Determine which user-defined parameter values produce the best results in trade signals.

Trade System Optimizer

• Summary• Commonly Viewed Statistics• Statistics Glossary• Opening the TSO• Setting the TSO• TSO Setup Window• Trading System Alerts

Trade System Optimizer

SummaryTest results with optimum sets of user-defined parameter values.

The Trade System Optimizer (TSO) is a feature that tests the results of trading systems running differentsettings and parameters included in trade signals.

The selected parameter combinations are evaluated and then reported on the TSO window. Traders candetermine which set of user-defined parameter values produced the best result (expressed as the bestvalue for the selected Optimize On statistic) on a specific trading system applied to a defined historicalchart data.

The TSO functions with trade systems that contain user-defined parameters. These parameters are required to test combinations and return optimal values.

Commonly Viewed StatisticsHow the TSO run results are divided, gauged, and calculated.

• Profit to Maximum Drawdown: Divides the end profit figure by the largest open drawdown inthe sample:

The Profit to Maximum Drawdown does not take the highest profit point and divides it by the largest drawdown after that point. It is possible that a drawdown ratio could be worse than the figure shown.

A top-quality system that could be sold and results published or reviewed by hedge fund publications would need a ratio above ten, which indicates a maximum drawdown of less than 10% of equity.

More aggressive traders could use ratios above five, indicating a 20% fall. The open drawdown and the draw amount should be compared to the closed draw amount. There should not be a large difference between the two. For most systems, except short-term scalping systems, any difference of more than two times the closed drawdown indicates that the money management and stop-loss rules might be too loose.

• Maximum Draw Duration: Gauges the tolerance of how long a trader should continue trading on a particular system. This is often overlooked and should be linked to the Consecutive Losses. In the absence of a very high Percentage Remove to Neutral number (above ten), traders must take every trade. Otherwise, signals that consequently prove to be successful could be ignored. The figure is calculated on the number of calendar days.

Commonly Viewed Statistics (continued)How the TSO run results are divided, gauged, and calculated.

• Maximum Consecutive Losses: Calculates losses while being on the highest instance. When using the TSO, the Maximum Consecutive Losses, while being the highest instance, could have been repeated many times. For example, four consecutive losses could have occurred on tenseparate occasions.

• Profit/Loss Ratio: Divides average wins by losses on intraday, scalping, and short- term systems. A ratio of over three is necessary to prevent profits from being eaten away by slippage and commission.

• Percentage Remove to Neutral: Calculates the percentage of the best trades that would need to be removed to bring the trader back to a zero profit. This figure needs to be greater than ten on intraday and scalping systems. On historical systems, this figure must be greater than five.

Statistics GlossaryTerminology of profits and losses.

• Total Net Profit: The cumulative profits and losses of open and closed positions. On a chart, green lines indicate profits and red lines indicate losses.

• Closed Net Profit: The total profit on closed trades.• Total Trade Count: The total numbers of buys and sells. If there are multiple exits to a trade, CQG

will treat each exit as a trade.• Open Position: The number of long or short contracts. If the number is zero, the total net profit and

the closed net profit will have the same value.• Percent Long: The percentage of the total trades that were long trades.• Average Duration: The average number of bars a trade is open.• Average Profit: The average gain of all trades.• Average Wins: The average of all winning trades.• Maximum Wins: The biggest winning trades.• Average Loss: The average of all losing trades.• Maximum Loss: The biggest losing trade.• Max Closed Draw Down: The maximum loss for any string of losing trades (the worst case of a

vertical drop between winners).• Max Draw Amount: The largest accumulated loss in equity at any time.• Max Draw Duration: The longest peak-to-peak interval represented on the profit curve.

Statistics Glossary (continued)Terminology of profits and losses.

• Max Consecutive Losses: The largest number of consecutive losing trades.• Profit to Max Draw Down: The total net profit and maximum draw down amount. The higher the

figure, the more desirable the outcome. A negative indicator indicates a zero profit.• Profit Loss Ratio: The average gain on winning trades and the average loss on losing trades.• Percent Winners: The percentage of profitable trades.• Remove to Neutral: The amount of profitable trades that would have to be removed to equal a

zero profit.

Opening the TSOOptimize the TSO when a trade system is applied.

When the trade system is applied to a chart,right-click the trade system, and thenselect Optimize.

Setting the TSOSpecify optimization details and learn the details of a TSO run.

When the optimize view is opened from a chart,a new TSO run is created. By default, the run istitled Trade System Optimizer - unknown x,and it is based on information taken from:• The chart (symbol, trade system, time

interval, time range, and base expression).• The trade system (user-defined parameters

and values).

The TSO Setup Window:To specify optimization details, click theSpecify button.

TSO Setup WindowSelect, create, copy, or delete a TSO run.

The optimizer runs are listed on the Runs window.

To remove a run from the list, highlight a run and click the Delete button.

To set up parameters, select the Use boxes on the Trade System Parameters window. Traders can alsoadjust chart and data information by clicking the Chart type or Chart parameters drop-down menus. Toedit the bar range, click the Edit button on the Bar Range window, and then enter the range.

TSO Setup Window (continued)Select, create, copy, or delete a TSO run.

OptimizerRuns

Trade SystemParameters

Statistics

ChartInformation

DataInformation

Trade System ParametersThe Trade System Parameters window displays all user-defined parameters associated with the selected trade system.

• The Start Value displays the figures that were initially set in the trading system. Traders can select the order to run the parameters on the TSO Setup window. The order is noted on the Use field check boxes that are selected.

• The Start Value and End Value determine the range to test each parameter to find thebest combination versus the statistic value. If the Start Value and the End Value are integer numbers, a step of one indicates the optimizer will test every value between the values. A step of five indicates that the optimizer will check start values with an increment of five until an end valueis reached.

Trade System Parameters (continued)Access all user-defined parameters associated with the selected trade system.

• The optimizer changes only one parameter at a time, therefore, all combinations of values are tested in Exhaustive Mode.

• The Step field determines how the TSOincrements change the parameter value.

Statistics to be OptimizedSelect a statistic to measure the success of the trade system on the Optimize ondrop-down menu.

On the TSO Setup window, the default statisticon the Optimize on drop-down menu isTotalNetProfit. The Optimize on statistic isalways the first statistic column displayed in thesummary result table. Traders may want toselect Profit to Max Draw from the menu.

Statistics to be Optimized (continued)Choose from Exhaustive or Genetic algorithms to effectively test parameters.

Algorithms:• Exhaustive: Evaluates trading system

effectiveness for each possible combination of all parameters. The best-found parameter combination reflects the maximum effectiveness. One disadvantage of this calculation is the high request of resources on the network. Traders can select Exhaustive from the drop-down menu if they are using a narrow range of values for their parameters.

• Genetic: Evaluates a subset of every combination of parameters. This algorithmsearches the most effective combination, according to biological laws. Results are notguaranteed, but the Genetic algorithm takes less time to run than the Exhaustive algorithm. Traders should choose a wide range of values for their parameters, and then select Genetic from the Algorithm drop-down menu.

Chart and Data InformationSelect an interval from the Chart parameters window.

On the Chart parameters window, the BarRange determines the period of time traderswant to use the trade system and optimize it.

Click the Edit button, and then select thenumber of bars or the period from a specifieddate to the ending date. When applicable,traders can also select all sessions.

Chart types include:• Bar• Candlestick• Constant Volume Bar• Fill gap• No Gap• Percent bar• TradeFlow• Yield

TSO Results Table SettingsCustomize the display of TSO run results.

The Table tab options include:• Sort By: Sorts results by any of the

parameters or statistics. The default Sort By value is the same as the Optimizeon selection.

• Max Best Results: Limits the number of rows included in the results table. If the set number is lower than the total number of steps, only the best results will be shown. The default is set to 100.

TSO Results Table Settings (continued)Customize the display of TSO run results.

The Display Chart with drop-downmenu options include:• No Update: Does not update the chart with

optimization results. The display remains idle while the TSO is running.

• Current Value: Displays the chart with the value for a particular row.

• Best Value: Updates the chart with the best value (if the value changes).

• Best for Refresh: Displays the best value within a series of steps. Best for Refreshupdates after a series of additional steps.

• After Steps: Determines how often the chart is displayed or updated with the results table data. If No Update is selected, After Steps will be grayed out.

TSO Results Table Settings (continued)Customize the display of your TSO run results.

After setting the parameters on the TSO Setupwindow and the table settings, click the Setupbutton. The TSO run results are displayed onthe main window.

TSO ResultsView run results in a chart by double-clicking a cell.

The best combination of parameters is shown inthe first row. The first row is the current stepresult, regardless of the table sortingpreferences. After the run is completed, thecurrent line is no longer visible. As each stepruns, the TSO’s progress is reported on the topsection of the window, and rows are added tothe table.

To view specific run results in a chart, double-click a cell. The trade system graph at thebottom reflects the values on the results table.

Customize TSO ResultsOrder and adjust the parameters and statistic columns.

Traders can customize the display to view specific columns by right-clicking the top of one of the columnsand then by clicking the Customize Columns button.

Customize TSO Results (continued)Order and adjust the parameters and statistic columns.

From the TSO results table, trades can call a chart with optimizedparameters to be applied on the active trading system. To set up a

tradesystem with a preferred combination of parameters, right-click a TSOrun row and then select Launch Chart with Parameters.

Saving TSO ResultsSave results as a .txt file or as a clipboard.

To save your TSO results, click the Setup button, and then choose from SaveResults to TXT File or Copy All Grid to Clipboard.

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Disclaimer

Trading and investment carry a high level of risk, and CQG, Inc. does not make any recommendations for buying or selling any financial instruments. We offer educational information on ways to use our sophisticated CQG trading tools, but it is up to our customers and other readers to make their own trading and investment decisions or to consult with a registered investment advisor.

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