being offered through Meyers Analytics L.L.C. for $395 . Shipping via Email consists of a zip file containing the Manual in Adobe PDF format and the MA-KeyTrSysSetup.exe setup file. /p>

How To Order
To order online click Order Online. If you would like to talk to me about the product, please call me at (312) 280-1687 M-F 12pm to 5pm CST. All E-mail queries can be sent to support@meyersanalytics.com.

Thank you for your Interest....Dennis Meyers




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