Noxa CSSA Hands-On Tutorial For Neuroshell Trader v5.x

Noxa CSSA
© <2007> <Noxa Analytics, Inc.>
Causal Singular Spectrum Analysis

Noxa CSSA
Table of Contents
Foreword 0
Part I Overview 1
Part II Disclaimer/ License Agreement 2
Part III CSSA in Action 5

1 Transaction Timing
................................................................................................................................... 5
2 Built in Signals
................................................................................................................................... 6
3 Crossover Signals
................................................................................................................................... 10
4 Support/Resistance
...................................................................................................................................
Violation Signals 12
5 Trading Strategies
................................................................................................................................... 14
6 Knowledge ...................................................................................................................................
Discovery 20
7 Trend Confirmation
................................................................................................................................... 21
8 Setting the ...................................................................................................................................
Range 22
9 Inserting CSSA
...................................................................................................................................
Entry Indicators in a trading strategy 32
Part IV CSSA 101 45

1 Singular Spectrum
................................................................................................................................... 45
2 Embedding................................................................................................................................... 47
3 Decomposition
................................................................................................................................... 49
4 Grouping ................................................................................................................................... 51
5 Causality ................................................................................................................................... 52
Part V CSSA indicators 54

1 CSSA-ShowRange
................................................................................................................................... 55
2 CSSA-ShowEigenvectors
................................................................................................................................... 56
3 CSSA-Cycles
................................................................................................................................... 58
4 CSSA-Slope................................................................................................................................... 60
5 CSSA-Long...................................................................................................................................
Entries #0 61
6 CSSA-Long...................................................................................................................................
Entries #2 62
7 CSSA-Short...................................................................................................................................
Entries #0 63
8 CSSA-Short...................................................................................................................................
Entries #2 64
9 CSSA-Trendline
................................................................................................................................... 66
10 CSSA-Instant
...................................................................................................................................
Trendline 67
11 CSSA-QPhase
................................................................................................................................... 68
12 CSSA-Oscillator
................................................................................................................................... 69
13 CSSA-Percent
...................................................................................................................................
Variance 70

Contents
14 CSSA-Coupling
...................................................................................................................................
Index 71
15 CSSA-Change
...................................................................................................................................
Point Score 72
16 CSSA-Turning
...................................................................................................................................
Levels 73
17 CSSA-Max Line
................................................................................................................................... 74
18 CSSA-Min Line
................................................................................................................................... 76
19 CSSA-Flatlines
................................................................................................................................... 78
Index 0

1 Noxa CSSA
1 Overview
Category Noxa CSSA
Nature and its parts fluctuate in cycles. Markets are no exceptions. A quick glance at
any price chart will reveal cyclical behaviors; price bobs up and down with a good
degree of regularity giving evidence of rhythm. Obviously, if cycles are genuine, the
presumption is that they will continue. And mostly they do, so we cannot afford to
ignore them.
Noxa CSSA is a package that runs as an add-on to Neuroshell Trader® v5.2 and
above. It is packed with a set of non-lagging indicators that extract “well-behaved”
cycles in financial data.
· Catch and trade cycles with unprecedented accuracy,

· Spot reversals faster in all time frames.
What does CSSA offer that other tools don’t?
SSA (Singular Spectrum Analysis) is a powerful statistical technique that provides a

complete multi-wave representation of the market. It breaks price into “modes of
variability” that capture the variance at any time frame.
Like other transformations, SSA is designed to enhance certain aspects of a data set;
in Fourier decomposition it is the frequencies whereas in SSA it is the variance.
Viewing cycles in terms of variance represents a radical departure from spectral

analysis; it allows us to perform the transform from the data itself without making any
assumption whatsoever on the way to proceed.
Fourier methods assume that future data consist of a periodic repetition of past data in
the form of pure sinusoids. Wavelets offer yet another way of analyzing price series.
They operate with a fixed set of filters of predetermined shape. There is usually little
physical evidence in markets for such assumptions.
We find it most useful to extract cycles from the data itself, in which case the
transform is ideally adapted to the kind of market that is being traded. Cycles are not
forced to conform to some unsubstantiated mathematical representation therefore
they retain a remarkable resemblance to the original series.

Overview 2
2 Disclaimer/ License Agreement
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3 Noxa CSSA
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Disclaimer/ License Agreement 4
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5 Noxa CSSA
3 CSSA in Action
3.1 Transaction Timing
· Quickly anticipate turning points
The key to transaction timing is in knowing when we are at a low or a high.
Let’s first take a look at cycles in the Diamonds Trust (DIA). The next figure (top
chart) is a daily high-low chart of the DIA from the most recent data (December 2006
to April 2007). Prices have certainly fluctuated during that period.
GroupStart = 9, GroupDepth = 4

CSSA in Action 6
Turn your attention now to the bottom chart. A cycle composite from CSSA illustrates
its timing capabilities. You’ll notice that the peaks and troughs of this curve emphasize
the swings quite well and would make good entry points.
3.2 Built in Signals
· Make the most of each market move.
The previous chart made clear that trading the cycle peaks and valleys can be
appropriate with CSSA. Here we show signals from CSSA-Long and Short entries
#0 that actually tell when to buy bottoms and sell tops.
Warning: Built in Signals do not show up in the Trading Strategy Wizard. They need to
be created as new indicators prior to be added in a trading strategy. See Inserting
CSSA Entry Indicators in a trading strategy 32
Long entry: Noxa CSSA-Long Entries #0(Close,50,9,4,1,0,1,1000)
Short entry: Noxa CSSA-Short Entries #0(Close,50,9,4,1,0,1,1000)

7 Noxa CSSA
These results are very pleasing; the entries occur at market turns as if they were
predicted with perfect hindsight.
Note on the predictive ability of CSSA indicators
· Compensate for inherent execution lags
We saw that CSSA yields an effective response to the market. Lagless cycles tell us
when to “Buy low and sell high” –Or do they?
The signals lag the cycle by one bar and another bar is needed to make the trade. In
other words, our trade execution is two bars late!
To remedy this lag we implemented a “causal” leading feature to CSSA indicators.

Cycles are projected ahead so that the trade can be made at the exact turning points.
This chart illustrates a cycle whose peaks and troughs lead by one bar (blue curve).
“Lead = 1”

CSSA in Action 8
A word of caution
· Don’t get whipsawed in and out
All sounds pretty rosy so far. However CSSA-Long/Short entries #0 can lose its
effectiveness when cycles fail to follow though. This is particularly true in trending
markets.
As you can see in the figure below, the DIA was in a trend free from cycles through
October 2006. False signals were generated during that period. When strong trends
are present, the anticipated reversals may simply never take place, leading to entries
in the wrong direction.

9 Noxa CSSA
Fortunately, the cycle composite usually rides below or above the zero line (hence no
whipsaw effect) in the context of developing trends. It is therefore possible to discard
those spurious signals by simply testing the levels at which CSSA-cycles sits.
It is important to realize that despite its propensity to produce an excess of trades,

this indicator, when used along with proper confirmation rules, can yield great profits.
· Take advantage of trends
CSSA-Long/Short entries #2 is one method to actually disregard those signals that

arise from riding waves. As you can see here, most signals concerned have been

CSSA in Action 10
filtered out.
Long entry: Noxa CSSA-Long Entries #2(Close,50,9,4,1,0,1,1000,0)
Short entry: Noxa CSSA-Short Entries #2(Close,50,9,4,1,0,1,1000,0)
3.3 Crossover Signals
· Naturally geared towards early entry signals
CSSA-QPhase is the quadrature version of CSSA-Cycles. It has zero-crossings when

11 Noxa CSSA
the cycle is at a peak or trough. Signals can then be triggered by simple crossovers as
shown below:
Long entry: CrossBelow(Noxa CSSA-QPhase(Close,50,9,4,1,0,1,1000,1),0)
Short entry: CrossAbove(Noxa CSSA-QPhase(Close,50,9,4,1,0,1,1000,1),0)
Crossover signals from CSSA-QPhase have the advantage over CSSA-Long/Short

Entries that they mostly don’t lag the cycle thus allowing a less extensive use of the
“Lead” parameter.
CSSA-Oscillator is an oscillator derived from CSSA-Cycles. Setting Mode to 2 in this

indicator computes the oscillator derived from CSSA-QPhase. Similarly to
CSSA-QPhase non-lagging entries can be set by crossovers:
Long entry: CrossBelow(Noxa CSSA-Oscillator(Close,50,9,4,1,0,1,1000,2),0)
Short entry: CrossAbove(Noxa CSSA-Oscillator(Close,50,9,4,1,0,1,1000,2),0)

CSSA in Action 12
3.4 Support/Resistance Violation Signals
CSSA-Turning Levels draws a line horizontally triggered by the base before an up–
move in CSSA (when Flag series = CSSA-Long Entries) or the peak before a down–
move (when Flag series = CSSA-Short Entries). The purpose of this indicator is to
show where price is liable to find some local support and encounter some local
resistance. The violation of these lines can generate great entry points.
Long entries are triggered by CSSA-Trendline (top chart, red curve) crossing above
the local support line (top chart, blue curve).
Long entry: CrossAbove(Noxa CSSA-Trendline(Close,13,9,1,10000),Noxa CSSA-Turning Levels(Low,Noxa

CSSA-Long Entries #2(Close,10,5,1,1,0.16,1,10000,0.71)))

13 Noxa CSSA
Short entries are triggered by CSSA-Trendline (top chart, red curve) crossing below
the local resistance level (top chart, blue curve).
Short entry: CrossBelow(Noxa CSSA-Trendline(Close,5,9,1,10000),Noxa CSSA-Turning Levels(High,Noxa

CSSA-Short Entries #2(Close,14,9,3,5,0.79,1,10000,-0.19)))

CSSA in Action 14
3.5 Trading Strategies

15 Noxa CSSA
There are legitimate concerns that, with the recent proliferation of cycle analysis
software, cycles become easily detectable; as a result, they might be distorted or
traded away very quickly whenever they develop in the market.
Well, let’s go a step further and put CSSA to the test!
The chart examples given here are not intended to form the basis of a specific trading
system, but simply to illustrate the ability of CSSA to catch self sustained cycles. The
models naturally lend themselves to countertrend trading style. Long entries are set
when the cycle shows downward momentum. Similarly, short entries are set when
upward momentum resumes.
We used Optimization with early and frequent pausing to allow visual checks of the
out-of-sample signals. CSSA indicators are optimal in that they pack as much
information as possible in the smallest number of cyclic components. Cycles from
CSSA are also optimally smooth; so trading strategies that use them maximize fitness
very efficiently. We found it useful to stop the optimization early and frequently so
that overtraining is avoided. If the out-of-sample results are not satisfying, we kept
optimizing over the previous settings.
Round-turn commissions were set to $20, results are given out-of-sample.
Long/Short Entries
This example illustrates the use of stop losses. A separate trading strategy dedicated
to placing stop orders was built upon the signals from CSSA-Long/Short Entries.
Long entry: Noxa CSSA-Long Entries #2(Close,25,8,7,5,0.77,1206,500,0.003)
Long stop: PriceFloor%(Trading Strategy with stop losses,2.5)
Short entry: Noxa CSSA-Short Entries #2(Close,25,10,10,9,0.05,284,500,-0.059)
Short stop: PriceFloor%(Trading Strategy with stop losses,3)

CSSA in Action 16
As you can see above, tight stop losses straightened the equity cure. Because of the
accuracy of the signals, the stop is never hit and the trade quickly turns profitable. In
the case the signal fails, the stop is hit almost immediately resulting in only a small
loss.
QPhase Crossovers
Even though securities develop trends, they can also fluctuate within those trends.

17 Noxa CSSA
Long entry: CrossBelow(Noxa CSSA-QPhase(Close,12,3,8,0,0.91,175,300,1),-0.12)
Short entry: CrossAbove(Noxa CSSA-QPhase(Close,20,3,5,2,0.63,1738,300,1),0.09)
Oscillator Crossovers
CSSA is particularly well suited to ranging markets.
Long entry: CrossBelow(Noxa CSSA-Oscillator(Close,12,8,6,9,0.27,771,500,2),-0.071)

CSSA in Action 18
Short entry: CrossAbove(Noxa CSSA-Oscillator(Close,45,9,5,5,0.82,2745,500,2),0.034)
Turning Levels Violation
Long entry: CrossAbove(Open,Noxa CSSA-Turning Levels(Low,Noxa CSSA-Long Entries

#2(Close,48,9,8,5,0.11,1,10000,0.41)))
Short entry: CrossBelow(Close,Noxa CSSA-Turning Levels(High,Noxa CSSA-Short Entries

#2(Close,11,6,6,8,0.3,1,10000,-0.78)))

19 Noxa CSSA

CSSA in Action 20
3.6 Knowledge Discovery
Until now, we showed how signals could be derived from CSSA. In addition to
generating entries, CSSA can also signal that something is amiss with the current
trend. The following chart for the DIA shows early signs that the trend is about to
change (end of October 2005, end of March 2006 and more recently end of February
2007).
CSSA-Percent Variance and CSSA-Coupling Index are variations of the same

concept. They both use the variance accounted by individual cycles or group of cycles
to compute the degree of coupling between them. Any sudden variation in this

21 Noxa CSSA
coupling can be used as a proxy for change.
CSSA-Change Point Score computes a degree of change between recent and past
price action (the base). It can be interpreted as the probability that some change is
likely to occur due to strong causal dependencies in the data. In other words this
indicator reveals hidden dependencies that announce significant changes in trend.
3.7 Trend Confirmation
In addition to generating signals, CSSA-Oscillator also provides useful trend

confirmation with the following setting:
GroupStart=2
GroupDepth=1
If the oscillator crosses the zero-line from below, a bullish trend is generally observed
(and vice versa). It is recommended however to use CSSA-Instant Trendline in
tandem with the oscillator to validate the trend; an up-trend is confirmed when the
Instant Trendline sits above the zero line (and vice versa).

CSSA in Action 22
3.8 Setting the Range
Selecting the training range of CSSA indicators has causal repercussions!
The training range of CSSA indicators allows you to set the most appropriate period in
which to estimate the eigenvectors and eigenvalues but this has to be done with care

23 Noxa CSSA
to avoid non causalities (read more 24 ) and future leaks (read more 26 ).
You can use CSSA-ShowRange 55 to this effect as shown below. The horizontal time
span of theindicator can be moved and stretched out with the mouse.
Then read the values shown in the caption to set the training range accordingly; here
we let the optimizer choose from the most appropriate 400 bar range:

CSSA in Action 24
Read more 22 on how to set the range.
Setting the range to avoid spurious changes of past signals
A system is non causal, thus not appropriate for use in a trading strategy when new data
bars cause past values of an indicator to change on the fly. This in turn can cause the
NeuroShell Trader signals to change in the past. So to avoid this problem, make sure to
exclude the current bar from the training range.
Let’s take the example of a series with 48 bars:
The training range that follows (20 bar wide starting at bar #8), is the period used to
calculate the oscillation patterns or eigenvectors in the data. These patterns are then
used to calculate the indicator.

25 Noxa CSSA
TrainStart is the first bar of the range,

TrainDepth is the number of bars in the range.
In most cases, the range by default exceeds the total number of bars in the chart:
Keeping the range by default can then be a problem when trading with the raw indicator.
As new bars come in, the training range keeps growing causing the indicator to change
some of its past values. The next figure shows a graph inflated by one bar; the effective
training range is now one bar wider:
In order to avoid this problem, the training range has to be set so that the current bar is
not included:

CSSA in Action 26
Thus the training range does not inflate with new bars coming in. Then as expected, past
values of the indicator do not change; only the last bar value is updated:
To sum up, when trading with raw CSSA indicators, the training range can be set freely
as long as the last bar is not included:
Setting the range to avoid future leaks during optimization
TrainStart and TrainBars are not seen as dates by Neuroshell; if you keep the range
by default (1~10000) and assuming that your chart has less than 10000 bars, the GA
will try values from the first bar in your chart to today independently of the dates you

27 Noxa CSSA
have set to optimize and evaluate your trading strategy.
But you need to set the training range before optimizing your system so that it does not
overlap with the paper trading period as shown below:
An overlap would mean using data from the evaluation period to calculate the indicator.
This would constitute a future leak.
Setting the range with ShowRange
Step 1: How to get the total number of bars in the chart.

- Insert a ShowRange indicator
- Press shift and drag right to fully zoom out
- Grab the green edges of the chooser to adjust the range
When the range is fully expanded, the value in the caption indicates the number of bars
in the chart.
Step 2: adjust the training range making sure that it does not go past the paper trading
range limit of bar #2130 (TrainStart + TrainDepth = 1637 + 493 = 2130, shown here
by a vertical green line):

CSSA in Action 28
Step 3: use the values in the caption to manually set TrainStart and TrainDepth in the
trading strategy wizard.
Based on the values in the caption we set TrainDepth = 500 bars starting at bar #1600.

29 Noxa CSSA
In this example, TrainDepth = 1000 but the range is free to slide; TrainStart = 1 ~
1100. We verify again that the training range never goes past the paper trading limit of
2130; In the worst case, TrainDepth + TrainStart = 1000 + 1100 = 2100 < 2130.

CSSA in Action 30

31 Noxa CSSA
And finally we let the optimization choose TrainDepth in the range 500 ~ 1000 bars
making sure again that TrainStart + TrainDepth never exceeds the paper trading range
limit.

CSSA in Action 32
3.9 Inserting CSSA Entry Indicators in a trading strategy
NeuroShell uses entry and exit rules that are based either on true and false conditions.
You can also use CSSA-Long/ Short entries but you’ll need to insert them in your chart
prior to building the trading strategy. Then, the indicators can be selected as entry and
exit rules in the selection wizard as shown below:

33 Noxa CSSA
Refer to the steps below for a detailed description on how to insert CSSA entry
indicators.
1. Open the Indicator Wizard: Insert/ New Indicator …

CSSA in Action 34
2. Choose the Noxa category

35 Noxa CSSA
3. Select both CSSA-Long and Short Entries

CSSA in Action 36
4. Adjust the parameters as you like and click Finished

37 Noxa CSSA
5. You are now set; the indicators appear in your chart.

CSSA in Action 38
The following steps describe how you can build a trading strategy using these entries.
6. Open the Trading Strategy Wizard: Insert/ New Trading Strategy …

39 Noxa CSSA
7. Choose (No Template)

CSSA in Action 40
8. Select the Long Entry tab and Click Add Condition(s) …

41 Noxa CSSA
9. Choose the CSSA-Long Entries indicator in the selection wizard and click OK

CSSA in Action 42
10. The CSSA-Long Entries rule is inserted as long entry:

43 Noxa CSSA
11. You can proceed the same way with the Short entry rule:

CSSA in Action 44

45 Noxa CSSA
4 CSSA 101
This section will take you through the steps needed to perform a Singular Spectrum
Analysis. We will try to provide an explanation of what is happening at each point so
that you can make informed decisions when you use this technique yourself.
4.1 Singular Spectrum
Singular Spectrum Analysis (SSA) is a method that takes all the variability in a series
and breaks it into a few oscillation patterns that we refer to as eigenvectors. It also
gives a measure of significance of these patterns or eigenvalues.
“Eigen” is a German word, which roughly translates to “characteristic”. Eigenvectors
are structure functions that best represent the modes of behavior in price. The
eigenvalues are a measure of the variance that these modes account for.
The eigenvectors can be ordered by eigenvalue, highest to lowest, so that the first few
patterns retain most of the variance in the data. The ordered eigenvalues are referred
to collectively as the Singular Spectrum.
The following figure gives an example of Singular Spectrum from

CSSA-ShowEigenvectors. The top chart gives the spectrum of QUALCOMM INC
(QCOM); the dots represent eigenvalues that can be selected with the green chooser.
The bottom chart draws the corresponding eigenvector.
The top left dot represents the component that accounts for most of the variability in
the data; it is the lower frequency component (usually the trend) as shown below:

CSSA 101 46
Eigenvector 1/30:
The other dots represent cycles of smaller periods as we go further to the right. Each
successive eigenvector explains progressively smaller portions of the variance.
Eigenvector 3/30:
Eigenvector 9/30:
Most of the data is usually explained by the first few dominant eigenvectors only. And
since no other eigenvectors contribute much (all eigenvalues are small) we can
assume that everything else found in the series is structureless noise.
Eigenvector 29/30:

47 Noxa CSSA
4.2 Embedding
The first step in SSA consists in embedding the series into a vector space. In short,
SSA looks for linear relationships between lagged copies of market snapshots. The
m-histories parameter is the number of lags of interest.
Let’s look at the example of m-histories=2, meaning that we consider only two
consecutive market snapshots:
This example is simple enough to give a two-dimensional graphic representation of the

vector space. We can achieve this by plotting the price from market snapshot lag=0
versus the price from market snapshot lag=1:

CSSA 101 48
SSA looks for the orthogonal directions in that plane that best fit the cloud of points:
The first direction accounts for as much of the variance as possible (the longer axis).
The second direction accounts for the remaining variance.
The directions are chosen orthogonal meaning that the corresponding eigenvectors are
uncorrelated from each other. Each one makes an independent contribution to
accounting for the variance of the original series.
Let’s now consider a more practical case for which m-histories=50. The vector space
has now 50 dimensions. Needless to say that such hyperspace is impossible to picture
as a simple graph. Nevertheless, SSA extracts 50 eigenvectors, each of them
representing a preferred direction in that hyperspace.
What did we learn so far?

· m-histories corresponds to the number of components to decompose the series
into,
· Embedding transforms a price series into a multi-dimensional space,
· Eigenvectors may be thought as elementary patterns of behavior that maximize
the variance between lagged market snapshots. They provide a graphical
representation of the structure in a price series.
· The eigenvalues are a measure of the importance of the eigenvectors.
It is worth noting that SSA does not resolve periods longer than m-histories.
m-histories is the maximum period (in bars) that can be detected.

49 Noxa CSSA
4.3 Decomposition
Adaptive filters are devised from the eigenvectors themselves to decompose the series
into cyclic components. The following figure displays components 2 to 6 for
QUALCOMM INC (QCOM).

CSSA 101 50
TrainStart and TrainBars are parameters to set up the time span within which the
eigenvectors are extracted. You can use CSSA-ShowRange 55 to this effect.

51 Noxa CSSA
4.4 Grouping
The last step in CSSA consists in choosing a selection of components (or group) to
obtain the final cycle composite that best represents the price action. Here we have
identified two groups which emphasize different time frames for EXXON MOBIL CP
(NYSE:XOM):
Blue curve (37 bar period cycle): GroupStart=3. GroupDepth=2

Brown curve (10 bar period cycle): GroupStart=9, GroupDepth=4
GroupStart sets the first component number in the group. Higher values lead to
shorter cycles.
GroupDepth is the number of components in the group. More components increase

the level of detail of the cycle composite.

CSSA 101 52
Here are the corresponding singular spectrums and eigenvectors from

CSSA-ShowEigenvectors:
GroupStart=3, GroupDepth=2
GroupStart=9 GroupDepth=4
4.5 Causality
All indicators in this add-on are causal , hence the letter "C" in CSSA, meaning that
they exclusively use historical data.
One major caveat of the original SSA algorithm; the adaptive filters built from the
eigenvectors are time symmetric filters that use past and future data. As a result, the
last segment (m-histories wide) changes as the most recent price changes. In other
words, SSA is non causal and cannot be used for generating signals.
There are crude ways to make SSA cycles causal:

53 Noxa CSSA
· the easiest way would be to lag the cycle by m-histories,

· Another way would be to "re-run" the entire SSA calculation in a rolling window,
adding one bar each time (end-point version).
However we found both methods very limited in their predictive skills; they offered
little guidance for trading so we devised a proprietary causal version for SSA that is
particularly well-suited for use in trading strategies.

CSSA 101 54
5 CSSA indicators
Following is a brief overview of the indicators in the CSSA add-on:
CSSA-ShowRange
Select a range, and then use the values shown in the caption to set the training range
of CSSA indicators.
CSSA-ShowEigenvectors
Visualize the elementary patterns of behavior in price and find propagating modes.
Their inherent persistence over time makes these modes especially worthy of
attention.
CSSA-Cycles
This indicator provides a full wave-composite picture of the market. The cycles are
designed to be a direct reflection of the price action so that they don’t lag. In other
words, you will be able to quickly anticipate turning points independently of the
time-frame.
CSSA-Slope and Trendlines

These indicators are derivatives from CSSA-Cycles; they are particularly useful in
identifying and confirming the direction of momentum behind a move.
CSSA-Long and Short Entries

Signals are triggered by CSSA-Cycles from its bases and peaks. A causal lead and
filtering features have been added to compensate for inherent execution lags so that
you can make the most of each market move.
CSSA-QPhase
This indicator operates a 90 degree phase shift of CSSA-Cycles; the peaks and troughs
of the cycle line become zero crossings. Signals are then triggered when the transform
breaks through its center line. Because of the accuracy of the signals, tight stop losses
can be kept for even better results.
CSSA-Oscillator
In addition to generating signals, this centered oscillator can also be used to confirm
developing trends.
CSSA-Percent Variance
The ratio of the variance accounted by a group of cycles to the total variance in a
rolling window is given. Any sudden change in this ratio can announce that something

55 Noxa CSSA
is amiss with the current trend or that the current trend is about to change.
CSSA-Coupling Index
This indicator uses the variance accounted by individual cycles to return a degree of
coupling between them. It computes the ratio of the variance accounted by two
components in a rolling window. Any sudden change in this coupling can be used as a
proxy for change.
CSSA-Change Point Score
The degree of change between recent and past price action (the base) is returned. It
can be interpreted as the probability that some change is likely to occur due to strong
causal dependencies in the data. In other words this indicator reveals hidden
dependencies that may announce significant changes in trend.
CSSA-Turning Levels
Lines are drawn horizontally from the base before an up–move in CSSA or a peak
before a down–move. The purpose of this indicator is to show where price is liable to
find some local support and encounter some local resistance. The violation of these
lines can generate reliable entry points.
CSSA-Flatlines
You might want to stay out when markets settle down and start to chop; a market
moving sideways with very little upward and downward movement does not provide
enough price range to overcome transaction costs. Sideways coils are also prone to
fakeouts and we all know that escaping a position against a breakout can be expensive
due to slippage.
CSSA-Flatlines is a "flatline detector" in the form of upper and lower thresholds that
can be used to identify those long flat areas of excessive chop so you can get out in
time, or anticipate a breakout.
5.1 CSSA-ShowRange
Category Noxa CSSA
Input Parameters
Name Setting Default
Input series Time series Close

CSSA indicators 56
Description
A window attaches itself to the bottom of Neuroshell. This is simply a visual tool to
allow you to select a range, and then use the values shown in the caption to set the
training range (TrainStart and TrainBars) of CSSA indicators.
See the mouse action description given below to adjust the training range.
Mouse action
Shifting the range Grab the range (dark green) with the mouse and drag it.
Sizing the range Grab the green edges with the mouse to adjust the range.
To make the grabbing clearer, the mouse changes to
left/right arrows
Zooming Press shift and drag left to zoom in. Zooming does not
vertically rescale until the mouse is let up.
Use
See Setting the Range 22
5.2 CSSA-ShowEigenvectors
Category Noxa CSSA
Input Parameters

57 Noxa CSSA
m-histories Integer 5~250 50
Definition
m-histories Number of components
Description
A window attaches itself to the bottom of Neuroshell creating a visual representation

of the patterns that SSA detects:
· The top graph is the spectrum of eigenvalues (log scale), of which any group can be
selected,
· The bottom graph shows the sum of the corresponding eigenvectors.
The bottom window of Eigenvectors has two modes. It starts with the normal sum of
vectors, but if you click in the window it changes to Lissajous mode where it draws
three curves:
· Black is the first eigenvector in the group,
· Grey is the last eigenvector in the group,
· Green is the Lissajous pattern of them. The Lissajous pattern is the graph of the first
eigenvector plotted on the y axis combined with the last eigenvector plotted on the x
axis.

CSSA indicators 58
Tips
· A plateau in the spectrum usually indicates significant structure in the series,

· Propagating modes are steady pairs of cycles whose eigenvectors are in quadrature
(out of phase by 90 degrees) as shown above. The corresponding Lissajous pattern
is a circle. Their inherent persistence over time makes them especially worthy of
attention.
Mouse action
Shifting Grab the (dark green) group of eigenvalues with the mouse to
drag it.
Rescaling Grab the edges to adjust the size of the group. To make the
grabbing clearer, the mouse changes to left/right arrows.
5.3 CSSA-Cycles
Category Noxa CSSA
Input Parameters

59 Noxa CSSA
GroupStart Integer >=2 2
GroupDepth Integer >=1 1
Lead Integer >0 0
Smoothing Real 0~1 0
TrainStart Integer >=1 1
TrainBars Integer >=10 10,000
Mode Integer >=1 1
Definition
GroupStart The first component# in group for reconstruction
GroupDepth The number of components in group for reconstruction
Lead The number of bars ahead to project the cycle
Smoothing The amount of smoothing (lagless) to apply to cycles
TrainStart The first bar# of training range
TrainBars The number of bars in training range
Mode Mode = 1: Amplitude not restored

Mode = 2: Amplitude restored
The lead and smoothing operations attenuate the amplitude of the cycles. Mode = 2 is
a method to restore this amplitude. Restoring the amplitude might be useful in some
crossover strategies.
Description
CSSA-Cycles is a causal version of the free SSA-Cycles indicator. It is appropriate for

use in trading strategies, although it is different from the original implementation.
This indicator provides a full wave-composite picture of the market. The cycles are
designed to be a direct reflection of the price action so that they don’t lag. In other
words, you will be able to quickly anticipate turning points independently of the
time-frame.

CSSA indicators 60
Use
See Transaction Timing 5
5.4 CSSA-Slope
Category Noxa CSSA
Input Parameters
Lead Integer >0 0
Mode Integer >=1 1
Definition
Mode Mode = 1: Parabolic interpolation (smoother but lags 1 bar)

Mode = 2: First order difference

61 Noxa CSSA
Description
CSSA-Slope computes the slope of CSSA-Cycles. It is good for identifying the

direction of momentum behind a move. Momentum is bullish when the slope sits
above its center line and bearish when the slope sits below its centerline.
5.5 CSSA-Long Entries #0

Category Noxa CSSA
Input Parameters
Lead Integer >0 0
Definition
Description

CSSA indicators 62
CSSA-Long Entries #0 are entry points triggered by CSSA-Cycles from its bases. It
is recommended to use the signals in tandem with other indicators for confirmation.
A causal lead and filtering features have been added to compensate for inherent
execution lags so that you can make the most of each market move.
Use
See Built in Signals 6
5.6 CSSA-Long Entries #2

Category Noxa CSSA
Input Parameters
Lead Integer >0 0
Threshold Real -1~+1 0
Definition

63 Noxa CSSA
Threshold Line above which signals from riding waves are filtered out
Description
CSSA-Long Entries #2 is a filtered version of CSSA-Long Entries #0. Signals

generated by waves riding above and bellow the threshold line are filtered out.
Use
See Built in Signals 9 , Trading Strategies 15
5.7 CSSA-Short Entries #0

Category Noxa CSSA
Input Parameters
Lead Integer >0 0
Definition

CSSA indicators 64
Description
CSSA-Short Entries #0 are entry points triggered by CSSA-Cycles from its peaks. It
is recommended to use the signals in tandem with other indicators for confirmation.
Use
See Built in Signals 6
5.8 CSSA-Short Entries #2

Category Noxa CSSA
Input Parameters

65 Noxa CSSA
Lead Integer >0 0
Threshold Real -1~+1 0
Definition
Threshold Line below which signals from riding waves are filtered out
Description
CSSA-Short Entries #2 is a filtered version of CSSA-Short Entries #0. Signals

generated by waves riding above and below the threshold line are filtered out.
Use
See Built in Signals 9 , Trading Strategies 15

CSSA indicators 66
5.9 CSSA-Trendline
Category Noxa CSSA
Input Parameters
Definition

(component #1 included)
Description
CSSA-Trendline is a causal version of the free SSA-Trendline indicator. It is

appropriate for use in trading strategies, although it is different from the original
implementation.
Use
See Support/Resistance Violation Signals 12

67 Noxa CSSA
5.10 CSSA-Instant Trendline

Category Noxa CSSA
Input Parameters
Mode Integer >=1 1
Definition

(component #1 included)
Mode Mode = 1: Parabolic interpolation (smoother but lags 1 bar)

Mode = 2: First order difference
Description
CSSA-Instant Trendline computes the slope of CSSA-Trendline.
Use
See Trend Confirmation 21

CSSA indicators 68
5.11 CSSA-QPhase
Category Noxa CSSA
Input Parameters
Lead Integer >0 0
Mode Integer >=1 1
Definition
Mode Mode = 1: +90 degree phase shift

Mode = 2: -90 degree phase shift
Description
CSSA-QPhase operates a 90 degree phase shift of CSSA-Cycles so that the peaks and
troughs of the cycle line become zero crossings. Signals can then be generated when
the transform breaks through its center zero line.
Because of the accuracy of the signals, tight stop losses can be kept for even better

69 Noxa CSSA
results.
Use
See Crossover Signals 10 , Trading Strategies 16
5.12 CSSA-Oscillator
Category Noxa CSSA
Input Parameters
Mode Integer >=1 1
Definition
Mode Mode = 1: Oscillator

Mode = 2: QPhase transform applied
Setting Mode to 2 allows for peaks and troughs to be measured through zero
crossings. Extrema are reached when the QPhase transform of the oscillator breaks

CSSA indicators 70
through the zero line.
Description
CSSA-Oscillator is a centered oscillator. It oscillates above and below the zero line. It
is particularly good for identifying the direction of price momentum behind a move.
Readings above the center line indicate bullish momentum. Similarly, readings below
the center line indicate bearish momentum.
Setting Mode to 2 in this indicator computes the oscillator derived from

CSSA-QPhase. Similarly to CSSA-QPhase non-lagging entries can be set by
crossovers.
In addition to generating signals, this centered oscillator can also be used to confirm
developing trends
Use
See Crossover Signals 10 , Trend Confirmation 21 , Trading Strategies 17
5.13 CSSA-Percent Variance

Category Noxa CSSA
Input Parameters
Window Integer >=6 100
Definition

71 Noxa CSSA
Window Moving window
Description
CSSA-Percent Variance computes the ratio of the variance accounted by a group of

cycles to the total variance in a rolling window. Any sudden change in this ratio can
announce that something is amiss with the current trend or that the current trend is
about to change.
Use
See Knowledge Discovery 20
5.14 CSSA-Coupling Index

Category Noxa CSSA
Input Parameters
Component #1 Integer >=1 20
Component #2 Integer >=1 2
Definition
Component #1
Component #2

CSSA indicators 72
Description
CSSA-Coupling Index uses the variance accounted by individual cycles to return a

degree of coupling between them. It computes the ratio of the variance accounted by
component #1 to the variance accounted by component #2 in a rolling window. Any
sudden change in this coupling can be used as a proxy for change.
Use
5.15 CSSA-Change Point Score

Category Noxa CSSA
Input Parameters
BaseLag Integer >=1 5
Definition
BaseLag Lag in bars of the base matrix
Description
CSSA-Change Point Score computes a degree of change between recent and past
price action (the base). It can be interpreted as the probability that some change is
likely to occur due to strong causal dependencies in the data. In other words this
indicator reveals hidden dependencies that may announce significant changes in trend.

73 Noxa CSSA
Use
Reference
Tsuyosji Ide, Koji Tsuda, Change-Point Detection using Krylov Subspace Learning
5.16 CSSA-Turning Levels

Category Noxa CSSA
Input Parameters
Flag series Time series Close
Definition
Flag series Can be either CSSA-Long or CSSA-Short entries
Description
CSSA-Turning Levels draws a line horizontally triggered by the base before an up–
move in CSSA (when Flag series = CSSA-Long Entries) or the peak before a down–
move (when Flag series = CSSA-Short Entries). The purpose of this indicator is to
show where price is liable to find some local support and encounter some local
resistance. The violation of these lines can generate reliable entry points.
Long entries can be triggered by CSSA-Trendline crossing above the local support
line.
Short entries can be triggered by CSSA-Trendline crossing below the local support
line.

CSSA indicators 74
Use
See Support/Resistance Violation Signals 12 , Trading Strategies 18
5.17 CSSA-Max Line

Category Noxa CSSA
Input Parameters
Threshold series Numeric value or 0

time series
Mode Integer 1~2 2
Definition
Threshold series Can be either a real value or a series
Mode Mode=1: if (X > Y) then 1 otherwise 0

where X = trailing line, Y = Threshold series
Mode=2: the trailing line
Description
Mode=2: Horizontal trailing lines are drawn from the local maxima of the Input
series.
Mode=1: Indicates the periods when the trailing line has just broken out above the
Threshold series.
Use
CSSA-Min Line can be used with zeroed inputs. In the following chart example the
input is a CSSA-Cycle.
Mode = 2: Max line (Blue curve)
Mode = 1: Boolean with threshold = 0.2 (green curve)

75 Noxa CSSA
CSSA-Max Line can be also used with non zeroed inputs (CSSA-Trend line in this
example):
Red curve: Max-Line, Mode = 2

CSSA indicators 76
5.18 CSSA-Min Line

Category Noxa CSSA
Input Parameters
Threshold series Numeric value or 0

time series
Mode Integer 1~2 2
Definition
Threshold series Can be either a real value or a series

77 Noxa CSSA
Mode Mode=1: if (X < Y) then -1 otherwise 0

where X = trailing line, Y = Threshold series
Mode=2: the trailing line
Description
Mode=2: Horizontal trailing lines are drawn from the local minima of the Input
series.
Mode=1: Indicates the periods when the trailing line has just broken out below the
Threshold series.
Use
CSSA-Min Line can be used with zeroed inputs. In the following chart example the
input is a CSSA-Cycle.
Mode = 2: Min line (Blue curve)
Mode = 1: Boolean with threshold = -0.2 (green curve)

CSSA indicators 78
5.19 CSSA-Flatlines
Category Noxa CSSA
Input Parameters
Upper Threshold Numeric value or 0

time series
Lower Threshold Numeric value or 0

time series
Confirmation Integer < 500 10

period
Threshold flag Integer 1~3 1

mode
Output flag Integer 1~7 3

mode
Definition
Upper Threshold Can be either a numeric value or a data series
Lower Threshold Can be either a numeric value or a data series
Confirmation Numeric value in the 0~500 range (read more 84 )

period
Threshold flag TF Mode = 1: Threshold = percentage of input series

mode TF Mode = 2: Threshold = Price level
TF Mode = 3: Threshold = Threshold series - Input series
Output flag OF Mode = 1: Upper line

mode OF Mode = 2: Lower line
OF Mode = 3: Average line
OF Mode = 4: Cross-below signals
OF Mode = 5: Cross-above signals
OF Mode = 6: Boolean indicating the periods when the input
enters a range after crossing below the Upper line
OF Mode = 7: Boolean indicating the periods when the input
enters a range after crossing above the Lower line
Output Flag Mode description

79 Noxa CSSA
OF Mode = 1: Upper line (see chart 80 )
Thresholds are added to the local maxima of the input series. Horizontal trailing lines
are then drawn from these levels.
OF Mode = 2: Lower line (see chart 81 )
Thresholds are added to the local minima of the input series. Horizontal trailing lines
are then drawn from these levels.
OF Mode = 3: Average line (see chart 81 )
(Upper line + Lower line) / 2

The average line is a piecewise approximation of the input series.
OF Mode = 4: (see chart 82 )
Signals are triggered when the input has just crossed below the average line.
Signals are triggered when the input has just crossed above the average line.
Boolean = 1 indicates the periods when the input enters a range after crossing below
the Upper line
Boolean = 1 indicates the periods when the input enters a range after crossing above
the Lower line
Threshold Flag Mode description
The thresholds are added to or subtracted from the peaks and valleys of the input
series:
TF Mode = 1: Thresholds = percentage of the input series
TF Mode = 2: Thresholds = price value

CSSA indicators 80
The thresholds can also be an independent price series; in this case, the trailing lines
are drawn from the threshold series itself:
TF Mode = 3: Thresholds = Threshold series - Input series (see chart 85 )
Discussion
You might want to stay out when markets settle down and start to chop; a market
moving sideways with very little upward and downward movement does not provide
enough price range to overcome transaction costs. CSSA-Flatlines and its upper and
lower thresholds can help identifying these long flat areas of excessive chop so you
can get out in time or anticipate a breakout. Breaking out or down out of a congestive
range is one of the big unsolved problems in daytrading. Sideways coils are prone to
fakeouts and we all know that escaping a position against a breakout can be expensive
due to slippage.
Use
The examples given below use CSSA-Trendline as input series but any input that
flattens out smoothly to the horizontal on the flat zones of the price can be used for
that matter.
OF Mode = 1: Upper line (blue curve)

Upper threshold = 2

81 Noxa CSSA
OF Mode = 2: Lower line (blue curve)

Lower threshold = 2

CSSA indicators 82
OF Mode = 3: Average line (red curve)

Upper threshold = 2
Lower threshold = 2
Crossover signals are provided when Trendline crisscrosses the Average line.
OF Mode = 4: Cross below signals (brown spikes)

OF Mode = 5: Cross above signals (blue spikes)
Upper threshold = 2
Lower threshold = 2

83 Noxa CSSA
OF Mode = 6: the input enters a range after crossing below the Upper line (blue
curve)
OF Mode = 7: the input enters a range after crossing above the Lower line (red
curve)
Upper threshold = 2
Lower threshold = 2
Confirmation period = 0

CSSA indicators 84
You might want to wait some time after entering a range to either exit or wait for a
definite change in direction. Here, the Confirmation period is set to 100 bars.
OF Mode = 6: the input enters a range after crossing below the Upper line (blue
curve)
OF Mode = 7: the input enters a range after crossing above the Lower line (red
curve)
Upper threshold = 2
Lower threshold = 2
Confirmation period = 100

85 Noxa CSSA
TF Mode = 3: the trailing lines are triggered by the input series and drawn from the
threshold series itself. In this example the upper and lower thresholds series are
Bollinger Bands High and Low.

CSSA indicators 86

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Noxa CSSA

© <2007> <Noxa Analytics, Inc.>

Causal Singular Spectrum Analysis

Part II Disclaimer/ License Agreement 2

Part III CSSA in Action 5

Part IV CSSA 101 45

Part V CSSA indicators 54

© <2007> <Noxa Analytics, Inc.>

© <2007> <Noxa Analytics, Inc.>

Category Noxa CSSA

· Catch and trade cycles with unprecedented accuracy,

What does CSSA offer that other tools don’t?

SSA (Singular Spectrum Analysis) is a powerful statistical technique that provides a

Viewing cycles in terms of variance represents a radical departure from spectral

© <2007> <Noxa Analytics, Inc.>

2 Disclaimer/ License Agreement

© <2007> <Noxa Analytics, Inc.>

LIMITED LIABILITY: NO LIABILITY FOR CONSEQUENTIAL DAMAGES. YOU ASSUME THE

© <2007> <Noxa Analytics, Inc.>

© <2007> <Noxa Analytics, Inc.>

3.1 Transaction Timing

· Quickly anticipate turning points

The key to transaction timing is in knowing when we are at a low or a high.

© <2007> <Noxa Analytics, Inc.>

3.2 Built in Signals

· Make the most of each market move.

Long entry: Noxa CSSA-Long Entries #0(Close,50,9,4,1,0,1,1000)

Short entry: Noxa CSSA-Short Entries #0(Close,50,9,4,1,0,1,1000)

© <2007> <Noxa Analytics, Inc.>

Note on the predictive ability of CSSA indicators

· Compensate for inherent execution lags

To remedy this lag we implemented a “causal” leading feature to CSSA indicators.

© <2007> <Noxa Analytics, Inc.>

· Don’t get whipsawed in and out

© <2007> <Noxa Analytics, Inc.>

It is important to realize that despite its propensity to produce an excess of trades,

· Take advantage of trends

CSSA-Long/Short entries #2 is one method to actually disregard those signals that

© <2007> <Noxa Analytics, Inc.>

Long entry: Noxa CSSA-Long Entries #2(Close,50,9,4,1,0,1,1000,0)

Short entry: Noxa CSSA-Short Entries #2(Close,50,9,4,1,0,1,1000,0)

3.3 Crossover Signals

· Naturally geared towards early entry signals

CSSA-QPhase is the quadrature version of CSSA-Cycles. It has zero-crossings when

© <2007> <Noxa Analytics, Inc.>

Long entry: CrossBelow(Noxa CSSA-QPhase(Close,50,9,4,1,0,1,1000,1),0)

Short entry: CrossAbove(Noxa CSSA-QPhase(Close,50,9,4,1,0,1,1000,1),0)

Crossover signals from CSSA-QPhase have the advantage over CSSA-Long/Short

CSSA-Oscillator is an oscillator derived from CSSA-Cycles. Setting Mode to 2 in this

Long entry: CrossBelow(Noxa CSSA-Oscillator(Close,50,9,4,1,0,1,1000,2),0)

Short entry: CrossAbove(Noxa CSSA-Oscillator(Close,50,9,4,1,0,1,1000,2),0)

© <2007> <Noxa Analytics, Inc.>

3.4 Support/Resistance Violation Signals

Long entry: CrossAbove(Noxa CSSA-Trendline(Close,13,9,1,10000),Noxa CSSA-Turning Levels(Low,Noxa

© <2007> <Noxa Analytics, Inc.>

Short entry: CrossBelow(Noxa CSSA-Trendline(Close,5,9,1,10000),Noxa CSSA-Turning Levels(High,Noxa

© <2007> <Noxa Analytics, Inc.>

3.5 Trading Strategies

© <2007> <Noxa Analytics, Inc.>

Well, let’s go a step further and put CSSA to the test!

Round-turn commissions were set to $20, results are given out-of-sample.

Long entry: Noxa CSSA-Long Entries #2(Close,25,8,7,5,0.77,1206,500,0.003)

Long stop: PriceFloor%(Trading Strategy with stop losses,2.5)