What is the Signal Aggregator?
Most trading systems evaluate a trading signal and execute actions if the signal is true or false.
Some trading systems will use multiple signals. Generally, all of the signals must evaluate to true for an action to be executed.
A trade signal is any logic derived from the market that can be evaluate to true or false. A trade signal is usually based on technical analysis: indicators values, prices, candle-stick patterns, etc.
An example of a simple trade signal is:
RSI > 75.0
This trade signals reads "RSI greater than 75.0". If the current RSI value is greater than 75.0, then this trade signal will evaluate to true.
This kind of signal can be very powerful and is the basis for virtually all automated trading systems.
The Signal Aggregator brings technical analysis to another level. It combines an unlimited number of trade signals and applies an individual weight to each signal.
The Signal Aggregator works likes this:
- Trade Signals are added to the Signal Aggregator.
- Each Signal returns a value of true or false.
- Each Signal is assigned a weight.
- If a Signal evaluates to true, its weight is added to the Signal Aggregator's total weight.
- If the Signal Aggregator's total weight is greater than a threshold value, a trading action is executed.
This aggregation allows some signals to be assigned a greater or lesser weight than other signals. The result is that a single trade signal does not control the entire trade action.
This is an example of six trade signals, each with its own assigned weight:
Trade Signal |
Weight |
Notes |
ADX > 35.0 |
20 |
ADX is greater than 35.0 |
Close[1] > Close[2] |
20 |
The Close price of the previous candle is greater than the Close price before the previous candle |
RSI < 75.0 |
20 |
The RSI is less than 75 |
Hour > 5 and Hour < 11 |
10 |
The time is between 5 and 11 o'clock |
High[1] > iHighest(24,...) |
25 |
The current High price is greater than the highest high of the last 24 candles |
Daily ATR > Weekly ATR |
5 |
The daily ATR is greater than the weekly ATR |
Total* |
100 |
Total weight of all signals |
*The sum of all weights is 100.
- For this Signal Aggregator a threshold value is chosen, for example: threshold = 75.
- If a Trade Signal evaluates to true, its weight is added to the Signal Aggregator's total weight.
- If the Signal Aggregator's total weight is greater than 75, a trade action is executed.
- There are several combinations of trueTrade Signals that can lead to a threshold value greater than 75, but no one signal can drive the trade action.