Advanced Neural Network Software for Financial Forecasting and Stock Prediction

Pattern Matcher
Ward Systems Group, Inc.

Overview of the Pattern Matcher Add-on

The Pattern Matcher add-on grew out of many requests by users who wanted to know if patterns in their data streams had occurred before in history, and if so, what type of activity followed those historical patterns. Some users also wanted to identify a pattern in history and be alerted when a similar pattern occurs in the future. The Pattern Matcher add-on meets both needs by providing indicators that match patterns and revealing the subsequent activity.

Pattern Matcher indicators work on any data stream in the NeuroShell Trader, Trader Professional, or DayTrader Professional. The Pattern Matcher can find patterns in raw price data streams or indicators made from raw data streams. It is often advantageous to match patterns in indicators applied to prices rather than to the prices themselves, as you will see in a subsequent section of this document.

The Pattern Matcher is unlike any of our other add-ons in that it is not designed for use in either a neural network or a trading strategy to make buy/sell decisions. It is intended that the user treat the Pattern Matcher as an intellectual tool to provide input to one's own biological neural networks for discretionary trading, or as confirmation of other signals you may be obtaining in other ways.

So what does this mean? It means that the Pattern Matcher is designed to provide answers to the questions that have plagued technical analysts since long before computers were born:

1. Has the current pattern that we see in the most recent bars occurred in the past?

2. If so how many times, and how closely do those past patterns match the current one?

3. If there were a number of closely matching patterns in the past, what type of market moves did they precede on average?

You will be making your own subjective decisions about whether or how to trade based on the information the Pattern Matcher is showing you. These subjective judgments will be based on your own study and experience watching similar patterns, and based upon your decisions about what data streams in which to watch for patterns. Price streams (like open, high, low, close, and volume) may not be the proper data streams to be monitoring for patterns. Indicator data streams, in our experience, seem to provide a more reproducible pattern source.

At Ward Systems, we have used the Pattern Matcher in the way just described. We have found that there is less value in trying to feed Pattern Matcher input into either neural nets or rules. We believe the tool is a powerful resource which will help you even the playing field, so to speak, as you compete with professional traders who have years of experience recognizing and reacting to patterns in the markets. They rely on their memories and intuition - you now have an analytic tool to bring to odds of success more in your favor.

Furthermore, you should not assume that past patterns are an indicator of future performance. The pattern matcher may very well be a powerful tool for the contrarian trader too. The markets are quite capable of reversing what usually happens after recurring patterns. If this were not true, it would be easy to predict and make money in the markets, and we all know that it isn't easy.

Overview of Indicators

The following descriptions of Pattern Matcher Indicators are abbreviated. There are more comprehensive descriptions in the help file.

Match - The Match indicator takes a very recent pattern on the chart and displays the probability that other patterns in history on the chart match that current pattern.

MatchPast - The MatchPast indicator takes a designated pattern on the chart and displays the probability that other patterns in both history and future on the chart match that designated pattern.

ProjectAvg - The Project Average indicator returns the average of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectMin - The Project Average indicator returns the minimum of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectMax - The Project Average indicator returns the maximum of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectStndDev - The Project Standard Deviation indicator returns the standard deviation of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectRange - The Project Range indicator returns the range of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectUpperB - The Project Upper Band indicator returns the upper envelope of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectLowerB - The Project Lower Band indicator returns the lower envelope of all projections (leads) of the projection series for all pattern matches that are greater than the indicated projection threshold.

ProjectCount - Given a projection threshold, the Project Count indicator returns the total number of matches between the current pattern and patterns in history.

ProjectPercent - Given a projection threshold, the Project Percent indicator returns the percentage of total number of matches between the current pattern and patterns in history.

For more details, please view the product manual for this add-on

Advanced Neural Network Software for Financial Forecasting and Stock Prediction

Ward Systems Group, Inc
Executive Park West
5 Hillcrest Drive
Frederick, MD 21703

Phone : (301) 662-7950
Fax : (301) 663-9920
Email : sales@wardsystems.com
Skype (Sales Only) : wardsystems | wardsystems2