After launching the Nirvana Club in 1996, we built a Genetic Algorithm to find combinations of Factors and Clues that formed "rules" in a Knowedge Base, such as "If MACD is rising and Volume is increasing and today's Open is above yesterday's Close, there is a 70% chance of the security going up." 

This process involved many thousands of processing hours.  We networked all our machines together and let them "cook" each night to find these rules.

In 1998 we released the first Knowledge Bases to  members, calling it ARM2 Release 2 (Release 1 was experimental).  ARM2 R2 improved accuracy by about 10 points.  That was a great start, but we had a way to go.  So we continued looking for better ways to do the same job.

ARM2 R3 - Our First Neural Network
In 1999 we released ARM2 R3 using a commercial Neural Network.  We discovered that Neural Networks are better suited to our problem (though we later re-invented the Genetic Algorithm component when we created ARM3.)  Market Factors and Clues were fed as "inputs" into a the Nerual Network to find relationships in the data.

At each Signal event, a Neural Network was consulted to determine the likelihood of the security rising or falling based on the trained Neural Network.  The Network issued a "Thumbs Up" or "Thumbs Down" indication on each Signal. Signals were then either passed to the Vote Line or not based on this determination.

The ARM2 Release 3 Neural Networks increased the accuracy of OmniTrader's buy/sell signals by 10 to 20%. An OmniTrader profile that generated an average Forward Test accuracy of 55% could generate accuracies on the order of 65 to 70 percent. This was a phenomenal achievement so early in the Club's life. 

How is ARM2 different?
An important aspect of all ARM2 (and ARM3) strategies is the fact that optimization is not used.  Standard OmniTrader profiles (like Default) work by optimizing every Symbol individually to find the best parameters for the Systems being used.  This is a good way to tune a System, but has the disadvantage that as soon as a new Back Test is run, the Signals will change as new parameters are chosen. 

With ARM2 and ARM3, System Parameters are fixed and do not vary, which in turn means the signals will not change. Signals that are passed to the Neural Network either "make it" to the Vote Line or filtered out the same way regardless of how when the Back Test is run.  The same Signal will always be seen in the Chart.  This behavior definitely makes it easier to "trust" the Signals in real trading.

The Next Generation
ARM2 was very important in our understanding of how to apply Artificial Intelligence technology to the market problem.  Using this knowledge, we developed the next generation of A.I. tools for members that takes advantage of OmniTrader's Strategy Builder paradigm - ARM3.  ARM3 is our current Nirvana Club Signal Technology.  Click here.here to learn more about ARM3.