Dynamic mode
By default upon installation, the Turning Points (TP) add-on works in the so-called “dynamic” mode. In dynamic mode, the add-on finds turning points that are best for data currently available on the chart. In other words, the turning point engine establishes peaks that are highest between two neighboring valleys (or between the most recent valley and the end of the chart) and valleys that are lowest between neighboring peaks (or between the most recent peak and the end of the chart).
The dynamic mode assures that established turning points are overall best for all the data currently found on the chart by modifying the turning points as new data dictates. The dynamic mode can be compared to a human expert that is asked to draw the best zigzag line through ups and downs in a time series.
An inevitable consequence of the dynamic mode is that new data can change the location of the most recent turning point. For example, suppose the last turning point is a peak. Then suppose, as more data arrives, a new higher peak is found before a valley is found. In that case, the last turning point will be re-adjusted higher. The “re-adjustment” means that the last peak will be deleted from its current location and move to the right on the chart to a new location. The peak disappearance can lead to changed values of all turning point indicators that are dependent on that particular peak.
If you have built a trading strategy or prediction based on any of our indicators in which the location or value of the most recent turning point is involved, it is possible that an existing buy/sell signal already on the chart will disappear or a new signal will appear where it was not before.
That also means backtests may be a little optimistic. You should not let this anomaly detract from your appreciation of the power of the Turning Points add-on; the next signal you get may be better because of the dynamic adaptation that is taking place. However you have to be mentally prepared to accept that an old signal can change.
There is no such problem if you have built a prediction with one of the TP indicators as actual output as opposed to an input. The reason is that predictions only use actual output values during optimization and backtesting. When going forward, predictions only use inputs and don’t look at the actual output. When a trading strategy is built around such a prediction, buy/sell signals stay and do not move when new data arrives.
In NeuroShell Trader 6 it is safe to use dynamic turning points when the integrated trading is turned ON. NST6 has a special mechanism to remember buy/sell signals already executed on the chart. You don’t even need to actually setup a brokerage to use integrated trading. It is enough to initiate active trading through the View menu -> Alerts and Orders Window. Put a check mark against a trading strategy that uses TP indicators as inputs, and executed signals will stay on the chart once new data arrives.
Static mode
For those users who cannot tolerate buy/sell signal re-adjustment when trading (especially in NeuroShell Trader 5), there is another version of the TP add-on. We call this version “static” because the TP engine in this case establishes turning points once permanently and does not re-adjust them when new data arrives.
Some users find static TPs useful, some do not. A big disadvantage of static turning points is that, when backtesting, turning points located may not be best peaks and valleys as found by a human eye. As a result, backtesting results are generally more pessimistic when compared to dynamic TPs backtesting results, and your models are not as good as they could potentially be given the data.
Switching between Dynamic and Static Turning Points
By default, the Turning Points add-on installs its dynamic engine. The engine is contained in the tpoints.dll file which is located in your NeuroShell Trader 6/Template folder.
Upon installation, the Turning Points add-on also creates two files identically named tpoints.dll, but located in two separate backup folders. This makes switching between dynamic and static modes an easy task.
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To install the static TP engine, manually copy the file:
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NeuroShell Trader 6\Turning Points Examples\Backup Static DLL\tpoints.dll
into your NeuroShell Trader 6\Template folder.
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To re-install the dynamic TP engine, manually copy the file:
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NeuroShell Trader 6\Turning Points Examples\Backup Dynamic DLL\tpoints.dll
into your NeuroShell Trader 6\Template folder.
It is best to do all the copying while NeuroShell Trader is not running.
If you are running previous NST versions, replace NeuroShell Trader 6 above with the name of your NST folder.
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