FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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A3
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Postby A3 » Thu Nov 02, 2006 5:10 pm

ryan wrote:Michal, you graphs are very encouraging even if they do use data which has been 'articifically' created in part.

I have been wondering for a while if we can dervive a $ figure value from the FPI differential? Is this possible?


This is a good question. Strange no body figured out this before.

In order to have a triangular arbitrage situation, in other words to be able to:

Sell $1 and buy JPY, sell JPY and buy EUR, sell EUR to buy back USD with a profit it is necessary that:

$1* USDJPY (bid) / EURJPY (ask) * EURUSD (bid) > $1.
USDJPY (bid) / EURJPY (ask) * EURUSD (bid) >1.
or
FPI>1
FPI = dollar amount at the end of transactions for 1 dollar invested


In the other case in order to:

Sell $1 and buy EUR, sell EUR and buy JPY, sell JPY to buy back USD with a profit:

$1 / EURUSD (ask) * EURJPY (bid) / USDJPY (bid) > 1$
1 / EURUSD (ask) * EURJPY (bid) / USDJPY (bid) > 1
or
EURUSD (ask) * 1/EURJPY (bid) *USDJPY (bid) < 1
or
FPI<1

-FPI = dollar amount at the end of transactions for 1 dollar invested

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real money

Postby annie » Thu Nov 02, 2006 5:44 pm

Hello from Belgium,

After theory are there many of you that apply FPI on the real market with profit.

Could you show some results.

Annie

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Postby Nicholishen » Thu Nov 02, 2006 7:48 pm

I am affraid bitcy may be correct in that there aren't that many opportunities to take advantage to the FPI in real time. I have been working with MT and the results from the indicators are interesting. As time goes on the amplitude of the fpi is greater suggesting the broker data may be tainted. As the indicator is tracked in real time it is relatively quiet. Last night I launched my first experiment to see how these opportunities develop in real time. The EA calculates the following every 100ms on fourteen different 3 symbol rings:

1 FPI
2 The inverse of the fpi
3 The number of lots divided appropriately amongst the pairs to hedge.
4 the aggregate amount in dollars from the spread * lots on the pairs
5 the estimated profit from present fpi to closing at the inverse based on
a) the new price of pair A considering B and C remain static
b) the prices for B and C using the same crieria a)
c) the average of a, b, c
6. The netprofit (spread+estimated profit)
6. the swap potential on the ring

Maybe today was just a lack luster day, but IMHO there wasn't any opportunities to make profit... More data to be collected though, so I'll keep y'all up to date.

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Postby Bruce » Thu Nov 02, 2006 8:29 pm

Nicholishen wrote:I am affraid bitcy may be correct in that there aren't that many opportunities to take advantage to the FPI in real time. I have been working with MT and the results from the indicators are interesting. As time goes on the amplitude of the fpi is greater suggesting the broker data may be tainted. As the indicator is tracked in real time it is relatively quiet. Last night I launched my first experiment to see how these opportunities develop in real time. The EA calculates the following every 100ms on fourteen different 3 symbol rings:

1 FPI
2 The inverse of the fpi
3 The number of lots divided appropriately amongst the pairs to hedge.
4 the aggregate amount in dollars from the spread * lots on the pairs
5 the estimated profit from present fpi to closing at the inverse based on
a) the new price of pair A considering B and C remain static
b) the prices for B and C using the same crieria a)
c) the average of a, b, c
6. The netprofit (spread+estimated profit)
6. the swap potential on the ring

Maybe today was just a lack luster day, but IMHO there wasn't any opportunities to make profit... More data to be collected though, so I'll keep y'all up to date.


Nicholishen,

I am interested in what you have done on MetaTrader.

I wonder if you would be will to share the indicator and EA that you used to run this experiment? If so you can upload here or PM me. Thanks.

Would appreciate it.

Bruce

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Postby Gert Frobe » Thu Nov 02, 2006 8:55 pm

hi Nicholishen, your right about the pitfalls of MT4 and the fixed brokers spread is to large. it goes back to Michal's first post about how you cant have a bandit for a broker and get the fpi to work. ive worked my butt off trying to get it to be profitable using the brokers in the MT platform. i can only get it to just about breakeven. however if you can get it to breakeven on MT4 it makes it profitable w/ a non bandit broker but than you will have to use neo or maby one day well have one for esignal.

just today ive been trying out a fpi-esh hedge w/ the fpi-3 ver1 MT4 that was posted here on this form

i changed the setting to 1 min and set the chart to 1min. trading these pairs: short eurusd 1.8 full lots, long usdjpy 1 full lot, long usdchf 1.3 full lots

the fpi-3 ver1 moves from a low of 113.91950 up to 114.27870
the 113. level is a good entry and at the 114.2 is good for getting out. in one cycle of trading in a demo money it made a littel over 400 bucks from a rip off fixed spread broker. i dont use the MT4 brokers w/ real money but iv made real money taking the trade over to my efx account (in real money it made about 455) it looks like it will do the same w/ hots but they only have full lot size -im not ready to test it w/ 45 dimes yet.

BTW thanks to makosgu for his post on correlation that leed me to try this.

as always michal and everbody that have made post here at kreslik
thank yall very much.

ben

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Postby Gert Frobe » Thu Nov 02, 2006 9:08 pm

sorry just one more thing,

thanks eagel for the FPI-3 symbol indicator

ben

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Postby Nicholishen » Thu Nov 02, 2006 9:50 pm

Gert Frobe wrote:hi Nicholishen, your right about the pitfalls of MT4 and the fixed brokers spread is to large. it goes back to Michal's first post about how you cant have a bandit for a broker and get the fpi to work. ive worked my butt off trying to get it to be profitable using the brokers in the MT platform. i can only get it to just about breakeven. however if you can get it to breakeven on MT4 it makes it profitable w/ a non bandit broker but than you will have to use neo or maby one day well have one for esignal.

just today ive been trying out a fpi-esh hedge w/ the fpi-3 ver1 MT4 that was posted here on this form

i changed the setting to 1 min and set the chart to 1min. trading these pairs: short eurusd 1.8 full lots, long usdjpy 1 full lot, long usdchf 1.3 full lots

the fpi-3 ver1 moves from a low of 113.91950 up to 114.27870
the 113. level is a good entry and at the 114.2 is good for getting out. in one cycle of trading in a demo money it made a littel over 400 bucks from a rip off fixed spread broker. i dont use the MT4 brokers w/ real money but iv made real money taking the trade over to my efx account (in real money it made about 455) it looks like it will do the same w/ hots but they only have full lot size -im not ready to test it w/ 45 dimes yet.

BTW thanks to makosgu for his post on correlation that leed me to try this.

as always michal and everbody that have made post here at kreslik
thank yall very much.

ben

Gert,

Can you explain your method for this trade? I see that you are not using an FPI ring. Are you taking a mix of currenies that could be causing different, yet alt corresponding rings to deviate from 1?

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Postby michal.kreslik » Thu Nov 02, 2006 10:52 pm

As to trading FPI with MetaTrader: it's great MT is free. I think MT is one of the great emerging platforms out there.

But there's a catch-22 to that. :twisted:

That freedom comes at a cost: MetaTrader programmers need to be paid by someone. Do you think they work for free just for the heck of it? I doubt it seriously :) They are on your payroll.

You are paying them by trading at brokers that are supported by MT. By trading at brokers that have artificially widened spread to accomodate for the MT's hidden commission.

This way, I fear that MT would rather choose a broker that offers higher hidden commission for MT than a broker that offers better trading conditions to their clients. Nothing against this busienss model - but one should always assess at what cost comes the fact that something is "free" :)

Michal

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Postby Gert Frobe » Thu Nov 02, 2006 10:58 pm

shure, its kinda sloppy how i picked these pairs. i opened up 4- 3pair rings at the same time (i have 3 32in in monitors)and looked how they traded looking for correlation and counter correlation. the three i use work well togather pluse i like the intrest that these three pay at roleover.

iv been thinking of TRO's trade like a banker statment he made about a month ago. it was not comming to me at the time so i started learning about Michal's FPI. than, over the past three days i had a few lightbulb turning on ideas.

the first was from a PM from that dickhead scott over at the *censored - swear word* from FF 5 min. before they banned me(but hay im not bitter LOL)- he was trying to tell me that he wasn't trying to steal michal's idea as his own. he said he was working on a synthetic hedge that dubbled his account sence aug. and how the FPI would not work w/ the brokers from FF or MT4 platform. he did not say how his hedge was sopose to work.

so, i made one that would work for me. i put in the trades and just let them ride tracking how far apart they got. ie were the dollar amount went from a low of neg 375 to pluse 510 but they would come back into line w/ each other from these extreams. i also made them = to each other as far as the long $amt and the short $amt.

next was reading makosgu's commit about correlation of pairs that leaded me to changed the setting on eagels MT4 to check if the correlation was plotting on a graph. the #s came out weard w/ a range between 113.9800 and 114.3000. i buy at the 113.98ish level sell it at the 114.2ish level

"buy" is to short 1.8 lots of eurusd, long 1lot of usdjpy, long 1.3 lots of usdchf.

"sell" is to cover the 1.8 lots of eurusd, sell the 1lot of long usdjpy, sell the 1.3 lots of usdchf.

all i know how to do just trade, sometimes i wish i could program this stuff but im happy w/ what i do.

ben

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Postby michal.kreslik » Fri Nov 03, 2006 12:24 am

makosgu wrote:@Michal

I don't understand the rational for the displayvalue equation you have posted. I would ask to post the underlying data


It's attached at the end of the post. It's the raw data series without any filtering, only the incomplete sets of prices (where one or more close prices were missing at date / time) were removed.

makosgu wrote:Secondly BSS 100 and BSS 011 should show the similar distributions. In otherwords, it is counterintuitive as to how a 100 would give a different distribution then 011.


Agreed. I have yet to find out why this is so. At first sight, I'd guess it's because of the slight distortion of precision brought into the equation by the "1/x" fraction.

makosgu wrote:The idea is to continually be engaging in the extremes of ANY pair that is now at extreme. In other words, you want to be indiffferent to any given pair, and biased to ALL opportunities across all pairs that arise at any given moment. It is super advanced I admit. However, this is the material they don't talk about in literature and how I deal with the markets in the equities arena...

Nonetheless Michal, SUPER post.


With automation code for executing FPI-based strategy, this will be feasible. 8)

Michal
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Last edited by michal.kreslik on Fri Nov 03, 2006 12:43 am, edited 1 time in total.

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