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Colin Nicholson's website is choc full of valuable information on investing and analysis.

Colin is best known from his monthly articles on charting and the psychology of investing in AFR Smart Investor Magazine. His books Building Wealth in the Stock Market and Think Like the Great Investors are available from his website or any good bookshop.

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Insight Trader Systems Tester

What can the Insight Trader Systems Module do for me?

Insight Trader Systems TesterThe Insight Trader Systems Module performs two separate functions:

As a SYSTEMS FILTER it will allow you to scan your whole database of securities, for any specific date, to highlight those securities which satisfy a set of fundamental and/or technical criteria that you specify. For example, you would use this where you might like to be alerted to all securities where the MACD crossed upwards because you regard this event as generally signalling a possible buying opportunity.

As a PROFITABILITY TESTER it can use the same set of criteria as a system of trading rules to allow you to test the profitability of this trading system on a single security over a range of historical data. In other words, if you had been using this system to trade BHP over the last ten years, how much profit would you have made. You can even test say 20 different systems on each of 500 different stocks in one operation.

How do I set up the criteria?

The criteria you specify are based on indicators already available in the Insight Trader charting package as well as a number of additional functions and are expressed in an easily understandable way such as:
RSI(14,D):>: 70

This example criterion will be satisfied if the 14 day RSI is above 70.

If required these functions such as RSI and Moving Averages can be added, subtracted, multiplied or divided together to produce new values.

You can specify whether one value equals another, is greater than or less than another, whether one value has just penetrated another, or whether the trigger line of an indicator such as the stochastic has crossed up or down. Fundamental criteria such as dividend yield and PER can be mixed with technical signals. There are 67 technical and fundamental functions such as RSI to choose from.

What is a SYSTEM?

Each system is composed of two sets of criteria - one set to alert you to a buying opportunity, the other set to alert you to a selling opportunity. The buy alert set and the sell alert set can each have between 1 and 8 criteria of the type in the example given above, linked by AND/OR relationships.

Using these options you can construct systems varying in complexity from quite simple to very elaborate. Once you have constructed a system you can give it a name and save it to disk. Up to 1000 such systems can be saved for later recall at any time for use in either the filter mode or the profitability testing mode.

How do I operate the Filter?

You load up the system of your choice from the list of systems you have saved to disk and specify the date for which you wish to perform the filtering. When complete, a report will appear presenting a list of the securities highlighted together with an indication of each criterion satisfied. This highlight list can be Autorun in the normal way to give a slideshow of all securities selected.

How do I run a Profitability Test?

Again load the system of your choice from the list of saved systems. Set up the conditions for trading which include things like brokerage rates, the size of your initial equity, and the minimum parcel of securities which you can trade. You can also specify any of five different types of stop loss conditions which, if satisfied, would cause you to exit your position.

Enter the start date, end date and security code required for the profitability run. The output report displays the Date of the trade, the Position held the Action taken, the Price at which the trade occurred, the Profit accumulated, Commissions paid, Equity remaining and the profit a Buy and Hold strategy would have produced for comparison. Once you have finished a profitability run the buy and sell positions can be overlaid on a chart of the security you have just tested.

The Insight Trader Systems Module is an optional addition to your normal Insight Trader charting program and becomes accessible from within it.