For example:

• Open the Nasd100 profile (click on File, Open and select Nasd100).
• Now click on View and select Signal Generation.
• There are three tabs, and if you select the Trading Model tab, you will see that this profile uses the Stocks, Medium Term Aggressive model, and you will see the 4 exit rules used in this particular model (there are no active entry delays or filters in the models provided).

The Trading Model screen shows the model and any active filters, rules or delays.

Trading Models are discussed in depth starting on page 80 of your OmniTrader Guidebook. However, let's touch on a few points concerning models:

• There are specific models for Stocks, Futures, Mutual Funds and Real Time Profiles.
• For each type of end of day profile, there are 4 different model types (Aggressive, Trending, Reversal and Open) for each time frame (Short, Medium and Long Term).
• Just as there is a model for each profile in OmniTrader, there is also a model for each system used in OmniTrader as well.

So now we know that Trading Models are a list of entry and exit rules. Let's look at some of the more frequently asked questions concerning Trading Models.

Frequently Asked Questions

Q: If I enter a trade on a signal that OmniTrader generates, should I wait for the trade to exit on the vote line to close my position?

A: No. Remember that OmniTrader is a prospecting tool. If OT found a good trade opportunity for you, it has basically done its job. Once you have entered the trade, you should use chart information or other preferred trade management tools to manage the trade. We will discuss more on trade management in week 10 of OT Tips.

Q: If the exits in a model shouldn't be used to tell me when to exit a trade, what good are they?

A: This is a very common question. The main function of the exits is to take OmniTrader out of trades in the testing periods. This allows us to get a good indication of how accurate OT was on that security in the testing period using the selected systems and settings.

Q: There a quite few models to choose from - which one should I use?

A: This is another common question. Basically, the default model for each profile is the recommended model (most profiles use the Medium Term Aggressive model). Since OmniTrader is a prospecting tool, we don't want to get too hung up searching for the perfect model. However, if you are using a very large list of securities and want to find a specific type of trade, you may want to look at the Reversing or Trending models. Keep in mind, though, that for 99% of users, the Medium Term Aggressive Model is recommended.

Q: In the Ed's Magic Profile, it shows an Ed's Magic Trading Model - is this correct?

A: Yes. The Ed's Magic Trading Model was designed specifically for the Ed's Magic Profile. Ed's Magic will exit a trade no later than 5 days after the signal was fired. It uses a very high threshold on the Inactivity Exit to achieve this. It was designed this way to better find good short term opportunities in the direction of a trend.

Summary
If I can offer you one piece of advice on Trading Models, it would be to not concentrate on them. The bulk of research done on OmniTrader has been on generating trade prospects and automating as much of the initial analysis process as possible. While the Trading Model serves a function, it should not be used as an exit tool for your actual trading. You could spend weeks tweaking a model with minimal, if any, improvement on the signals generated.

I hope this lesson has been helpful in your understanding of Trading Models.

Best of luck with your trades!

Jeff Drake
Director of Education
Nirvana Systems
jdrake@nirvsys.com