FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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Luke
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Re: Possible Fix

Postby Luke » Tue Oct 17, 2006 2:18 am

michal.kreslik wrote:
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.


In the method ExtractSymbolsFromChart, the 4th parameter: bool sort = false (always)
I don't think it is sorting like it should

line 122 KToolsNeo.cs

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trevman
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Postby trevman » Tue Oct 17, 2006 3:09 pm

can someone help me setup neoticker to recieve forex data in realtime? thanks.

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watzdorf
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Postby watzdorf » Tue Oct 17, 2006 4:14 pm

Thank you Trader_hal,


alex

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watzdorf
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Postby watzdorf » Wed Oct 18, 2006 10:20 am

trevman wrote:can someone help me setup neoticker to recieve forex data in realtime? thanks.


I am using EFX datafeed.

You need to install the order server

http://www.tickquest.com/NeoTicker/NTOSEFX38.exe

and also the navigator from EFX
http://www.efxgroup.com/download.asp

hth

alex

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Re: Taking Advantage of FPI

Postby davidf » Wed Oct 18, 2006 11:11 am

To: Silverpike

Hi, and how way I can recognize what pair offers dsicount a which pairs offers premium?

you wrote:
However, selling at a premium is the goal. "Buying" when the group is at a maximum discount and "selling" the group at the maximum premium[glow=red] is the name of this game.


DavidF

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Postby ryan » Wed Oct 18, 2006 11:44 am

Hello all,

Just wanted to say hello .. I found the FPI concept today and will look forward to providing my input in the coming weeks. Thanks for Michal and all who continue to contribute.

Is there a maximum possible FPI range, and an optimum ENTRY/EXIT level?

I have done some *very* crude FPI spreadsheet analysis on some historial data -- just looking at 1min data across 2 trading days -- and the fluctuations <1 FPI >1 -- are occuring all the time (I am sure you all already have this figured out!).

These fluctations between +ve and -ve (>1,<1) positions can be quite close together, so I wonder if trades couldnt occur throughout the day?

I have attached my spreadsheet which should be self-explanatory -- highlighted rows show where ENTRY/EXIT could be possible (?) nearby.

** UPDATE: My old spreadsheet was rubbish ... I have updated it with proper calculations; see my next post for details
Attachments
fpi_1min_analysisV2.zip
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Last edited by ryan on Wed Oct 18, 2006 3:21 pm, edited 1 time in total.

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Gert Frobe
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Postby Gert Frobe » Wed Oct 18, 2006 1:45 pm

hi ryan, great work on the speradsheet & looking forward to more of your imput.

Michal, the FPI is is the trigger to finaly get me to signup for neoticker, i can't put it off any longer. so with that being said, is there a way to set up neoticker to place all three trades at the same time as well as exit the trade at the same time. therefore maxing out the pips from the FPI.

thank you both again,

ben

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Don;t fall into the trap!

Postby ryan » Wed Oct 18, 2006 3:18 pm

Ben, thanks for your warm welcome. I've been spending some more time looking at the formulas and realised my earlier analysis was fatally falled. I'll share what I now know as obvious in case any one else is making the same mistake.

The formula to create the PFI is:

a * b * (1/c)

or to use three pairs with correlation from Michals first post example:

(EUR/USD) * (USD/CHF) * (1 / (EUR/CHF))

eg,

1.1840 * 1.3145 * (1 / 1.5565) = 0.999915194

Although is correct we need to take few things into account which I havent been doing: (a) the spread, (b) the trades, (c) realise that there are two _independent_ calculations to be made and then compared.

Look at it this way:

PFI_Entry: A_Bid * B_Bid * (1/C_Ask)
PFI_Exit: A_Ask * B_Ask * (1/C_Bid)

or another way, if you're using historical data based say on the Open Price like I was:

PFI_Entry: APrice+Spread * BPrice+Spread * (1/CPrice)
PFI_Exit: APrice * BPrice * (1/CPrice+Spread)

When I did my initial calculations I was just taking, say the open price (foolishly) and calculating what I thought was the PFI.

Now I have created an update to my earlier spreadsheet listing a PFI_Entry value and PFI_Exit value for each tick of the 1 minutes chart.

The spreads (used to calculate the PFIs from the Open price) as on a seperate sheet if you want to adjust them

And there is an example on another sheet.

I think this now works.

UPDATE:
Of the potential entry points in my 2 days worth of 1 min data 8.76% (121/1381) where potential PFI entry points, ie. PFI_Entry < 1

Of the potential exit points in my 2 days worth of 1 min data 17.09% (236/1381) were potential PFI exit points, ie. PFI_Exit > 1.

Any comments?
Attachments
fpi_1min_analysisV2.zip
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Last edited by ryan on Wed Oct 18, 2006 4:02 pm, edited 1 time in total.

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michal.kreslik
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Re: Don;t fall into the trap!

Postby michal.kreslik » Wed Oct 18, 2006 3:50 pm

ryan wrote:Although is correct we need to take few things into account which I havent been doing: (a) the spread, (b) the trades, (c) realise that there are two _independent_ calculations to be made and then compared.

Look at it this way:

PFI_Entry: A_Bid * B_Bid * (1/C_Ask)
PFI_Exit: A_Ask * B_Ask * (1/C_Bid)

or another way, if you're using historical data based say on the Open Price like I was:

PFI_Entry: APrice+Spread * BPrice+Spread * (1/CPrice)
PFI_Exit: APrice * BPrice * (1/CPrice+Spread)

When I did my initial calculations I was just taking, say the open price (foolishly) and calculating what I thought was the PFI.


Ryan,

quote from the original article:

michal.kreslik wrote:Certainly, one of the factors contributing to the fact that the product is not exactly 1 constantly is that we are not using a mean value between Bid and Ask, but instead only a Bid price here. But that would account only for an absolute shift from the ideally effective product of 1, not for the wild oscillation we can see on the screenshot.


Obviously, in order to find out the true FPI value, we have to use the ask price for every FX symbol that is bought in the ring and the bid price for every FX symbol that is sold short.

The trouble is that EFX nor Tradestation doesn't provide Bid/Ask history, so we need to estimate the average spread in order to get the correct FPI. I'm working on including these artificial spreads in the C# FPI Control Panel.

Michal

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Postby michal.kreslik » Wed Oct 18, 2006 3:59 pm

Gert Frobe wrote:is there a way to set up neoticker to place all three trades at the same time as well as exit the trade at the same time.


Ben, you can set up any arbitrary number of trades in NeoTicker and then send them all at once by clicking "Send All" in the Account Manager. But the trouble is that the broker will execute the trades one after another, although it will be done very quickly.

As I said in the original article, the best way to solve this would be to make a broker support a composite hedge order. Thus, the individual orders won't be executed unless all of them are executed.

Gert Frobe wrote:therefore maxing out the pips from the FPI


You won't be "maxing out" the pips from the FPI trade :) You will be trading it correctly. If you don't open or close the positions at the same time, you can either gain or lose. The trouble is, you never know whether you would gain or lose. Thus, it's the safest to trade FPI as it is intended.

Michal
Last edited by michal.kreslik on Wed Oct 18, 2006 4:25 pm, edited 1 time in total.

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