FPI - Fractional Product Inefficiency: The Impeccable Hedge

NeoTicker indicators

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rwrwrw
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Postby rwrwrw » Fri Sep 19, 2008 8:14 am

hi, michal. please sorry for my english. i've been testing this strategy for a long time. and i've noticed one thing. if you use the ring for example usdchf * gbpusd * (1/gbpchf) and it ishows that the fractional product is > or < than 1 it doesn't depend on the real balance. for example if we've opened a ring 2008.08.05 00:00 GMT BUY USDCHF 1.0480 BUY GBPUSD 1.9618 SELL GBPCHF 2.0566 and closed it 2008.08.18 23:00 GMT USDCHF 1.0983 GBPUSD 1.8620 GBPCHF 2.0448 we would lost 377 pips (503-998+118=-377)though we've opened the ring when the fractional product was 0.9997 and closed it when it was 1.0001. According to your theory we must have earned some money, but instead of it we've lost it. Then i had an idea to replace the pairs. instead of usdchf*gbpusd*(1/gbpchf) i used (1/usdchf)*gbpusd*gbpchf. the result of this replacement was "a new currency pair"it has it's own rises and falls, as if it was a currency pair. if it falls we should buy usdchf sell gbpusd sell gbpchf, and if it rises we should sell usdchf buy gbpusd buy gbpchf. it is quiet a liquid instrument, it is enough to move a little and the result is a big profit or a big loss. the same is if we use usdchf*(1/gbpusd)*gbpchf. I want to know your opinon. again, sorry for my english.

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brough
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Postby brough » Fri Sep 19, 2008 2:15 pm

If you opened a ring and lost pips then your ring was not balanced and you were taking a position. I repeated what you did and noticed you used one standard lot on all pairs, which is not quite correct. You're almost there but I think the key part you're missing is the number of lots of each pair.

I would recommend going back and looking at some of the previous examples and see how one of the pairs does not use the same number of lots as the other two pairs.

rwrwrw
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Postby rwrwrw » Fri Sep 19, 2008 2:28 pm

Brough, thanks for the answer. yes i used one standard lot on all pairs, but the thing is that if we use different lots our ring will be closed, and we couldn't earn anything because there will be no balance fluctuations. we can earn money only if one of pairs moves faster. tell me please if i am mistaken. thanks.

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Arb Calculator

Postby FAB4X » Fri Oct 03, 2008 2:09 pm

I have download this arb calculator and used it a bit different and it WORK$$$$$$

What you need to do is enter the current rates.
Then change with the arrows just the EURGBP rates till you will see either
a BUY or SELL indication
Then keep changing the values to how much money you wish to make.

Enter your trades manually, they will be either a buylimit or selllimt orders.

It works every time

Now what I need is someone who could do this auto, like a MT4 EA
Any ideas how this arb calculates this?
Attachments
facalcwin.zip
(108.2 KiB) Downloaded 275 times

wolfe
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Postby wolfe » Sat Oct 04, 2008 12:25 am

Hello everyone,

Could this FPI ring be traded more successfully across multiple brokers simultaneously?

If an application were to be coded enabling the application to "share" information between 3 separate brokers, and automate trading operations respectively, I believe this trading method could work great.

Best of all? The brokers would not know what you were doing.

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michal.kreslik
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Postby michal.kreslik » Sat Oct 04, 2008 9:41 am

wolfe wrote:Hello everyone,

Could this FPI ring be traded more successfully across multiple brokers simultaneously?

If an application were to be coded enabling the application to "share" information between 3 separate brokers, and automate trading operations respectively, I believe this trading method could work great.

Best of all? The brokers would not know what you were doing.


FPI arbitrage can't be run with retail brokers, much less with multiple retail brokers.

Michal

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pineapples
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Postby pineapples » Sat Oct 04, 2008 12:44 pm

Use of multiple brokers doesn't eliminate the "timing of execution" risk; if anything it increases it. If you manage to get two orders placed simultaneously and the third one takes twenty five seconds longer, then the whole point of using this system is negated.
I brought this possibility up earlier in the thread, suggesting also the use of separate accounts working together (the old "synchronise watches, boys" routine).
The conclusion of that discussion was that the only practical means to use FPI would be through the use of a "basket order" that a willing broker would provide - this still would not guarantee simultanaeity of order execution.

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michal.kreslik
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Postby michal.kreslik » Sat Oct 04, 2008 1:09 pm

FPI can only be run on a direct interbank market.

wwx69
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Postby wwx69 » Sun Oct 12, 2008 7:54 am

Mikhal, I know only banking institutions are capable of utilizing success out of FPI as you have stated in previous posts but would EFXGroup be an equivalent for the same potential success?

By the way I think your Ideas are brilliant. I wish I had your intellectual capacity.

Respectful Regards

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michal.kreslik
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Postby michal.kreslik » Sun Oct 12, 2008 9:06 am

EFX group can't be used for running FPI.

In fact, I don't know of any retail forex broker out there that would fit the stringent requirement of precise order processing and execution.

This is one of the reasons I haven't contributed to this thread much lately as knowing that the FPI requires an interbank market access, FPI is only accessible to traders/investors with something like $1 mil+ in trading capital.

I guess that for most readers it would be a purely theoretical discussion then.

Michal

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