michal.kreslik wrote:People are still asking me about the correct position size for FPI.
Let's make it perfectly clear now.
We decided to employ this FPI ring:
- SellShort EUR/USD
- Buy EUR/JPY
- SellShort USD/JPY
You see, we have hedged the colored currencies one unit for one. The JPY is not hedged precisely one for one (14,937,000 for 14,934,113), but it can't be closer.
Michal
Keep in mind that experts store and recall information differently than novices...I usually think in big ideas and leave the details to the mathematicians
Michal's grasp of mathematics outstrips mine, even though I have college calculus under my belt.
Having said that, I did my homework and worked through the calculations myself several different ways. For example, we can also go Short 1 lot USD/JPY, Long .79192 lots EUR/JPY and Short .79192 lots EUR/USD. But this is hardly clear from the original post. The reader is left to fend for himself on this point.
I also did another pair, or "ring", using current quotes. Might I suggest that providing an algorithm to work out the correct position sizes would come in helpful. This little piece of posted work is not going to be enough for most traders, although I could work it out on my own now. Also, I personally would hate to have to do it on the fly, given how I basically have to work through it all over again when I want to know the correct lot sizes. I'm sure the algorithm is already incorporated in your code, but seeing it in a higher order, human, language would be helpful (this is kind of like how C programmers don't document their code very well). If no one else posts the algorithm I will.
And finally, is anybody really trading this?
Thank you all for the interesting thread, it's nice to see something that goes beyond, "when the blue line turns up..."
BW