If you occasionally read this blog, you may have noted that I often say that r.Virgeel is not a trading system. I want to warn the newcomers that they will not find any automatic fount of wealth here.
Any serious trader has matured its activity in a deeply constructed attitude: call it a plan, or a set of rules, or a set of indicators or all these things together. Traders hate losses like cats hate water: sometimes you need some, but better avoid. So, they build their framework, each one different, each one influenced by the history of each trader itself.
When I first designed the model that will become r.Virgeel, my trading experience was at the “trade-with-technical-analysis-the-fundamentally-chosen-stocks” stage. Many experiments started with sets of t.a. oscillators and were largely unsatisfactory. It took time to understand that I might ask to the model “impossible” answers.
What I understood is that I must ask the model “impossible” answers, otherwise better use the t.a. methods an go on with the traditional analysis. With “impossible” I mean not available using traditional programming techniques. All t.a. is computer-based nowadays, so code is the key to performance. But traditional code cannot perform certain tasks in a manageable reasonable way, like forecasting next bars as the weather channel forecasts the temperatures for the next days. The model, neural networks based, can. Now, consider that saying “tomorrow low will be at XXXX.XX” involves a certain responsibility, bearable, in my case, by the long term performance of the model.
I’ve developed various indicators, during the never-ending development of r.Virgeel, and many have disappeared, leaving an affordable set of unique information. To best fit into everyone’s set of weapons, you have t.a. mimicking indicators, as rV.Target or rV.Stop, and some “impossible” indicators, as rV.Future Bars or rV.ExpectedTurn (which evaluates how many bars to the next turn) or rV.ColorBars (which evaluates at which stage inside the ideal position is the market and shows it as an easy to read colour code).
At a certain point, I started to develop the rV.Position indicators: they are many, all derived by the same learning process that reads the S&P 500 index flow into positions, long and short, picking always the best market position. Now, you may say, this IS a trading system and yes, in some way it is. In the middle, there is the behaviour of the model, that sees and detects a huge amount of patterns and correlates dozens of different inputs. Experience has taught to my faithful subscribers and me that r.Virgeel is very responsive, sometimes too much (it is still young, you know), rarely it gets blind for one bar (this behaviour has been drastically reduced by latest improvements), and it is correct most of the time. I do not consider rV.Position indicators as a trading system, so I do not follow blindly its entry/exit signals; instead, I search for correlations between all the indicators to confirm any trading activity. Of great importance is the Weekly analysis, that has demonstrated to be well integrated with the Daily analysis.
Since few months, I have introduced an automatic summary: r.Virgeel writes a brief summary evaluation on the daily report and this is intriguing: it is a small text and it is working well, opening the road to new possibilities in the model output presentation.