VantagePoint is perhaps one of the few 'neural net' software packages to survive the test of time. VantagePoint, an inter-market neural net software package, was developed in 1991, and claims a 75-80% accuracy rate in predicting markets.

Whilst neural net packages enjoyed a rush of new found popularity around ten years ago, most of these packages have not withstood the test of time like VantagePoint has. We decided to put this neural net software through its paces.

What is a neural network?
The function of a 'neural network' is to learn to recognize patterns in data. Once the neural net has been 'trained' on a past data sample, the idea is that it can make predictions by detecting similar patterns in current data. Software that 'learns' has so called "Artificial Intelligence." Thus the term 'neural' or 'brain-like,' as it can literally search out millions of possible correlations that are invisible to the naked eye. It 'learns' which patterns work best, and then uses these adaptive rule sets to make current predictions.

Inter-market Relationships?
In the early 1990's the idea that markets were related came to the fore, with the publication of books such as John Murphy's Intermarket Technical Analysis. One doesn't have to be a rocket scientist to see these obvious inter-market relationships. Even markets that apparently have little to do with each other sometimes appear to have correlations that can be seen by eyeballing charts of the two side by side.

On a fundamental level, everyone knows that changes in one market will often precipitate moves in another.  For example, a weaker dollar sends the oil price in one direction, while stock market indices react and bond markets do something else. Other commodities also appear to be affected.

Changes in one set of currencies will often have an effect on another currency. VantagePoint's job is to find mathematical correlations between these relationships.

The VantagePoint software looks at a number of different 'inputs' to its inter-market neural net.  Their GBPUSD cash model, for example, uses inputs from the AUDJPY, AUDUSD, GBPJPY, Gold, EURCAD, Nasdaq 100, FTSE 100, S&P 500 and US Dollar Index (as well as Cable itself) in order to generate its predictions. Users may adjust the inputs to reflect the cash or futures contracts as inputs for some markets.

Programming and correlating these 'inter-market' relationships, and then producing a simple, useable output is the main function in Vantage Point.

At first glance the software output consists of no more than a page packed full of numbers, a simple chart with a few lines and an oscillator with none of the sexy bells and whistles of the market packages we are commonly used to. You could be forgiven for tossing it aside as it doesn't 'shout' at you.

However, the output is credible and Vantage Point seem to have a notable band of followers in the UK and elsewhere. The predicted highs and lows are sometimes incredibly accurate, hitting the target to the tick.

Useable Predictive Indicators?
Perhaps VantagePoint's 'minimalist' output from its multi market data input is in fact to be its greatest strength. It takes open, high, low, close and volume information from as many as nine separate but related markets to issue five separate predictions each day. These are detailed below:

One 'network' predicts tomorrow's high and one predicts tomorrow's low. A third network predicts a 'Neural Index' which indicates whether or not the market is likely to top out or bottom out (in other words, change trend direction) in the next two days. The fourth network predicts the five day moving average of closes, for two days into the future and the fifth and final neural network predicts the ten day moving average, for four days into the future.

These indicators are then charted and tabulated in a user defined output in the package. The outputs are also tabulated and charted in terms of oscillators, based around a zero line, comparing the predicted output with the current data. For example, Phigh Diff is a derivative indicator that shows the difference between the predicted high for tomorrow and today's actual high.

These outputs help to build a useable momentum picture so one can literally see the market heading into a turn. VantagePoint has turned traditionally reactive indicators like oscillators and added an accurate predictive element.

Other oscillators include Plow Diff, showing the difference between the predicted low for tomorrow and the actual low and PTS Diff and PTM Diff, which show (separately) the difference between the predicted and actual two-day (PTS) and the predicted and actual four-day (PTM) moving averages.

It is left up to the user to combine and use these, either with each other or with other technical indicators, in order to produce a workable technique or system to trade the market(s) they are interested in.

Example
One committed user of VantagePoint software is full-time trader Richard Willis from Yorkshire. Willis uses VantagePoint's daily data output to trade currencies intra-day.

He claims a high success rate trading the 'majors,' including 'Cable' (Sterling /US$), Euro/US$, US$/Yen, US$/Swiss Franc, US$/Canadian Dollar and Euro/Sterling.

'I look at the forecasts for the high and low for each currency and I look at the index trend indicator. I look at whether it is predicted to trend upwards or downwards for the day. Then I either wait or put an order in towards the predicted day's high or predicted day's low to go long or short depending on which way the market is predicted to go,' comments Richard.

According to Willis he trades 'whichever currencies offer the best value for the day. If one currency only has a predicted range of 50 or 60 points on the day it's not worthwhile me doing, but if you've got a (predicted) range of 70, 80, or 90 points I'll trade it. I'm not looking to make 80 or 90 points at a time. I'm quite happy with 40 or 50 points on each trade.'

Mr Willis will also look for a confluence of predicted points coming together to further confirm his entry points. For example, he notes, 'If for example Cable (Pound/US$) is approaching its day's high and the Swiss Franc (US$/Swiss Franc) is approaching its day's low everything's in sync. Then you know you're onto a good one.'

'Out of all the trades I've done this week,' admits Richard, 'I've only had one loser, for 30 points. So I've had about 400 points out of the market this week.'   Willis also uses the longer term data from VantagePoint to take positions in commodity futures.

The package works on an internet based daily data download feed via either CSI, CRB or Genesis, two three of America's most reputable end of day data services.

The company haves installed a freephone number in the UK that connects directly with their office in Florida. They do offer a free sample trial of VantagePoint's forecastings 'output', (rather than the software itself)  from their website at www.tradertech.com or by calling one of the following numbers: USA:  1-800-732-5407, Canada:   1-800-732-5407, United Kingdom:  0-800-0186-502, Australia:  1-800-992-327.

Pricing
Whilst the package is seems rather expensive, relative to a 'standard' technical toolbox like say, Metastock, it does cater for a person who is looking to a package that goes some way to answering questions rather than giving a series of endless possibilities and scenarios.

Depending on the number of market modules chosen, the package costs between $3,500 and $10,000. Despite the price tag, the company argues that its cost is small in comparison to the potential profit to be realized from using it. It is of courses an age old argument - but one which is can perhaps be justified by the number of users who seem to be able to turn a profit from using its output to their trading advantage.  Market Technologies, LLC has become an Inc. 500 Company which means it is one of the fastest growing privately held companies in the United States.

Markets
Vantage Point has significantly enhanced the number of markets it covers. Apart from over 25 global commodity markets and several global indices, Vantage Point covers forecasts the following a range of currency futures and cash forex markets:

Currency Futures   Australian Dollar   British Pound   Canadian Dollar   Euro FX   Japanese Yen   Swiss Franc   US Dollar Index

Forex Pairs   US Dollar/Canadian $   US Dollar/Jap Yen   US Dollar/Swiss Franc   Aust $/US Dollar   Euro $/US Dollar   B-Pound/US Dollar   Aust $/Jap Yen   B-Pound/Jap Yen   B-Pound/Swiss Franc   Euro $/B-Pound   Euro $/Canadian $   Euro $/Jap Yen   NZD $/US Dollar

Conclusion
Whilst no software package is a perfect predictor of the future, VantagePoint goes some way towards giving an idea of what might happen the next day and also giving an idea of the intermediate trend. Its solutions oriented simplicity and accuracy are clearly its main strengths.

The short term predicted highs and lows can be used by day traders trying to trade in the direction of the trend, whilst the medium term predicted averages can be used to detect intermediate term trend changes.

VantagePoint is clearly a useful tool for the futures, currency and index trader though currently it does not address individual equities. According to the company, the complexity of the program is such that a set of programmers is employed to customize the package for each and every market, so it would perhaps be difficult to do this for individual equities. 

This is not a package that offers simplistic black and white buy and sell signals though. Many users have developed their own trading 'systems' by using its indicators though, often combining these with conventional technical analysis. VantagePoint, with its predictive technology, could serve as a useful tool in the traders armory for short term spread betting, binary betting or straight futures trading. Highly recommended.

 

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