FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

Moderator: moderators

User avatar
Nicholishen
rank: 50+ posts
rank: 50+ posts
Posts: 52
Joined: Thu Oct 26, 2006 8:44 am
Reputation: 0
Real name: Nick
Gender: Male

Postby Nicholishen » Mon Nov 06, 2006 8:49 pm

Luke wrote:I'm sure most have already noticed this but for those who haven't:

Each FPI number can only be calculated by the corresponding Bid/Ask price or the FPI number is meaningless.
So a BBS FPI is calculated by Ask * Ask * Bid & a SSB FPI by Bid * Bid * Ask.

This makes it impossible to test on historical data unless one has data with Bid/Ask.

I have found that using the price median ((bid+ask)/2) is actually giving me more realistic results for the fpi. When you use the b,a,a or the a,b,b, you'll notice that most pairs with high spreads will hover away from 1. If you'll take a look at the FPI REAL TIME, you'll see how close to 1 the fpi stays, especially in quiet times! That's because it uses the price median. Now, understandably it would be hard to understand that this can provide value. The value is in knowing how far off the fpi is - in the real world. One way to use this would be to calculate the minimum amount of fpi travel need to break even ... etc. We have to remember that when dealing with fpi - it is a way to make sure that the quotes are within a reasonable distribution. However when it comes down to bottom line profits, a 5 point fpi move in any given ring will probably not equal the p&l of a 5 point move for that same ring under different circumstances. Thus, we need to create a model to be able to estimate the minimum net profit with (x) amount of FPI travel. Unfortunately, just by calculating fpi using bid ask ask or visa versa, it doesn't mean that you'll breakeven if it returns to 1... heck, you won't even know where [1] really is!

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

Luke
rank: 50+ posts
rank: 50+ posts
Posts: 65
Joined: Sat Jul 01, 2006 1:46 pm
Reputation: 0
Gender: Male

Postby Luke » Mon Nov 06, 2006 9:51 pm

EvgeniX wrote:
Nicholishen wrote:http://www.moneytec.com/forums/f130/somebody-kick-off-evgenix-14927/?highlight=evgenix


So? what doest in mean?


Lol!

It probably means you ask too many simple questions. It means you may not have learned how to use google yet.

User avatar
EvgeniX
rank: <50 posts
rank: <50 posts
Posts: 23
Joined: Fri Nov 03, 2006 5:19 am
Reputation: 0
Gender: None specified

Postby EvgeniX » Mon Nov 06, 2006 9:58 pm

Luke wrote:
Evgeni wrote:
Nicholishen wrote:http://www.moneytec.com/forums/f130/somebody-kick-off-evgenix-14927/?highlight=evgenix


So? what doest in mean?


Lol!

It probably means you ask too many simple questions. It means you may not have learned how to use Google yet.


It was BS and moneytec is suck but they did not ban me.

For Nicholishen i do not think your MT4 script work correct! :!:

User avatar
Nicholishen
rank: 50+ posts
rank: 50+ posts
Posts: 52
Joined: Thu Oct 26, 2006 8:44 am
Reputation: 0
Real name: Nick
Gender: Male

Postby Nicholishen » Mon Nov 06, 2006 10:06 pm

EvgeniX wrote:
Luke wrote:
Evgeni wrote:
Nicholishen wrote:http://www.moneytec.com/forums/f130/somebody-kick-off-evgenix-14927/?highlight=evgenix


So? what doest in mean?


Lol!

It probably means you ask too many simple questions. It means you may not have learned how to use Google yet.


It was BS and moneytec is suck but they did not ban me.

For Nicholishen i do not think your MT4 script work correct! :!:


No Problems here! Make sure you put it in the experts/scripts folder and you have a connection.

User avatar
EvgeniX
rank: <50 posts
rank: <50 posts
Posts: 23
Joined: Fri Nov 03, 2006 5:19 am
Reputation: 0
Gender: None specified

Postby EvgeniX » Mon Nov 06, 2006 10:07 pm

Nicholishen wrote:No Problems here! Make sure you put it in the experts/scripts folder and you have a connection.


I mean its calculate wrong numbers or do you use (bid+ask)/2 to calculate Real time FPI?

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

User avatar
michal.kreslik
rank: 1000+ posts
rank: 1000+ posts
Posts: 1032
Joined: Sat May 13, 2006 2:40 am
Reputation: 0
Location: Monte Carlo, Monaco
Real name: Michal Kreslik
Gender: Male
Contact:

Postby michal.kreslik » Mon Nov 06, 2006 10:35 pm

Nicholishen wrote:I have found that using the price median ((bid+ask)/2) is actually giving me more realistic results for the fpi. When you use the b,a,a or the a,b,b, you'll notice that most pairs with high spreads will hover away from 1. If you'll take a look at the FPI REAL TIME, you'll see how close to 1 the fpi stays, especially in quiet times! That's because it uses the price median. Now, understandably it would be hard to understand that this can provide value. The value is in knowing how far off the fpi is - in the real world. One way to use this would be to calculate the minimum amount of fpi travel need to break even ... etc. We have to remember that when dealing with fpi - it is a way to make sure that the quotes are within a reasonable distribution. However when it comes down to bottom line profits, a 5 point fpi move in any given ring will probably not equal the p&l of a 5 point move for that same ring under different circumstances. Thus, we need to create a model to be able to estimate the minimum net profit with (x) amount of FPI travel. Unfortunately, just by calculating fpi using bid ask ask or visa versa, it doesn't mean that you'll breakeven if it returns to 1... heck, you won't even know where [1] really is!


Nicholishen,

just for a record, you are talking about the mean value. The median value as a statistical term is the center value in the sample (in sample of "1, 1, 100", the median value is the center "1").

Anyway, I doubt any broker offers buying / selling at the mean value, so we've got to use the proper Bid/Ask prices.

Michal

User avatar
michal.kreslik
rank: 1000+ posts
rank: 1000+ posts
Posts: 1032
Joined: Sat May 13, 2006 2:40 am
Reputation: 0
Location: Monte Carlo, Monaco
Real name: Michal Kreslik
Gender: Male
Contact:

Postby michal.kreslik » Mon Nov 06, 2006 10:37 pm

Nicholishen wrote:http://www.moneytec.com/forums/f130/somebody-kick-off-evgenix-14927/?highlight=evgenix


By the way, if anyone would like to report any post to the kreslik.com forum moderators, there's a neat feature called "blue card":



Michal

User avatar
Nicholishen
rank: 50+ posts
rank: 50+ posts
Posts: 52
Joined: Thu Oct 26, 2006 8:44 am
Reputation: 0
Real name: Nick
Gender: Male

Postby Nicholishen » Mon Nov 06, 2006 10:49 pm

michal.kreslik wrote:
Nicholishen wrote:I have found that using the price median ((bid+ask)/2) is actually giving me more realistic results for the fpi. When you use the b,a,a or the a,b,b, you'll notice that most pairs with high spreads will hover away from 1. If you'll take a look at the FPI REAL TIME, you'll see how close to 1 the fpi stays, especially in quiet times! That's because it uses the price median. Now, understandably it would be hard to understand that this can provide value. The value is in knowing how far off the fpi is - in the real world. One way to use this would be to calculate the minimum amount of fpi travel need to break even ... etc. We have to remember that when dealing with fpi - it is a way to make sure that the quotes are within a reasonable distribution. However when it comes down to bottom line profits, a 5 point fpi move in any given ring will probably not equal the p&l of a 5 point move for that same ring under different circumstances. Thus, we need to create a model to be able to estimate the minimum net profit with (x) amount of FPI travel. Unfortunately, just by calculating fpi using bid ask ask or visa versa, it doesn't mean that you'll breakeven if it returns to 1... heck, you won't even know where [1] really is!


Nicholishen,

just for a record, you are talking about the mean value. The median value as a statistical term is the center value in the sample (in sample of "1, 1, 100", the median value is the center "1").

Anyway, I doubt any broker offers buying / selling at the mean value, so we've got to use the proper Bid/Ask prices.

Michal

I apologize for using incorrect terminology; I was referring to MT4 terms. As far as buying and selling at the mean, you are correct. However, I am not proposing anything along those lines. The Price mean provides us with the most realistic fractional product for the given ring. One of many of the problems associated with using bid,ask,ask & .... is that the data is skewed during times when the spreads naturally widen. The actual trading and trade decisions can be still be made in a similar fashion, but in this method we can determine a safe baseline (1) as opposed to other methods.

What I am proposing is a new method for calculating the profitability or potential for trades. Does anyone have any ideas for determining how much (x)fpi travel will affect (n)profit???





As you can see, in a perfect world it would have taken an fpi swing of 7 points to break even. The swing is the same regardless of which way you calculate. The only difference is where the fpi is in relation to 1.

Harm
rank: <50 posts
rank: <50 posts
Posts: 15
Joined: Sat Oct 28, 2006 7:35 pm
Reputation: 0
Gender: None specified

Postby Harm » Tue Nov 07, 2006 6:43 am

The "offset" for the reall FPI (on bid and ask price) is actually a measure for the spread. The mean of the FPI distribution should be less than 1.

I was thinking to use this to set a kind of threshold to enter the positions.

e.g., mean FPI = 0,9995 (0,05 % spread), so an increase of 0,0005 in FPI would make up for the spread and get us at break even. So if we set a thresshold for let's say 5 times the spread, we enter at an FPI of 0,9970. Now if the FPI gets back to 0,9995, which it certainly will, we'd make 4 times the total spread. Of course we could wait for an FPI >1.

To get the numbers right, one should determine the FPI distributions for the different rings to get an accurate mean and to detemine the FPI entry level.

Key is to get accurate bid-ask data. I will start to record 1m live feed from my brokers for some number crunching.

User avatar
michal.kreslik
rank: 1000+ posts
rank: 1000+ posts
Posts: 1032
Joined: Sat May 13, 2006 2:40 am
Reputation: 0
Location: Monte Carlo, Monaco
Real name: Michal Kreslik
Gender: Male
Contact:

Postby michal.kreslik » Tue Nov 07, 2006 9:52 am

Harm wrote:Key is to get accurate bid-ask data. I will start to record 1m live feed from my brokers for some number crunching.


For a realistic backtest, having the true Bid/Ask tick data with second timestamps for major FX pairs would be great.

The trouble is, I can't find such a data anywhere on the internet. Does anyone have access to the data like this?

Michal

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.


Return to “NeoTicker indicators”