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Squawk / 18 August 2016 at 13:20 GMT
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Poland
Hi fxtime, I have a small problem with your 6 lines algo. With currency pairs going same direction ratio is obvious, but what when eurusd going up, let's say 10 pips and gbpusd going down 5 pips. Is ratio 2:1? Another problem is when programm starts to count pips at 9pm. Let's say eurusd going up 2 pips and gbpusd stay at same price. That way ratio is 2:1 but is it worth to open trade? Thanks
18 August
kom75 kom75
Sorry for mistake, to open trade we need eurusd going 3 pips to get ratio exceedin 2.1:1. But question is same:)
18 August
fxtime fxtime
When you build your programme you need as you have rightly noticed a benchmark value to start with. Therefore when the eurusd or cable say is at +/-25pips or adjust to whatever level you are comfortable with before the algo takes control. The benchmark minimum is basically a way of defining your risk aversion level. I cannot post requirements on this line as the risk aversion comes down to you along with your stop ratios. But without a benchmark minimum you will have the issues as you mention. The algo originally posted was perhaps too generalised. The six lines are exact but I left risk etc to the algo writer/trader and reckon when I am back from my holidays I should write an article purely on this one topic as clearly there is interest on this topic of controls/risk/liquidity and time stamping.
18 August
fxtime fxtime
Another topic to base an article ''on'' is the calculation of probability of profit and calculating expected moves?
18 August
kom75 kom75
Thanks and have a good holiday:)
Btw. I suspected you're on holiday, because I haven't had my Wednesday lesson Lol
18 August
fxtime fxtime
oops ofcourse I only told TF Editors..sorry about that. I am away until Sept 3rd :-)
The benchmark mentioned above if you are into the maths is best calculated via a monte carlo simulation technique...(don't confuse with the monte carlo trade systems which will bankrupt you). The simulation correlates random samples of other traders or a basic risk aversion value of yours and applies it into a stochastic process. Stochastics basically measure ''unknown'' distribution and speed. When you plot the results into a histogram you quickly see where the optimum value occurs. 25 is a reasonable area imho for cautious trading. Do not drop below 11 as that is close to the extreme 5% of distribution who incur the greatest losses.
18 August
kom75 kom75
Well, you should see my (mentioned in earlier post) blind face now Lol. I'll stay with simple parameter to change like your 25 points. At least for now
18 August
fxtime fxtime
LOL...an aggressive level is 15 fwiw
18 August
kom75 kom75
Thanks
05 September
kom75 kom75
Hi fxtime. I hope you had a good holiday:). If I may can I have one more question? Managing trades is based on ratio. If I want to close trade manually, and ratio is greater then 2.1:1, my algo opens new trade. What did you do to avoid this? Do you reset your algo and start counting pips from closing trade time?
05 September
fxtime fxtime
Hi Kom....a great holiday thanks.
Regarding the trade ratio on my flow charts the trade sequencing permits a trade to open as usual and only then will a trail stop ratio be applied. However should you close the trade manually it regards the candle you '''close out on'' as nullified. So no new order can be opened on the same candle. The nullified candles occur when you either close/cover your trade or when a trade signal would trigger on an outside candle that is still in formation. None of my algo scenarios will permit a trade to open if an outside candle in the midst of formation triggers the trade. Outside candles must be completed before a trade can trigger. I have series of weightings to each and every trade signal for opening and closing orders such as the nullified stance but basically if you close an order manually the algo adopts a principal of reset and hold for further commands from you. Thus you have a safety brake to prevent accidental orders.
05 September
fxtime fxtime
Nate Silver wrote a book called The Signal and the Noise which basically outlines scenarios that occur within a lot of pricing/noise and what actions result from action and inaction. The consensus was a cooling period before permitting another trade....if you manually close a trade then as a default mode step away from the market for a pre-determined period eg the next candle or next day before resetting systems.
I am assuming you have a maximum ratio setting for when the markets become too stretched?
05 September
kom75 kom75
thanks for explanation. Your basic 6 lines algo seems to be more complex I thought:)
05 September
kom75 kom75
I don't have maximum ratio setting, that's the other thing I have to think about. If I set minimum movement for a pair for 25 pips, and for the other for for 1 pip, ratio can be 25:1. On the other hand if I set minimum movement 25 pips for both pairs it looks I will get less trades I could with 25 pips set for one pair
05 September
kom75 kom75
I found the book, even in polish language which is my nativ one:)
05 September
fxtime fxtime
Usually these ratio trades seek less opening trades for larger moves. Today we had a 3:1 ratio drop and thus eurgbp short accrued +38 (manual close) as today is illiquid the algo remains de-activated now. However the point of the ratio trade is to gain duration and skew in the markets. When momentum stalls as it has the ratio stop will trigger as it assumes that the optimum duration of trade has been reached and any further length of trade would only leave you at un-necessary risk. Remember rates of change modelling (which this algo is operating) seeks only the fastest moves but it doesn't seek the micro 5pip scalps like some price breakout strategies. An average return should be 25+ pips as an example.
05 September
fxtime fxtime
Wow well done at finding the book and even better in Polish.
All the strategies I have posted this year are basic scenarios and I have repeatedly said onsite that it is a base level to build from and the six line algo can be operated manually yourself but when it comes to programming you will be amazed at how complicated things can become.
05 September
fxtime fxtime
If you are building a programme may I suggest each parameter is set as a zone within the algo...thus when you determine stops have a whole zone/chapter programme for various stop scenarios for the best and worst scenarios. A programme needs defined limits for profit ratios and stop ratios and not just for trigger entry levels. Equally the programme will need to have a data reference to determine real time if the trade signal is valid and not a rogue data value and also if the current candle is say as described above a ''nullified'' outside candle which is still in formation.....or has the trade been closed manually...or is there a seperate order that stops another trade to be entered until a candle has completed...or is there a de-activation order in operation.
I tend to start with a notepad split into chapters and write each function in seperate chapters and slowly build up my flow charts from that...but take your time my friend it is worth it :-)
05 September
kom75 kom75
Thanks, I will stay with basic algo for now, meantime I'll start to build more complex one:)

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