Many traders apply neural nets incorrectly because they place too much trust in the software they use all without having been provided with proper instructions on how to use it properly. To use a neural network the right way and, thus, gainfully, a trader ought to pay attention to all the stages of the network preparation cycle. It is the trader and not his or her net that is responsible for inventing an idea, formalizing this idea, testing and improving it, and, finally, choosing the right moment to dispose of it when it’s no longer useful. Let us consider the stages of this crucial process in more detail:
1. Finding and Formalizing a Trading Idea
A trader should fully understand that his or her neural network is not intended for inventing winning trading ideas and concepts. It is intended for providing the most trustworthy and precise information possible on how effective your trading idea or concept is. Therefore, you should come up with an original trading idea and clearly define the purpose of this idea and what you expect to achieve by employing it. This is the most important stage in the network preparation cycle. (For related reading, see Lessons From A Trader's Diary.)
2. Improving the Parameters of Your Model
Next, you should try to improve the overall model quality by modifying the data set used and adjusting the different the parameters.
Figure 1: Specifying the optimization algorithm and its properties
3. Disposing of the Model When it Becomes Obsolete
Every neural-network based model has a life span and cannot be used indefinitely. The longevity of a model's life span depends on the market situation and on how long the market interdependencies reflected in it remain topical. However, sooner or later any model becomes obsolete. When this happens, you can either retrain the model using completely new data (i.e. replace all the data that has been used), add some new data to the existing data set and train the model again, or simply retire the model altogether.
Many traders make the mistake of following the simplest path - they rely heavily on and use the approach for which their software provides the most user-friendly and automated functionality. This simplest approach is forecasting a price a few bars ahead and basing your trading system on this forecast. Other traders forecast price change or percentage of the price change. This approach seldom yields better results than forecasting the price directly. Both the simplistic approaches fail to uncover and gainfully exploit most of the important longer-term interdependencies and, as a result, the model quickly becomes obsolete as the global driving forces change.
You will experience real success with neural nets only when you stop looking for the best net. After all, the key to your success with neural networks lies not in the network itself, but in your trading strategy. Therefore, to find a profitable strategy that works for you, you must develop a strong idea about how to create a committee of neural networks and use them in combination with classical filters and money management rules.
note: not my words but i agree with them. i cant post links.
i had some success with my system. i will start posting more result after i finalize everything.