OmniTrader Tips
Last week we looked at visual confirmation for trade candidates. In part II or our confirmation discussion, we are going to look at some of the automated tools available to you in OmniTrader that can help in the confirmation process.
The focus list provides us with quite a few statistics to see OmniTrader's test results. Backtest Hit Rate (BTHR), Backtest Annualized Percentage Rate (BTAPR), and Backtest Net Trades (BTNT) are a few of the categories that give us some idea as to how well OT was able to match systems with the personality of the security. You can sort the focus list by these categories, but an easier way to bring the symbols with the best test results to your attention is to sort by the Advisor Rating.
The Advisor Rating is a number from 1-100 that basically represents the "strength" of a signal. In other words, A high Advisor Rating means that the systems that OmniTrader chose for that symbol were accurate, profitable and in a good number of trades in the backtest period. I like to say that the Advisor Rating should be used as a shortcut to see which symbols had the best test results. However, I want to warn against reading too much into the exact value of the Advisor. For example, if one symbol has an Advisor of 92 and another one has an Advisor of 94, that does not mean that the symbol with the 94 is more likely to be a better trade. Both of these should be viewed as good candidates.
The Advisor Rating for this signal shows good test results.
If you have a large number of securities in
your focus list, you can use the filter to only show the securities that meet a specific
criteria. For example, many users will want to see candidates that have at least an
80 Advisor Rating and 80% Backtest Hit Rate. By clicking on the filter icon 
at the top of your focus list, you can select to see only the symbols with
test results that meet this criteria. An example of this type of filtering is shown
to the right.
If you use this filter, you know that any symbol you look at had at least an Advisor Rating of 80 and an 80% Backtest Hit Rate. Obviously, better test results in the backtest period increases the likelihood of the current signal being correct.
In one of our earlier lessons, we talked about using weekly confirmation. In real time, you can also use a higher periodicity to confirm signals as well. For example, you can confirm 5 minute signals with 15 minutes signals. Periodicity confirmation will increase the accuracy of your signals, but realize that it will also filter out signals as well so you will see less trade candidates. This is the reason that we only recommend using this confirmation with profiles that have a large number of symbols.
The Signal Confirmation Tab
For more information on periodicity confirmation, please refer to lesson 5 from our earlier emails, entitled Signal Generation.
One of the most commonly used methods of confirmation is to use an indicator. We talked about using an indicator in last weeks tip to help you visually confirm a trade, but OmniTrader gives you the ability use an indicator as a filter as well.
If you wish to create a filter with an indicator to confirm trades, you must follow ths rule: Know what that indicator is trying to indicate! By this I mean that certain indicators are looking for one type of behavior, while others are looking for a different type of behavior. If you are looking for trending candidates, indicators like the Aroon Oscillator, Moving Averages and MAC-D are useful. However, if you are looking for early reversal candidates, a volume based indicator like On Balance Volume or another indicator like Balance of Power would be more helpful. If you are unsure or unfamiliar with an indicator, check the Systems Manual under the Help Menu. This manual includes a brief description of all the indicators in OmniTrader as well as a short overview on how they are meant to be used.
In conclusion, I want to stress that the types of confirmation that we have covered in this lesson will also filter out candidates. If you choose to apply one or a combination of any of these techniques, realize that your list of candidates will be reduced. If you are using a small list of securities, I would refer to last weeks lesson on visual confirmation techniques.
Best of luck with your trading, and look for our final email tip next week.
Jeff Drake
Director of Education
Nirvana Systems