CONTENTS

• Dakota version 1.3: New Features

• New Dakota Videos: MicroChip (MCHP) and Propane Futures

• Tech Corner: Flocking: How and Why it works

• Customer Comments

BioComp Dakota Version 1.3
BioComp Dakota is one of the newest technologies to be brought to trading.  We believe this "newness" provides you an advantage because older technologies are "built-into" security prices through market efficiencies.  The more a technology becomes common, the harder it is for it to make money, because a larger population of traders are using it simultaneously.  Having a unique approach, such as continuously adaptive systems that Dakota provides, helps you avoid these efficiencies.

New Features:
Being a new product delivering new technologies, Dakota is rapidly progressing through its lifecycle.  We will release version 1.3 next week with important features, including:

• Stops and "ScriptStops"
  Much has been written that proper exit timing is key to gains and of course, protection of trading assets is critical.  While I strongly believe that entry AND exit are both critical, there is no argument that asset protection is a top priority.  To aid Dakota users, we've now added stops, both of our creation and also of yours, via "ScriptStops".  Now you can not only use stops, but write your own using Visual Basic within Dakota itself.  You can apply different types of stops, or the same stop multiple times but with different settings, simultaneously in the same system.  This enables you to customize Dakota to more closely match your style.  The first two stops we will provide "out-of-the-box" will be an "Equity Decline" stop and an "Equity Variance" stop.  The "Equity Decline" stop will stop you out when a moving average of equity begins to decline.  The "Equity Variance" stop will take you out when the current equity is negatively statistically significant from a rolling average equity.  Of course, there are a plethora of standard stops that can and will be created (trailing, for example), but we wanted to start with something unique.  Now, you cannot stop a bad system into a good one, but you certainly can make more money with good stops on a good system and still protect your assets and reduce those nail-biting drawdowns.
   
• Performance Consistency
  Repeatability and consistency are two key measures of the quality of any trading system and adaptive ones in particular.  Now with Dakota 1.3 we've add a feature that enhances system reproducibility by enabling you to initialize bot parameters uniformly across their ranges, then let the swarm technology seek equity peaks.

More Bots
As Dakota grows, so do the resources that are available.  Here's a list of the adaptive trading bots that are presently available (and users are also writing their own):

• Equity-Controller Moving Average Crossover... Good for investing in trendy securities
• Flocking Moving Average Crossover... Also good for investing in trendy securities
• Momentum Oscillator... Good for intermediate trade speed
• WinSlope... Trades an adaptive window regression slope
• WinZ... A ZScore trader, not unlike Bollinger bands
• Swing Trader... Trade between adaptive price thresholds
• Advance/Decline Pessimist  Good for choppy securities that always seem to turn on you quickly
• Self-Adjusting RSI (a Stocks and Commodities Magazine Traders' Tip)
• Jacinta Chan Bollinger Bands (BBZ) (another Stocks and Commodities Magazine Traders' Tip)
• Polynomial Forecaster
• Poly A/D Pessimist

New Videos  We added two new videos: trading MicroChip (MCHP) and Propane futures.  The results are nicely reproducible.

• MicroChip (MCHP)
  For this stock, we are using an "Advance/Decline Pessimist" ScriptBot, the source code for which is available to Dakota users in the exclusive Dakota User Web Site.  The video shows how Dakota earns a hypothetical 76 $/share on a stock priced at $37 over 5 years (results are hypothetical, so read the disclaimer on the web page!  There are risks and your results will vary).  The neat thing about the "Advance/Decline Pessimist" is that if a security's price is strongly rising, you EXIT or go short, and if it is strongly declining you BUY or "Go Long".  This anticipative strategy is successful on a surprising number of securities.  (pssst... the advance/decline pessimist bot works pretty well on AXP too, about a hypothetical 95$/share profit over the last 10 years or $25/share in the last 5 years... remember, this is walk-forward out-of-sample paper trading, not back-tested/fitted results).
   
• Propane Futures
  Here we trade Propane using an adaptive Momentum bot to grab about 400% of buy and hold, hypothetically, over the last 5 years, while "in the market" about 45% of the time.  The Momentum bot (the "MoBot" I like to call it) comes standard with Dakota and ScriptBot source code is available on our Dakota site too, so users can see how it works.

Please note that the above ticker/bot combinations are known to work nicely together.  Dakota's bots do not work for all securities, but these were found by users sharing results via Dakota's collaborative Knowledge Base feature.  When you get Dakota license, you are not alone.  You have access to our staff, the discussion group, and the Knowledge Base.  You stand on the shoulders of those who have come before you.

With these enhancements we have not increased Dakota's price.  It remain at a solid value...

• Standard                  $549
  Get version 1.x, pay for upgrades to versions 2, 3, etc. as you go, if you choose.
   
• Product Sponsor      $1,320
  Receive all Dakota product updates for the life of the product
  Receive all future BioComp-authored bots at no charge

Most BioComp Profit users recognize that the Sponsor level is a good deal, since Profit is approaching it's 10th birthday.  Dakota orders can be placed on-line at:  http://www.biocompsystems.com/store/financial/index.htm
(NOTE: We will be processing orders off and on over the February 11/12 weekend so you likely can download and get going Friday night, Saturday or Sunday)

Long time BioComp Customer?  You may automatically receive a Silver (10%), Gold (15%) or Platinum (20%) Preferred Customer Discount when we process your order.

Back to top

Tech Notes: Flocking
BioComp Dakota presently has two built-in adaptive technologies for adjusting trading bot parameters as it walks-forward through security prices: Flocking and Equity Control.  This issue we will talk about Flocking.  Next time we'll cover Equity Control.

Flocking is much like a flock of birds communicating with each other.  In this case, we have a flock of adaptive trading bots sharing information about their trading parameters (moving average periods, decision thresholds, etc.) vs. equity performance.  Each bot on each bar looks at its own equity and the equity of the other bots in the flock, and makes an equity-weighted move of it's parameters towards all the other bots in the flock and a bit more strongly towards the best performing bot.  In this process, there is a small injection of diversity so that the bots don't just pile up on each other, but hover on and around peak equity, looking for new opportunities as the markets shift that peak.

Since this is an equity-weighted trading system parameter movement, the bots will "fly" towards good equity.  When the bots are ill-performing in the current moment, they automatically repel from each other because negative equity weighting means negative "move towards" behavior.  This spreads the bots across the parameter space, which is exactly what we want.  When things are poor, cover the space to find new goodness quickly.  This divergence of bots does not mean instability, however, because Dakota, by default, is computing the average signal across all the bots and thus the resulting signal remains reasonably well behaved as the bots shift their trading strategies to smoothly converge to a new equity peak.  Also note that by taking the average signal across a population of adapting trading bots, you have built-in parallel averaging and smoothing.  While moving averages induce time-lag, parallel averaging does not.  You get robustness without the lag.

Customer Comments
Here are some comments we recently received from a Dakota user:

P.S.  Don't forget that qualified customers will automatically receive a Silver (10%), Gold (15%) or Platinum (20%) Preferred Customer Discount on their orders.  It will be applied when your order is processed... yes, by a human who cares.

Closure

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These documents are provided for informational purposes only. The information contained in this document represents the current view of BioComp Systems on the material discussed as of the date of publication.  Materials written should not be interpreted to be a commitment on the part of BioComp and BioComp cannot guarantee the accuracy of any information presented after the date of publication.   INFORMATION PROVIDED IN THIS DOCUMENT IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND FREEDOM FROM INFRINGEMENT. Statements of equity performance are hypothetical and have not been substantiated by records of actual trading.  Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading.  Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity.  Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those mentioned.

The user assumes the entire risk as to the accuracy and the use of this document. This document may be copied and distributed subject to the following conditions: 1) The entire document must be copied without modification; 2) All copies must contain BioComp's copyright notice and any other notices provided therein; and 3) This document may not be distributed for profit.  All trademarks acknowledged.  (C) Copyright BioComp Systems, Inc. 2006.