FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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pineapples
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Postby pineapples » Fri May 25, 2007 9:51 pm

quote: "the broker is processing the orders based on the time when the order was received. It doesn't matter to the broker whether the orders are received from three different accounts or from just one account. The only thing that matters is the time."
Thats the very reason I suggested multiple traders (two's company, three's a crowd) with separate accounts opening a trade with their respective brokers at exactly the same time.
If nothing else it would be a blast with your mates.
But if a "basket order" can be placed, then the most logical strategy would be to hit the markets during the quietest and most static time. If the fractional equation equals one so much the better, it's going to swing.

This method seems the most viable entry strategy to me in terms of minimal risk.
The exit is another story as profit only shows when the market is volatile. Though I am sure there are points at which the inefficiency holds for long enough to close everything and line the pockets. Sweet.

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Postby Pipscorer » Wed May 30, 2007 1:48 pm

Thanks for this wonderful thread..I have tried the 3 currency hedge for 2 weeks and up to now it is still flat. The Swap rate has been eating the balance slowly. I would like to try the 4 or 5 currency hedge, can anybody teach me formula for the lot allocation for 4, 5 or 6 currency hedge. Thanks

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How does daily pip range effect lot size

Postby toddanderson » Thu May 31, 2007 1:18 am

Does any one know how daily pip range effect lot size
for your hedge calculation



Pipscorer wrote:Thanks for this wonderful thread..I have tried the 3 currency hedge for 2 weeks and up to now it is still flat. The Swap rate has been eating the balance slowly. I would like to try the 4 or 5 currency hedge, can anybody teach me formula for the lot allocation for 4, 5 or 6 currency hedge. Thanks

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michal.kreslik
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Postby michal.kreslik » Thu May 31, 2007 1:36 pm

Pipscorer wrote:Thanks for this wonderful thread..I have tried the 3 currency hedge for 2 weeks and up to now it is still flat. The Swap rate has been eating the balance slowly. I would like to try the 4 or 5 currency hedge, can anybody teach me formula for the lot allocation for 4, 5 or 6 currency hedge. Thanks


It's very simple: you just need to include every currency on both sides of the market. I.e., if there's a USD in your FPI ring, there has to be USD buy and USD sell part with the same position size present in your FPI ring.

You can get a listing of FPI rings that are available for (I guess) 25 most widely traded FX pairs. I posted the listing earlier in this thread.

Michal

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Newbie Question

Postby okabija » Sat Jun 02, 2007 10:13 am

Hi....

I've read your 1st post about this strategy, although I didn't understand all, but i think its "safe" system that I'm looking for.
I'm not famous with NeoTicker, I use metatrader broker, WHC with spread 2 - 3pips.

I have few question :
* SellShort EUR/USD
* Buy EUR/JPY
* SellShort USD/JPY
this mean we should open those position exactly at the same time ?
and close it at same time ?
but how could I do the same open position at same time ? any metarader user could help me ?

How to determine to close and open position ?

thanks for reply

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michal.kreslik
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Re: Newbie Question

Postby michal.kreslik » Tue Jun 05, 2007 12:07 am

okabija wrote:Hi....

I've read your 1st post about this strategy, although I didn't understand all, but i think its "safe" system that I'm looking for.
I'm not famous with NeoTicker, I use metatrader broker, WHC with spread 2 - 3pips.

I have few question :
* SellShort EUR/USD
* Buy EUR/JPY
* SellShort USD/JPY
this mean we should open those position exactly at the same time ?
and close it at same time ?
but how could I do the same open position at same time ? any metarader user could help me ?

How to determine to close and open position ?

thanks for reply


Hello, Okabija,

all these questions have been answered in this thread earlier in detail. I'm thinking that I should put some sort of FAQ on FPI together here. Some people are even asking me to do a live seminar on FPI :) Well, if enough people would be interested in that, it'll be a pleasure for me to do that.

Anyway, according to my present knowledge (please correct me anyone if I'm wrong), MetaTrader brokers are paying a commission to MetaQuotes out of every client who is using MetaTrader with their brokerage. That's why MetaTrader is "free" for clients, but, unfortunately, this introduces a concept of hidden fees for these clients - fees that are not directly related to the trading mechanics itself.

For FPI to work at all, it's heavily dependent on prices that are as close to the real interbank (let's say, EBS) prices as possible with as low trading costs as possible. You don't know how much are you paying in the above mentioned hidden fees, so trading FPI thru such a broker might be as good as going to Las Vegas and playing black jack. In Las Vegas, you're gonna have some fun at least.

Michal

okabija
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FAQ

Postby okabija » Tue Jun 05, 2007 4:05 am

Thanks for reply,

I agree to post FAQ on the first page. Because newbie like me, must be confuse. Especially English is not my main language, so I don't understand all of "science word" 8)
May be you could create a group for metatrader or if possible you also post indicator in metatrader.
Could you post example trading, how to trade, indicator, profit / loss with simple way ? I think this system in marvelous.

thanks,

regards,
okabija

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michal.kreslik
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Re: FAQ

Postby michal.kreslik » Tue Jun 05, 2007 6:21 pm

okabija wrote:Thanks for reply,

I agree to post FAQ on the first page. Because newbie like me, must be confuse. Especially English is not my main language, so I don't understand all of "science word" 8)
May be you could create a group for metatrader or if possible you also post indicator in metatrader.
Could you post example trading, how to trade, indicator, profit / loss with simple way ? I think this system in marvelous.

thanks,

regards,
okabija


Okabija,

I'm not using MetaTrader nor do I think it's viable to run FPI arbitrage profitably with a broker that pays commissions to Metaquotes. MetaTrader is by no means a great platform, but their licensing model simply does not fit into the set of broker-related requirements for a price-highly-sensitive arbitrage model like FPI.

As for the trading examples: there have been a couple of them posted here in this thread. The underlying idea behind FPI is quite simple, but the implementation is quite a complex task.

I'm going to post a simple program in C# that will enable the user to calculate the correct position sizes and expected profit based on input Bid/Ask quotes for open and close of the FPI ring impeccable hedge position soon (right after I finish one smaller project for one of my clients).

Michal

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Patch
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Postby Patch » Wed Jun 06, 2007 3:42 am

Hi Michal

I think you are really smart, if not a trading and programming genius.

I've been reading this thread for a long time and wondering, what about auto trading to make The Impeccable Hedge have a profitable end result? The three smartest traders I know, use autotrade systems to remove their emotions from the trading equation.

Please tell my your thoughts, plus and minus.

Patch the Pirate
In VA

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michal.kreslik
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Postby michal.kreslik » Wed Jun 06, 2007 9:34 am

Patch wrote:Hi Michal

I think you are really smart, if not a trading and programming genius.

I've been reading this thread for a long time and wondering, what about auto trading to make The Impeccable Hedge have a profitable end result? The three smartest traders I know, use autotrade systems to remove their emotions from the trading equation.

Please tell my your thoughts, plus and minus.

Patch the Pirate
In VA


Patch, thanks, but I'm not going to be considering myself a "trading genius" any sooner than I get at least one million dollars from trading alone 8)

Of course, it's almost impossible to run the FPI arbitrage by hand. I was only going to post a simple program here that would make the concept more clear to the readers of this thread by showing the FPI value, correct positions sizes, profit etc. based on user's input (prices). It would be sort of educational tool on FPI.

As for the real world trading, as I said, it's essentialy unfeasible to run the FPI arbitrage manually. In this respect, I'm working on a fully automated FPI framework for a couple of clients.

Michal

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