August 2002

'Practice makes perfect', so the saying goes.  From our earliest days as school children learning a new subject, a valuable teaching mechanism has always been practice, practice, and more practice.  Ensign Windows has a nifty feature called 'Playback' that is a valuable tool for practicing your trading skills.  You are invited to download a copy of Ensign Windows from the Internet, and use the program without cost or obligation during a trial period. Ensign Software wants you to discover what Playback can do for you, and have fun with others in the B-Line chat room in Ensign Windows who use Playback on a regular basis.  This article will give you step by step instructions to get Ensign Windows installed and use the Playback feature.  You do not have to have a data feed in order for Playback to function as you will see.  You do not have to contact Ensign Software or anyone.  Everything in this article you can do privately.   Again, you are invited to follow along and enjoy.

Download Ensign Windows

Ensign Windows versions are available for the data feeds from eSignal, DTN, IQFeed, TransAct Futures, Open Tick, and Interactive Brokers.   Click this Ensign Windows link to start the download. 

A dialog box will display for the file download.   Click on the OPEN button.

The download will commence and take 2 minutes on a DSL or cable Internet connection, or 15 minutes on a slow telephone modem.

When the download is complete, the installation program should start automatically and display this screen.   Click the Next button to progress through the various installation screens and accept all defaults throughout the process.  On the final screen, click the RUN button and Ensign Windows will execute.

Download Play Back Files

Ensign Software maintains a library of playback files for the e-mini contracts.   You will use a tool in Ensign Windows to download one or more of these play back files.   In Ensign Windows, click menu File | Open | Internet Services, or click on the button on the main toolbar with 2 computers in the image.

The Ensign Internet Services form will display.  Select the Upgrade tab and click on the Connect button.

Ensign Windows will connect to the Ensign web site and fill in the dates of various files that are available for download.  Check the bullet for the Playback File.  Use the dropdown list to select a file date for either ES or NQ.

Now, click the Download button to fetch the file.   A meter will show the file download progress.  You are welcome to repeat the steps of  selecting a file  in the Playback File download list, and clicking the Download button to retrieve the file.  These play back files are being saved in the C:\Ensign\Playback folder.  When you are done downloading play back files, click the OK button to close the Internet Services form.

Set-Up Play Back

Now that you have the program and a few playback files, it is time to play.   Click menu Set-Up | Play Back.

This takes you to the Playback form where you control the play back feature.  On the form, enter the symbol in the first edit box, which will be either ES Z2 or NQ Z2.  

Now, click on the Browse button and select one of the playback files you downloaded from the Ensign web site.

Enter a Start Time of 8:30 to resume at the beginning of the day, or enter any other time during the day.     The data ahead of the start time will be showing on the chart already.  The time you enter is the time to resume play back of data for the selected date in the file name.  Have the Sync Time be blank.   The Playback Speed can be actual speed, or played faster at double speed.  

We are almost ready now.  The final step after verifying your play back parameters is to click the Reset Current Play Back button on the form.  Then click the OK button to close the Playback set-up form.

Open DEMO Chart

Playback is feeding a tick stream for your play back symbol into a special symbol called DEMO.   Therefore, open a chart for DEMO and it will be updating tick by tick, using actual data for either ES U2 or NQ U2, which ever symbol you are playing back.   To open a chart for DEMO, click the 2nd button on the main button bar which looks like a chart with 2 blue bars.

The chart panel is used to select a symbol and a time frame for the chart.   If DEMO is not seen in the list of symbols, then type DEMO in the Enter Symbol box and click the Add button just above the Enter Symbol box.   Click on DEMO in the Symbols list so it is selected.   Click on a time frame in the Times list.  Then click on the Open button.   A chart will be displayed and it will be updating tick by tick with data from the play back file.

Various draw tools and studies are available to use in analyzing the chart.  You are invited to dress the chart with studies and tools you like to use and practice buying and selling the market.  Information on how to use a Simulation Broker in conjunction with Playback can be found on the Help page of the Ensign web site.

A lot of traders meet in the B-Line chat room in Ensign Windows.  Many of these traders use Playback to hone their trading skills.  You are welcome to drop in and talk shop.  This is a very friendly bunch of traders, and they will help you with any Ensign Windows question you might have on setting up your studies and using the draw tools.

Uninstall Ensign Windows
During your evaluation period, check out the ability to download data for any symbol in any time frame using the Internet Services tool.   This is a wonderful resource for obtaining data from the Internet so you have charts to analyze.  Hopefully you like what you discover and will continue using the Ensign Windows program beyond September 1st.  Ensign Windows is available for a monthly fee of $39.95.  Use the secure order form on the Ensign web site to initiate a subscription.  The first month will be prorated for the balance of the month.  Cancel any time.

Ensign Windows can be removed from your computer as easily as it was installed.   Use your Windows Explorer program to navigate to the C:\Ensign folder and execute the UNWISE.EXE program.   This will remove Ensign Windows from your computer.   Thanks for taking a look at Ensign Windows and at Playback.

Neural Networks were discussed in the January 2002 issue of this Trading Tips newsletter.  This article is an update on this intriguing subject.

In June 2002, Larry Pesavento and Ensign Software signed a cooperation agreement which began the exchange of confidential information about the proprietary neural network used by Larry to give him his timing signals.   Larry's method of trading uses one price tool (Fibonacci Levels) and one timing tool (neural net forecast).  Larry's trading style was reviewed in the June 2002 issue of this newsletter.

A neural network extracts a forecast of tomorrow's price action by examining past data.  Sounds a bit mysterious and complex, and indeed it is.  We all feel that the market repeats itself, and accordingly use tools like cycles to measure repetitions in time, Fibonacci to measure repetitions in price, and Elliott waves to see repetitions in patterns.  A neural network, if designed properly, is allowed to generalize, and through an iterative process discover characteristics in the training data that contribute to a useful prediction.

The objective of the Pesavento/Ensign partnership is to design a better neural net.  In order to design a better mouse trap, one needs to thoroughly understand the design of an existing mouse trap.  Such is the case with the Pesavento neural net.  The originator of the Pesavento neural net design back in the early 1990s was Dennis Regan (deceased) .  I wish Dennis's thoughts and reasons for why certain things were done had been documented, but alas, such engineering notes apparently do not exist.  Therefore, Dr. John Arrington (PhD Stanford) and I have been spent the past couple months reverse engineering the Pesavento neural net, testing and understanding thoroughly every aspect of its unique design.  

Now I apologize in advance that I cannot divulge all that I have learned.  I have signed a non-disclosure agreement with Mr. Pesavento to protect the value of this intellectual property.  I will say that I have been totally surprised at the uniqueness of Mr. Regan's design.  It is something I would never in a month of Sundays have thought of.  In comparison to the neural nets I worked with previously, Mr. Regan's net definitely shows thinking outside of the norm.

While I cannot divulge exactly what Mr. Regan's design is, I can tell you what it is NOT.   The neural net designs that John and I were pursuing prior to our partnership with Mr. Pesavento, were based on training the neural net with several weeks of past price data and generating tomorrow's  forecast using 2-minute bars.  We started down that path three years ago because the Pesavento forecasts were overlaid on 2-minute bar charts.  Mr. Regan's design is not anything like that, and that initially really surprised both John and I.   Initially we wondered if we had the full Regan design because it did not seem like it could possibly work, yet it does.

The Arrington model was training with prices on the input nodes of the neural net.  The Regan model does no such thing.  It does not input prices, and that shocked us.  Instead it uses for input what I will describe as a pair of frequencies.  The analogy that John and I have used to get a mental handle on what is happening is that of a bat's radar.   A bat bounces a frequency off an object, and receives back a three dimensional image on its stereo receivers.  The Regan neural net is doing something similar, bouncing frequencies from two different points in time and space and detecting an image.  We know that Dennis Regan worked for the U.S. government on the top-secret Tomahawk missile guidance system.   Perhaps the design of the Pesavento neural net has its roots in technology Dennis was familiar with.  That is just one of our questions that will remain unanswered because Dennis died.

Well, we are involved in reverse engineering, researching, thinking, trying variations on the original Regan ideas.   Progress seems promising, but all new ideas must weather the test of time.  One idea is showing exceptional promise and was used to generate the following forecast for August 5th.   The blue line forecast was published in advance on the www.dacharts.com web site on Saturday, August 3rd.   I marvel at the correlation of Monday's actual price action.   I had a big smile on my face as I watched the day progress and track the forecast.  This idea just might be something great.

Not all forecasts are of this quality and usefulness.   But when a forecast like the above comes along, it is worth bragging about, particularly since it was published in advance.  Let me remind you the key use of the forecast is for TIMING.   For example, note the alignment of the top turn at 8:20, the alignment of the bottom turn at 10:42, and the alignment of the top at 13:26.  This is exceptional and exactly the trading advantage Mr. Pesavento seeks to have by using neural nets in his trading.

(Note:  Forecasts may be posted occasionally on the www.dacharts.com web site.   I do not know exactly where this project will lead, but offer this as an answer to the frequent inquiry of 'How do I get a hold of these forecasts?'.)