FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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richie
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Postby richie » Tue Jan 15, 2008 4:08 pm

michal.kreslik wrote:
richie wrote:Hi, I just reached this long thread. Michal, what FPI range do you use in order to open a trade or close ? is it 0.9998 - 1.0002 or else? and how many total pips would you expect to gain from the range? is it feasible despite the fact that EFX charges commission?


Hi, richie,

first of all; only the absolute difference between the opening FPI and closing FPI is relevant. Also, the FPI values don't technically fluctuate around 1 in real life as you can see here:

http://kreslik.com/forums/viewtopic.php?p=2636i#2636

Thus, the answer to your first question is that I first need to know what is the distribution of the FPI values for a given FPI ring in particular and then I can assess what is the FPI values range that I want to use for the opening/closing of this FPI ring.

In my fully automated FPI framework, written in C# for NeoTicker, the framework client is given an option to gradually choose between frequent FPI arbitrages with lower average outcome or less frequent FPI arbitrages with higher average outcome. There are pros and cons to both of these options. You should implement this in your solution as well.

Your question concerning the pips cannot be answered by using the term "pips". Forex traders often tend to think in pips as it's the most common way on how to express the price difference. The truth is that a "pip" is being replaced by a "pipette" when there are quotes available in fractions of a pip (typically 1/10 of a pip) and also, for some pairs, it's difficult to say what a pip really is. Let's take USD/CZK. The current quote is 17.3660. Can you tell me, what on earth is the value of a USD/CZK pip? Is it 0.01? Or 0.0001?

For this and other reasons, I'm using almost exclusively the ppm (parts per million) measure instead in my calculations. With ppm, you can represent the price differences for various fx pairs in a comparable fashion. Example: ten pips range of EUR/USD trading between 1.4500 and 1.4510 translates to 689.42 ppm (if we take the arithmetic mean between the 1.4500 and 1.4510 as the reference point).

Another problem with pips is that, obviously, a pip has different values for different FX pairs when converted to your account currency. The question of how much profit in your account currency terms can you expect from a single FPI arbitrage depends on the FX pairs used, the FPI range employed and the exchange rates between the particular arbitrage outcomes in all the FX pairs that form the FPI ring vs. your "home" (account) currency.

As you can see, the FPI concept is not for wussies :)

The commissions are a big obstacle for FPI indeed, but the brokers are generally willing to adjust your commissions if you are willing to trade through them :)

Michal


I think you're right on the pip thing. My point asking these questions were to get input from you since you obviously know well how this arbitrage operates, its potential, weakness, etc. If somehow this is still feasible to get real net profit then I will take my best shot to learn C# and develop the same (well probably it can take months or years may be) EA like yours :)

Also, do you think efx is still a good broker for the FPI? if you have found a better one, would you mind sharing it with us?

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Tim JP
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Postby Tim JP » Wed Jan 16, 2008 10:40 pm

A good way to determin FPI extrems are simple Bollinger Bands.
I plotted 10 period Bollinger Bands on the MT4 indicator.
You can see that the FPI likes to return to the Median BB which would
equal the market equillibirium of 1.

Image

Right know I'm working with some Java Programmers to get the Dukascopy Feed into MT4 via JForex API. This may help to get a more realistic FPI.
Keep the ball rolling guys! 8)

FAB4X
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Question?

Postby FAB4X » Fri Jan 18, 2008 8:55 pm

michal.kreslik wrote:
deepleo wrote:Hmm..Please forgive me for this..where do I need to calculate the correct Bid or Ask sides for this ring?


Simple:
  • use Ask price for FX symbol that is Bought
  • use Bid price for FX symbol that is SoldShort
Michal



Quick confirmation....
if FPI<1 do you use BSS or SBB
if FPI >1 close trades and reverse

Correct?

pipscalper
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Postby pipscalper » Sat Jan 26, 2008 3:43 am

michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)

FAB4X
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Postby FAB4X » Tue Jan 29, 2008 3:24 pm

pipscalper wrote:
michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)


Where is the link to download this?

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pipscalper
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Postby pipscalper » Tue Jan 29, 2008 4:02 pm

FAB4X wrote:
pipscalper wrote:
michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)


Where is the link to download this?
I do not know exactly how to post a link directly to Michal's post, but here is a link to the page. FPI calc.zip It's on page 48, second post from the bottom. The file is called FPI calc.zip

Dracozny
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linking posts

Postby Dracozny » Tue Jan 29, 2008 9:00 pm

pipscalper wrote:
FAB4X wrote:
pipscalper wrote:
michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)


Where is the link to download this?
I do not know exactly how to post a link directly to Michal's post, but here is a link to the page. FPI calc.zip It's on page 48, second post from the bottom. The file is called FPI calc.zip


heh I just figured it out, at the top of the post is a small paper icon, that is the link to the post. on most forums it appears as a post number. anyways right click on it and copy, then paste it in your new post

pipscalper
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Postby pipscalper » Wed Jan 30, 2008 1:02 am

FAB4X wrote:
pipscalper wrote:
michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)


Where is the link to download this?

http://kreslik.com/forums/viewtopic.php ... 932b7#4202


P.S. Thanks for the tip Dracozny. Maybe you can also figure out why the FPI ring calculator downloads as weird characters instead of the actual calculator? :?

Dracozny
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what characters

Postby Dracozny » Wed Jan 30, 2008 3:13 am

pipscalper wrote:
FAB4X wrote:
pipscalper wrote:
michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)


Where is the link to download this?

http://kreslik.com/forums/viewtopic.php ... 932b7#4202


P.S. Thanks for the tip Dracozny. Maybe you can also figure out why the FPI ring calculator downloads as weird characters instead of the actual calculator? :?


forgive me if i insult your intelligence :P
its in a zip file so you need to uncompress it, and then open the resulting file in your office application.
Attachments
FPIScreenshot.png
it loads for me
FPIScreenshot.png (79.54 KiB) Viewed 714 times

pipscalper
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Re: what characters

Postby pipscalper » Wed Jan 30, 2008 6:28 am

Dracozny wrote:
pipscalper wrote:
FAB4X wrote:
pipscalper wrote:
michal.kreslik wrote:Someone has just asked me if I could share the excel file that I used to make the FPI ring calculations two posts above.

Of course I can, attached you will find it.

Michal
I downloaded the FPI ring calculator posted by Michal but the downloaded excel file shows weird characters instead of the actual calculator. What am I doing wrong? ](*,)


Where is the link to download this?

http://kreslik.com/forums/viewtopic.php ... 932b7#4202


P.S. Thanks for the tip Dracozny. Maybe you can also figure out why the FPI ring calculator downloads as weird characters instead of the actual calculator? :?


forgive me if i insult your intelligence :P
its in a zip file so you need to uncompress it, and then open the resulting file in your office application.
No, you did not insult my intelligence, I insulted it myself :lol: Damn it, I thought I new everything about computers... :smt013 :smt030 Smoke_Smile

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