FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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michal.kreslik
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Postby michal.kreslik » Thu Oct 12, 2006 10:55 pm

eagles wrote:Michal,

Can you extract the list of 253, and provide that list in a text file, or some type of delimited file format?


It's easy to export such a file from the FPI Control Panel by modifying the source code, which is free.

eagles wrote:With regard to the effectiveness of this type of trading can it be concluded that the smaller the number of pairs involved (3), the easier to profit because of processing the trades in sequence?


Yes and also because of the fact that the less there are FX symbols in ring, the lesser the spread sum.

eagles wrote:Your charts of FPI appear to be on a 15 minute interval. Have you looked at longer time frames? It seems that the differential would exist on all time frames. The higher number of pairs might be easier to trade on the longer time frames, where order processing time would be less critical.


No, FPI doesn't work this way. Have a look at the above article with sine wave. Sure, the inefficiency will be visible on all time frames, but FPI trade can't be "slowed down" by using a higher timeframe. It's like thinking you can slow down a film by only looking at it every 5 seconds. By looking at a higher timeframe, you will miss some FPI extremes.

Michal

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Postby michal.kreslik » Thu Oct 12, 2006 11:19 pm

aspTrader wrote:It seems to me that it would be necessary to exclude periods during which currency pair exchange values were fluctuating wildly. My bet would be that during those periods you would find there to be FPI extremes that could NOT actually be traded and so would need to be excluded as possibilities.


aspTrader, thanks for your feedback! You are right, but this will depend solely on the FX broker quality. With excellent broker, there are almost no "wild-enough" times (have a look at Oanda spread history - almost no glitches).

aspTrader wrote:It also seems to me that using actual Bid/Ask prices and sizes in the analysis instead of Open/Close values would provide a view of what can actually be obtained in the market. Luckily, you are using a platform (NeoTicker) which provides for storage of and access to "Inside" Bid/Ask prices and sizes.


Have a look above at the practical example of a real trade with the Impeccable Hedge. And yes, I am grateful you did convert me to NeoTicker :) Thanks for that. No platform is flawless, but NeoTicker seems to be the least flawfull :)

aspTrader wrote:Of course, you correctly note that "FPI relies on your broker not being a bandit". Seems to me that this point is not a trivial one and still another argument, if one were needed, to focus on CME Currency Futures rather than Forex per se.


First of all, this is about the most important point in the FPI concept. But there are brokers that provide excellent service like Oanda or EFX. Recently one of my clients referred that FXCM is changing its policy on dealdesk execution - they will route orders for certain clients directly to the interbank market, they say.

Anyway, I'm glad you mentioned CME vs. Forex in this context. If anywhere, Forex is ideal for the Impeccable Hedge trading. Since the FPI trade is so secure, one can calmly leverage it to the sky and still stay cool. The outcome is small in the pips terms, but thanks to the outstanding Forex leverage, it is very lucrative.

Once again, thanks for your feedback, Steven.

Michal

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Issues with FPI

Postby trader_hal » Fri Oct 13, 2006 7:13 am

Hi Michal,

Genius work. I am amazed that this isnt talked about much.

I have run into issues installing your program. I copied all the files to the Indicator folder, and they copied fine with just one exception.

Interop.NeoTicker.dll had to be replaced. First I tried the older version.



This is what my setup looks like. It started up fine, but when I press the button to check for rings, it gives me this crash.



Then I tried the newer version. With that, it doesnt even go this far. The FPI app starts up but never finishes loading. I have to manually kill it.

Out of 10 tries, it has found rings just once. I am writing this after 5 more failed tries.

Is there anything I am doing wrong? Any light on this technical issue is appreciated. Thanks.

Bharat

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Possible Fix

Postby trader_hal » Fri Oct 13, 2006 7:52 am



Ok,

I tried again, this time I lined up the symbols in alphabetical order. And it worked first time around.

Not sure if thats an issue, just worked, I saved the group and pulls back fine. Since I am more a Sys Admin guy.. I am not going to ponder the issue any further, and save the file and pray to the geek god.

Please shed any light if anyone has any. Thanks,

Bharat

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Calculation of Impecable Hedge

Postby apfx » Fri Oct 13, 2006 8:58 am

Trade analysis:

* SellShort EUR/JPY
* open: SellShort 100,000 EUR/JPY @ 145.61; we pay 100,000 EUR, we get 14,561,000 JPY
* close: BuyToCover 100,000 EUR/JPY @ 145.90; we get 100,000 EUR, we pay 14,590,000 JPY
* profit/loss = -29,000 JPY

* Buy EUR/USD
* open: Buy 100,000 EUR/USD @ 1.26485; we get 100,000 EUR, we pay 126,485 USD
* close: Sell 100,000 EUR/USD @ 1.2753; we pay 100,000 EUR, we get 127,530 USD
* profit/loss = +1,045 USD

* Buy USD/JPY
* open: Buy 100,000 USD/JPY @ 115.17; we get 100,000 USD, we pay 11,517,000 JPY
* close: Sell 100,000 USD/JPY @ 114.34; we pay 100,000 USD, we get 11,434,000 JPY
* profit/loss = -83,000 JPY

* Overall profit/loss at the time of trade close in USD:
* EUR/JPY trade: -29,000 JPY / 114.36 (USD/JPY) = -254 USD
* EUR/USD trade: + 1,045 USD
* USD/JPY trade: -83,000 JPY / 114.36 (USD/JPY) = -726 USD
* Sum: 1,045 USD - 254 USD - 726 USD = 65 USD netto
______________________________________________________________

Now:

If you sell short 100,000 EUR/JPY and buy 100,000 EUR/USD you have sold and bought the same ammount of EUR.

If you buy 100,000 EUR/USD and buy 100,000 USD/JPY you have sold
126,485 USD and bought 100,000 USD. There are 26,485 USD not hedged

shouldn't you buy 126,485 USD/JPY instead of 100,000?

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michal.kreslik
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Re: Possible Fix

Postby michal.kreslik » Fri Oct 13, 2006 9:36 am

trader_hal wrote:Ok,

I tried again, this time I lined up the symbols in alphabetical order. And it worked first time around.

Not sure if thats an issue, just worked, I saved the group and pulls back fine. Since I am more a Sys Admin guy.. I am not going to ponder the issue any further, and save the file and pray to the geek god.

Please shed any light if anyone has any. Thanks,

Bharat


Bharat, it shouldn't depend on the symbols to be lined up in an alphabetical order. In fact, FPI Control Panel sorts any set of symbols automatically and ignores repeated symbols and non-Forex symbols.

The trouble is that NeoTicker acutally doesn's support this type of external control over the indicator, so I'm coding sort of "on the edge" here. This also means, that NeoTicker sometimes behaves strangely.

Anyway, the best way to find out what's happening is to load the source code into Visual Studio and run it (together with NeoTicker) from that.

Which version of NeoTicker are you using?

Michal

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Postby trader_hal » Fri Oct 13, 2006 10:25 am

I spoke too soon, the issue is back. HMM.

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Swap rates

Postby apfx » Fri Oct 13, 2006 11:20 am

Referring to your trade example,

Would the result of the trade operation be different if instead of:

Sell EURJPY swap: -10
Buy EURUSD swap: -8.65
Buy USDJPY swap: 13
--------------
Total: -5.65 $

you made the opposite transactions:

Buy EURJPY swap: 9.1
Sell EURUSD swap: 7.2
Sell USDJPY swap: -14
-------------
Total: 2.3 $

since this way swap rate can be collected and not payed

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Postby trader_hal » Fri Oct 13, 2006 12:08 pm

Hi Michal,

Pardon my n00bness on this matter, but how do I run it from VS?

I have VS 2005 loaded with C# and I a pulling up the NeoFPI project. Where do I go from there?

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Postby trader_hal » Fri Oct 13, 2006 3:51 pm

Hi Michal,

I am using 4.10, Build 43. I tried, Build 42, 42, 45 (unstable).

And no results. Although the indicator now only pulls up with your new interop dll.

Its still crashing after numerous tries.

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