FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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Luke
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Postby Luke » Thu Nov 09, 2006 3:36 pm

smotty1,

What automated platform were you using? I don't see how you would be profitable entering trades manually if that was the case. I can only say that through my analysis the FPI numbers are consistent with their relationship to 1 in determining their profitability, absolutely. How many feasible examples in the real market? I cannot say for sure. I agree that it either works or it doesn't. Mathematically, I have joined and will always reside in the "It Works" camp. As a poster stated above all the value from this thread has been stated. I'm not trading this now but even if I were or do in the future what good does it do telling you that?

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makosgu
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Postby makosgu » Thu Nov 09, 2006 7:12 pm

@bitcy

Credentials don't make the trader. I'm sure everyone here has an impressive background. I went to two ivy league universities (harvard & columbia). My dayjob salary is US $21K/month as an all around quant with many hats from systems to risk and portfolio manager. Note this is not including my personal trading which is fairly formidable with respect to my salary. My unleveraged trading account STARTED with 25x more capital then you did and my largest drawdown was US $600 on 600 shares of GOOG at around $185. In my dayjob, I am paid to identify and execute $300M transactions at a single clip. We push the bloomberg button ($1500/month feed) and call in the confirmation on turretts ($100K). I am leveraged 80:1 on $500M of hard capital. As I said before, we play in a very different arena (ie. NOT FOREX) but using the same EXACT CONCEPT! The point is that all trading is based on fundamental concepts and how it applies to any arena. All of "Loss" Vegas is built upon a normal loss distribution that has a mean loss probability of 51% to its participants. Casinos confidently generate billions from this small offset in the loss distribution, that's BILLIONS of US$. The major breakthrough for most traders is when they understand the big picture and where they are participating. Casinos can very precisely evaluate how much money they will generate on any particular day simply by knowing exactly how many people walk in their doors. WHY? Because they fully know and understand the analytics. They (we, at least some of us) do the same thing. Knowing what the possibilities are allows you to figure out where to participate so that the odds are in your favor. I have friends who have built up muscle memory so that they can bias the the probability of tossing a dice (ie. holding the dice the same way and throwing the same way actually favors a particular outcome). They spent years training their brain to make very precise connections on how to repeatedly throw the dice the same exact way everytime. It is not luck for them but rather a shifting of the mean probability of any face turning up (ie. approximately 16.6%). Card counters, muscle memory dice throwers, traders, quants they all make it their job to understand what the possibilities are and then bounding this range. The objective is to truncate the distribution and play in the range where the probabilities favor you. When people talk about edges, this is what they mean. The real edge is knowing how to be effective in all aspects of the distribution where you are optimally in a position all the time. It would require many many threads to be able to get this concept across to Michal and TRO but I'm sure that they would get it and trading would never ever look the same again. I could explain how anyone could treat the entire forex market as a random arena and then optimally cycle through the most profitable opportunities as they happen. However, this is not my thread nor forum but Michal's and therefore, I participate respectfully when time permits. I am of the same mindset as they are (ie. PAY THEM FORWARD)!!! Many poeple indicate as you do that it is a DIFFICULT concept to grasp unless of course, you have been there. Having been on both sides of the fence, you do get there, and you pay it forward since you realize that there never really was anything for you to lose from the get go. It's probably best for you not to respond as we wouldn't want you to misinterpret the english version. Perhaps I should have just written this in japanese although admittedly my japanese is a bit rusty....

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TheEconomist
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Postby TheEconomist » Thu Nov 09, 2006 7:54 pm

I am posting here a correction to my FPITrader.mq4:

locate this procedure and replace it:

double CalculateRingFPI(int RingPos,int RingType)
{
double p1,p2,p3,res;
string s1,s2,s3;
if (RingType==BSS)
{
p1=MarketInfo(RealRings[RingPos,0],MODE_ASK);
p2=MarketInfo(RealRings[RingPos,1],MODE_BID);
p3=MarketInfo(RealRings[RingPos,2],MODE_BID);
}
if (RingType==SBB)
{
p1=MarketInfo(RealRings[RingPos,0],MODE_BID);
p2=MarketInfo(RealRings[RingPos,1],MODE_ASK);
p3=MarketInfo(RealRings[RingPos,2],MODE_ASK);
}
s1=StringElement(RealRings[RingPos,3],0);
s2=StringElement(RealRings[RingPos,3],1);
s3=StringElement(RealRings[RingPos,3],2);
res=1;
if (s1=="*")
res=res*p1;
else
res=res/p1;
if (s2=="*")
res=res*p2;
else
res=res/p2;
if (s3=="*")
res=res*p3;
else
res=res/p3;
return(res);
}

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Nicholishen
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Postby Nicholishen » Thu Nov 09, 2006 8:00 pm

Has anyone taken a hard look at the MBtrading(EFXgroup) rollover rates??! No wonder they can offer low spreads...
Compare EFX to a standard retail broker.


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eagles
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Postby eagles » Thu Nov 09, 2006 8:31 pm

All detractors...

I am really really getting tired of all the pontificating. If you have read the thread and don't think this will work, you have said so --- now go to another thread, and stop being annoying to the people who apparently aren't as smart as you are.

Allow us to wallow blissfully in our ignorance until we figure it out for ourselves.

You are wasting your bandwidth, and our time by the continuous lashing of this deceased equine.

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watzdorf
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Postby watzdorf » Thu Nov 09, 2006 10:26 pm

Let's face it: it's a great idea and it's worth following it.
Everyone has to make his/her own opinion if it suits his/her investment style
and I think we are grown up enough to judge for ourselfs if we want to use it or not.
Thank you
alex
Last edited by watzdorf on Thu Nov 09, 2006 10:34 pm, edited 1 time in total.

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TheEconomist
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Postby TheEconomist » Thu Nov 09, 2006 10:31 pm

Warning! After the correction of the EA, might just open and close trades fast... perhaps Michal meant as close point fpi the fpi calculated by the same formula when entering (if you enter BSS, calculate exit fpi like BSS too)

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michal.kreslik
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Postby michal.kreslik » Thu Nov 09, 2006 10:43 pm

bitcy wrote:@michal
yes, thanks for clarifying. you are the best. unfortunately, your calculus is still wrong because 29.6.2006 was a date with extreme low liquidity, and the spreads were extremely high. At that time, as you can check, on IBFX the EURUSD spread was 12pips (!!!), on FXCM the spread of EURUSD was 6 pips, on Oanda the same spread was 4 pips, and on SXB it was 4 pips.


Dear Bitcy,

a professor of geography does not feel obliged regularly to confute those who believe that the earth is flat. But I feel obliged to confute you since you are spreading this "earth is flat" notion in my forum.

First of all, saying that any arbitrary day in Forex might be a day with "extreme low liquidity" (I guess you meant "extremely low") is just plain ridiculous. A market with daily turnover of $2 trillion might theoretically lack liquidity if you want to go for a $800 billion position.

Secondly, I seriously doubt about Oanda having a continuous spread of 4 pips in EURUSD. Oanda publishes their weekly spread history, but there's no way to know what the spread was 4 months ago (unless you were sampling Oanda data).

I can't comment on the other mentioned brokers (huh, I don't even consider FXCM a broker), but concerning Oanda, I am pretty sure you are simply lying. The continuous 4 pips spread in EURUSD is simply a science-fiction.

Anyway, there are zillions of other examples of FPI trades. You just simply need to do your homework and do the calc for yourself. No one can do that for you. For example, May/5/2006 was an "NFP" day with lots of volume (not that you need those trillions of dollars volume, but let's assume you do). If you entered the FPI trade at 14:10 and exited at 14:35, it would look like this:






bitcy wrote:And more than that, you REVERSED the ring now, ha ha ha ha, that is not the same ring as in initial example.


It's the same ring taken in the correct direction. Maybe you didn't get that the rings must be opened in a particular direction. The "direction" issue was not clear at the beginning.

bitcy wrote:At the moment of opening the ring you DON'T know which direction is good for the ring.


Yes, I do. And I am currently programming FPI automation for several clients. Do you think the professional hedge fund would pay me to code FPI just for the heck of it?

bitcy wrote:Oh, ok, man, if you are saying that you are working to find a strategy to choose the best direction to play a ring, than all my respects !! (seriously, no irony) and good luck. I would also pay money for that strategy if is for sale!!.


Finally a good idea, Bitcy. PM me then and we might arrange for the deal.

bitcy wrote:I appreciate anyhow that even I used bad words against you, you were still conciliative and did not jump to my neck :D. Thanks.


Only people with whom I have a great deal of respect for could possibly offend me. So you may sleep well.

bitcy wrote:I have built an indicator that shows you the profit you can make on perfect hedging.

I could not find any profit combination, all are losing money, no matter where I put the line.


I can't comment on your MT indicator, I'm coding in C# and possibly in EasyLanguage. Anyway, it's apparent you made a mistake somewhere.

One final note: seems like you've got plenty of time on your hands. You should consider utilizing this extra time more constructively. You want:

http://www.shockwave.com/online.jsp

Michal
Last edited by michal.kreslik on Thu Nov 09, 2006 10:45 pm, edited 1 time in total.

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michal.kreslik
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Postby michal.kreslik » Thu Nov 09, 2006 10:44 pm

TheEconomist wrote:Warning! After the correction of the EA, might just open and close trades fast... perhaps Michal meant as close point fpi the fpi calculated by the same formula when entering (if you enter BSS, calculate exit fpi like BSS too)


Sure, the open and exit FPI must be calculated the same way.

Michal

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Nicholishen
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Postby Nicholishen » Thu Nov 09, 2006 10:49 pm

TheEconomist wrote:Warning! After the correction of the EA, might just open and close trades fast... perhaps Michal meant as close point fpi the fpi calculated by the same formula when entering (if you enter BSS, calculate exit fpi like BSS too)


@economist

You are correct when you open and close on two different FP numbers, it's like enter on 'apple' conditions and exit on 'orange'. If you've seen the chart posted a few back and look at the difference between BAA and ABB, you'll notice that they follow similar deviations, but are far away from eachother. The key is to use one FP calculation and trade the extremums.

EDIT: Michal...sorry... you beat me to post :)

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