I started out to building a simple Bayes classification engine what the industry would normally consider a naive Bayes classifier. In the process of testing and enhancing for stock trading I needed the same world view but very different engineering. In the process it evolved in different directions with many changes away from the naive classifier.
I think it is still fair to claim a Bayesian (Bayes) worldview where we attempt to statistically compute future probabilities as an output from the classification engine.
Here are some of the changes:
- You must be able to state a goal and time frame.
- It can optimize for hundreds of goals to find those which best fit the customer.
- It uses thousands of discrete measures where each one would output a traditional probability which are combined to provide a computed probability.
- It is certainly not naive and uses a number of techniques to adjust feature weight contribution.
- It uses emergent algorithms such as genetic algorithms to adjust statistical feature weight in an attempt to maximize classification efficiency.
- Statistical features / Facets are grouped and classified to allow more accurate statistical comparison which allows us to prevent things that really are unrelated from impacting the rankings.
- It computes goals as separate classifications which can be combined.
- It moved into a multiphase system where the statistical scores are only one input into followup phases to provide a relative probability of meeting the goal.
- It uses an alternate statistical computation method to fit the answers into a 64 bit address space.
- We actively mine the learning / training data output to identify changing patterns and feed that data back into the emergent algorithms for optimization.
Forex, futures, stock, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using this methodology or system or the information in this letter will generate profits or ensure freedom from losses. Forex and Option trading can result in losses that exceed the original principal balance.
Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.
Even results from Live cash trading can be subject to specific market conditions that may not repeat in the future and as such, duplicate results from future trading is unlikely to duplicate past results. Changing the dollar amount traded can cause different behavior in live trading markets especially when trading large positons that can exceed the liquidity available in the market and cause changes in pricing behavior.
Bayes Analytic LLC provides software that can produce trading signals. The customer is responsible for choosing a configuration and parameters for the software that meets their own goals. The customer is responsible for conducting their own tests and only the customer can activate the software to start trading. The software runs in an account the customer has logged into and then activated the software. Bayes Analytic has no control of, influence over or visibility to the signals specific to given user because we have no visibility into configuration parameters the user has chosen to operate with. The Bayes Analytic software is provided without Warranty on a As Is, Where is basis. It is the customers responsibility to test the software to ensure it meets their trading requirements. Every time Bayes Analytic releases a new version of the software the customer should conduct new tests to validate the new version continues to meet their requirements because every software change could have unexpected side effects that may not be obvious until the customer has tested it in their environment with their configurations. The Bayes Analytic software may run as a script inside of other software packages or talking to API that Bayes Analytic has no control of or Influence over so the customer should test entire ecosystem to ensure it meets their trading requirements. Bayes Analytic may provide the software in source form since that is required by some trading systems but it remains the exclusive copyrighted property of Bayes Analytic and may not be reverse engineered or redistributed. The customer is responsible for choosing their own broker and installing the Bayes Analytic software so it can trade using the desired account. Bayes Analytic has no control over or influence of the broker and many brokers have different ways of quoting spreads, charging commissions, flow of orders and latency of information. As such a strategy and software that performs well at one broker may and probably will require changes to perform well at other brokers. It is the customers responsibility to test the software with their selected broker to ensure it meets their trading requirements.