FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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michal.kreslik
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Re: How does daily pip range effect lot size

Postby michal.kreslik » Thu Jun 07, 2007 4:00 pm

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


The FX pairs' daily ranges do not affect the calculation of position sizes.

Michal

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Luke
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Postby Luke » Fri Jun 08, 2007 3:45 pm

easy come, easy go.
I wish I didn't delete my post cause I lost what I typed. Anyway, here is code again.
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Last edited by Luke on Fri Jun 08, 2007 10:09 pm, edited 1 time in total.

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Postby fiberangel » Fri Jun 08, 2007 7:59 pm

Luke,

I downloaded your code (before you removed it). I don't have much time to look at it right now, but at the first glance I think you are calculating position sizes incorrectly (if at all, because I can see you are doubling on reversing thus reversing position [i.e. if you are short -10K and go long 20K you will end up with +10K long] ). I think it's wrong because for EACH ring/EACH direction you have to recalculate position sizes to have optimal hedged ring. Hence, you have to send a separate order to close each individual position in the ring (if you are using just one ring you can just close ALL positions) and when ALL successfully closed you can open reversed ring. Anyway, good luck.

Regards,

Max

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Postby michal.kreslik » Fri Jun 08, 2007 9:51 pm

Concerning the FPI mechanics written directly for a broker's API (as discussed in Luke's post): I agree that it's always better to have as little hubs and connectors on the way from the code itself to the execution.

But on the other hand, having the solution written for a platform (as opposed to having it written for the API) brings versatility: as new order interafaces for the platform (in this case, NeoTicker) become available, there are more brokers to choose from without writing a single line of new code.

For instance, it seems that IB (Interactive Brokers) might be a better broker for running the FPI than EFX is. IB does have lower commissions and seems to be very close to the real interbank prices. There exists an order interface between IB TWS and NeoTicker.

Without the platform, one would have to write an individual solution for every broker to see how it fares with that particular broker.

Michal

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Postby fiberangel » Fri Jun 08, 2007 9:59 pm

Michal,

While I agree that using something like NeoTicker adds to the ability of quickly change the brokers, there is also another side of the story. First, I don't want to pay over $1K for the platform if I can very quickly write an adapter/connector to broker's API myself; second, as you stated in the beginning, ALL arbitrage strategies are VERY time sensitive and if I can shave off milliseconds here and there by going directly to API, I recommend doing it.
It's an argument with no right answers, I'm just posting my thoughts.

Regards,

Max

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michal.kreslik
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Postby michal.kreslik » Fri Jun 08, 2007 11:46 pm

fiberangel wrote:Michal,

While I agree that using something like NeoTicker adds to the ability of quickly change the brokers, there is also another side of the story. First, I don't want to pay over $1K for the platform if I can very quickly write an adapter/connector to broker's API myself; second, as you stated in the beginning, ALL arbitrage strategies are VERY time sensitive and if I can shave off milliseconds here and there by going directly to API, I recommend doing it.
It's an argument with no right answers, I'm just posting my thoughts.

Regards,

Max


Max,

if I knew what broker is really the best one for FPI, I would go down the API path. When I find out, I probably will, but that's not the most important issue right now. The delay in processing thru the platform is certainly not milliseconds, I would guess that might be measured rather in microseconds (for NeoTicker).

There's also another twist: it might be advantageous to connect to a couple of brokers at the same time during the FPI calculation / order placing process. With a solution that would not use any standardized platform, it would be quite an expensive task to put that together. With a platform, you just "plug and go".

Michal

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Postby Luke » Sat Jun 09, 2007 2:24 am

fiberangel wrote:Luke,

I downloaded your code (before you removed it). I don't have much time to look at it right now, but at the first glance I think you are calculating position sizes incorrectly (if at all, because I can see you are doubling on reversing thus reversing position [i.e. if you are short -10K and go long 20K you will end up with +10K long] ). I think it's wrong because for EACH ring/EACH direction you have to recalculate position sizes to have optimal hedged ring. Hence, you have to send a separate order to close each individual position in the ring (if you are using just one ring you can just close ALL positions) and when ALL successfully closed you can open reversed ring. Anyway, good luck.

Regards,

Max


This was just my attempt at how I understood the strategy. Not saying it is the right way.

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The Ring stays flat only for 3-7 years, but not in 22 years

Postby cruzader » Tue Jun 12, 2007 10:23 am

Michal, i've been testing your ring. it seems to me that the ring stays flat only for 3 to 7 years. In 22 years test, the ring seems to lose its flat line (isn't it should be flat for eternity? or am i wrong assuming that). why so?

p.s: I'm using simulation technique, so there's no market exposure at all. (I'm using perfect impeccable hedge like the one mentioned in page 1 - 3, but it still lose its flat line in 22 years. The ring stayed flat only for about 7 years max). is it supposed to be like that Michal? or is it supposed to last for eternity?

thanks Michal,
cruz

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Re: The Ring stays flat only for 3-7 years, but not in 22 ye

Postby michal.kreslik » Tue Jun 12, 2007 10:52 am

cruzader wrote:Michal, i've been testing your ring. it seems to me that the ring stays flat only for 3 to 7 years. In 22 years test, the ring seems to lose its flat line (isn't it should be flat for eternity? or am i wrong assuming that). why so?

thanks Michal,
cruz


Cruz,

the rings, once formed, oscillate between a slight loss and a slight profit. That's the whole point of FPI.

Every rollover is a loss for any FPI ring, so if you would really hold the ring for 22 years, you would go broke (probably much sooner than that, just do the maths).

The point is to open the FPI ring at an advantegous time when it's highly probable that you'll be able to close it soon with a small profit.

Michal

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Postby cruzader » Wed Jun 13, 2007 3:26 am

Michal,

thanks for the reply, i'm hoping that i made mistake. you make me sure that i've made mistake with the simulation data. thanks :) i think you won't go broke (even if you hold the ring for life), if you had a non-interest account :D

do you think a non-interest account broker will allow you to do that (to hold the ring long enough to make profit), Michal?

cruz

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