Squawk / 23 July 2016 at 17:00 GMT
Financial Systems Advisor / Quantitative Investments Inc
Canada
Hi fxtime, in systematic models, should one use volume (number of price changes in observed time frame) and then strategies would be based on an objects classification (events that meet the conditions contained in the set of rules which depend on the value of certain parameters). Object—the event—is another candle. And rules are logical sentences like “if the price is greater than the upper barrier of the band” and the parameter is, for example, the upper barrier, which is a variable value. And when positions are opened the current volume should be greater than the average? And volume would be a parameter, say the last 8 candles, in order to trade the next two? R=8/2 or (I have also tested 5/1 on an H1 chart) is it simply better to stick to ROC, as its easy math?
23 July
fxtime fxtime
Volume I correlate to time distribution eg Steidlmayer on 30min ot better still via tick as the measure is VERY exact. However I still find that the error rate is too high for my liking so utilise ROC for daily strategies as a correlated trade eg the recent eurgbp algo can be via a ROC model using the three pairings or ratio trades as more real time and virtually no lag induced trade structure at all. The R=8/2 was tested by the Dennis and Eckhardt duo (turtle experiment) and they too found limitations even back then !
I find if you are going down this line of investigation it maybe best to consider the prime numbers as are optimum for lesser error responses say 11 or 13 but 7 is a reasonable value with a slightly lesser a confidence factor value.
However; tick or ratio analysis still outperform even the R' primes.
Also a stupidly simplistic system is the following...a hybrid Lady Luck which can be automated !
https://www.tradingfloor.com/posts/whatever-happened-to-lady-luck-7526004
23 July
fxtime fxtime
The commentary as always are usually more helpful LOL
Have a good weekend mate.
23 July
fxtime fxtime
I have checked my SPX data sets and tick easilly out performs raw vol data fwiw.
23 July
Qi2 Qi2
I agree, I think its a viable parameter, the question is, in fx, as its OTC, and I can't access EBS order book, can tick data be inferred as volume, and if so, is it of value.
23 July
Qi2 Qi2
My analysis shows for short positions, current volume should be greater than the average (number of price changes in observed time frame, attached is M30) and was probably the most important factor of decision model. Parameter conditions can be met in either of two occurrences, either during the period of the current considered candle or immediately at the opening of the next candle.
23 July
fxtime fxtime
Hmmm interesting point. Let me test a few things and I'll come back to you. For FX....vol can be a nightmare but let me check my data on M30 majors first.
24 July
fxtime fxtime
Over 10yrs of data vol holds water as it were until a black swan event occurs and you are simply stuffed :-( Spread widens and data shows a huge amount of unfilled orders due to minor gaps of a few pips :-( Result on data show 67% probable.....sadly the law of large numbers shows this can be replicated with a coin toss....a great schematic of yours but world events/balck swan events then cut your trade and run.
24 July
Qi2 Qi2
Ok, makes sense, I will have less weighting on that parameter on the next revisions of the algo!

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