Back Bay FX Services LLC : Neural Stock Index Program

Summary

The Neural Stock Index Program (NSIP) is systematic and will look to trade both the long and short side of equity index futures. The Program is primarily predictive, and secondarily trend following, and may use a hedge strategy of entering an opposite position in a different stock index futures contract when the market looks to be undecided in direction. Hedging may involve the use of covered options.

Investment Strategy

The program is comprised of many neural networks that use daily price points for equities, coupled with volume, interest rates, oil and gold prices, and which will calculate essential indicator values. Another set of neural networks generate mathematical equivalents of Japanese Candlestick patterns and evaluate all conceivable candlestick patterns for the purposes of forecasting market movement on a daily basis by determining relative buyer and seller strengths. The third major component is comprised of algorithms that look to estimate the 'temperature' of the stock market by using an analogy with the Maxwell-Boltzmann equation of Statistical Mechanics. All of these algorithmic layers will provide inputs to the equity models that are responsible for signal generation. The goal of the Program is to outperform the SP 500 benchmark.

Risk Management

The programs algorithmic layers will provide daily inputs to the equity models that are responsible for signal generation. In times of uncertainty the program will go into hedge mode. The program also uses a very low margin to equity ratio of under 15%