The Trading Specification (the ‘Spec’) is at the heart of RuleTrader. It defines your automated investment system and is responsible for analysing share data and raising trading signals based on that data.

Develop your spec in RuleTrader Test using the tools in the Trading System dialog group on the Test System tab. Then back-test it to find out how it performs and run reports to find out how it can be improved. Make the improvements, re-test it, then repeat the cycle until you’re happy with your system and have the confidence to deploy it for live trading using RuleTrader Live.

A Trading Spec contains the following elements:

• Trading Universe (optional) filter to pre-select all possible shares that your system may be interested in. If used, this reduces the total number of shares RuleTrader has to deal with, which makes back-tests faster, as well as reducing the load on the live system.
• Trading Strategies, which simplify your trading system by dividing it into manageable sections or modules. Strategies can be used to target particular markets, or market conditions, or to implement a specific trading idea. For example, the Example Investment System contains two strategies: the Value & Growth strategy to target smallish companies with good fundamentals and an affordable share price; and the Momentum strategy that targets medium to large companies whose share price is taking off.

Each strategy consists of three components: List Selectors, Trading Rules and Named Terms, as described next:

• List Selectors select a trading list of shares for the strategy’s trading rules to act upon. They can be reselected periodically or when some condition is met. In Live sessions, each time a new item of data is received for any share in that list, RuleTrader re-evaluates the Trading Rules you’ve defined against that share, while taking into account the new data.
• Trading Rules make the decision whether to trade a share. The trading rule specifies:
  • the nature of the trade e.g. to open, increase, decrease, or close a position
  • the size of the trade to make, if the rule is triggered
  • the criteria, or condition, that triggers the rule
• In addition to rules that trade shares, there are also Action Rules, which are used to display alerts (only relevant in RuleTrader Live sessions) or to update the values of Persistent Terms (see Named Terms, next).
• Named Terms are a way of simplifying trading rules and other terms by replacing any complex expressions they may use with a simple name to represent the value of those expressions. They can represent numeric or percentage values, the results of conditional expressions (i.e. true or false), a selected share, or a selected list of shares. A form of named term called a Persistent Term is also available. The values of these persist between ShareScope / RuleTrader sessions, to give your Spec ‘memory’.