FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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michal.kreslik
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Postby michal.kreslik » Fri Apr 27, 2007 10:03 pm

Hello, friends,

I have just returned to Europe. I'll update you on the FPI development here.

Michal

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Postby fiberangel » Fri Apr 27, 2007 10:09 pm

Funny, I was just checking out this thread a couple of hours ago thinking what happened to all activity here. Anyway, I've been working on it in my spare time and I'm looking forward to maybe participate in future discussions on the topic.

Regards,

Max

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Postby michal.kreslik » Fri Apr 27, 2007 10:22 pm

Max,

the intriguing aspect of FPI is that the theory is very simple, but the implementation in a real world trading is surprisingly complex.

I have received emails asking me whether I would do a seminar on FPI somewhere in the USA, so I'm thinking about that.

Michal

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Postby fiberangel » Sat Apr 28, 2007 4:07 pm

You are absolutely right about implementation. It is complex especially doing it with MBT/EFX. I'm running into several issues with slipping market orders way too much (I'm hoping when I move to the live server it will be less of a problem) which affects the impeccable hedge (though negligible). I am however somewhat close to maybe testing it live with 10K lots on MBT account. I have also looked at ducascopy briefly, but I don't know if they allow partial lots.
Keep posting.

Max

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Postby fiberangel » Sat Apr 28, 2007 7:01 pm

I have tried both market and limit, each has its own pluses and minuses. I was just stating for other readers that market orders with MBT may be problematic.

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Postby michal.kreslik » Mon Apr 30, 2007 1:17 pm

fiberangel wrote:You are absolutely right about implementation. It is complex especially doing it with MBT/EFX. I'm running into several issues with slipping market orders way too much (I'm hoping when I move to the live server it will be less of a problem) which affects the impeccable hedge (though negligible). I am however somewhat close to maybe testing it live with 10K lots on MBT account. I have also looked at ducascopy briefly, but I don't know if they allow partial lots.
Keep posting.

Max


Hi, Max,

I'd say that if you're having problems on a demo, those problems will be bigger on a live.

Given enough capital, you can set up the "partiality" of the FPI positions easily - you just use so many whole lots for every position. But we're talking about a BIG capital need here.

EFX allows for down-to-a-unit position sizes, though.

Michal

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Postby michal.kreslik » Mon Apr 30, 2007 1:38 pm

fiberangel wrote:I have tried both market and limit, each has its own pluses and minuses. I was just stating for other readers that market orders with MBT may be problematic.


Market orders are just that: market orders. If you don't restrict the broker in any other way, you never know which price you finally get.

I'm thinking about writing a sample C# script for NeoTicker that would test the viability of using limit orders for FPI position creation. Obviously, it's not that easy as saying "get me this or better price for this FPI position":
  • limit orders are not guaranteed to be executed. If you're left with an incomplete FPI ring, that's more risk than having one of the positions entered off the FPI price
  • all other factors being equal, the only correct price for a position in an FPI ring is the calculated one. Prices above or below are both worse. This is one of the main differences between FPI and plain trading.


Michal

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Postby fiberangel » Mon Apr 30, 2007 3:50 pm

michal.kreslik wrote:
fiberangel wrote:I have tried both market and limit, each has its own pluses and minuses. I was just stating for other readers that market orders with MBT may be problematic.


Market orders are just that: market orders. If you don't restrict the broker in any other way, you never know which price you finally get.

I'm thinking about writing a sample C# script for NeoTicker that would test the viability of using limit orders for FPI position creation. Obviously, it's not that easy as saying "get me this or better price for this FPI position":
  • limit orders are not guaranteed to be executed. If you're left with an incomplete FPI ring, that's more risk than having one of the positions entered off the FPI price
  • all other factors being equal, the only correct price for a position in an FPI ring is the calculated one. Prices above or below are both worse. This is one of the main differences between FPI and plain trading.

Michal


EXACTLY. That's the problem I was facing with Limit orders. Even after I implemented slip threshold, I still would get a canceled order once in a while which is even riskier than having an order filled at a market price.
All in all, to me it looks like setting the system to trade with market orders is fairly safe and still profitable. I just accept the slippage as a fact of life when running FPI system on MBT, it may lessen the profit, but it still works.

Another thing is why do you think that moving to the live server will only increase slippage? I've researched the topic a little and I don't 100% think that it will be only worse.

Max

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Postby geff » Mon Apr 30, 2007 4:31 pm

It's been my experience that demo servers are given a lower priority by the broker's I.T. and Customer Service departments. If there's an outage, a slowdown, a bug or a bad tick, they'll get to it IF the live servers and the live customers aren't needing attention.

On the flip side, if your broker is doing any price manipulation, I would think it would only be on the live servers where it could generate a profit. Manipulating demo servers would be a waste of time and could lose potential customers.

Anyway, it isn't real until it's on the live server with real money and that's the flaw in demo trading.

Jeff

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Postby fiberangel » Mon Apr 30, 2007 4:43 pm

Jeff,
I agree that demo servers are given much lower priority and that's exactly the logic behind my thinking that live servers may offer less slippage than demo servers. Also, I have traded manually (and currently still do) on MBT live with 10-30 MBT lots (1-3 standard 100K lots) and almost never get slipped on market orders and even when I do get slipped, it's usually a pip.
Anyway, this is not a discussion about MBT and their practices. I think they are a good broker for FPI if you are not a BIG time trader who can open USD 50K account with Ducascopy or other more liquid brokers.

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