Real work on MT5 NDD - page 19
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Stat arbitrage carries less risk the closer you get to the noise. Haven't studied (don't see the point yet) the history of LTCM, but something tells me that they were extremely far from HFT. Made up long market-neutral portfolios and traded them. That's huge risk, but also huge liquidity. Diversification has nothing to do with it. Moreover, even the flip side of diversification could have turned here - the market interrelationship used in one place breaks down, which in chain breaks the interrelationship in another. I.e. a chain reorganisation of the whole market. Yet HFT is much less risky in this sense.
What about the costs of the spread? Are they covered by...
By the way, gentlemen, does anyone have a clue about this "return" behaviour of currencies:
I have a picture like this.
What about the costs of the spread? Are they covered by...
The point seems to be not to play EUR vs CHF.
This is apparently a currency futures. Your picture clearly shows that there was nothing to catch on your source quotes. From the ECN/STP picture, of course, it was possible to squeeze a profit more than once.
What's the point of that?
On ECN/STP there is an extra sign, or else everything would be just as dead on.
Not a bad example of how artificial illogical restrictions are imposed even on exchanges. Obviously, if the spread on a symbol is always around the sampling step, it should be reduced.
Reducing the sampling step will inevitably significantly increase the technical burden on exchanges and brokers, but limiting pricing to the current technical imperfection is wrong.
I see another problem in this. Out of interest I looked at IB's forex site. For example on EURUSD they have an increment, as they call it, of 0.00005 mostly and sometimes 0.0001. In fact, the four digits turn out. At the same time, somewhere on their site there is a table of contract specifications with the names of banks - all majors like DB or Citi, not something like StroyInvestPromTrustBank.
For my part the only demo in IB and I don't see the quotes sources in Level II, and they are in advertising photos, so I don't have the possibility to check it.
Now to the problem. Where does the fifth digit come from? Yes, we have listened to wonderful tales about ECN, liquidity providers, etc. and we were even somewhat optimistic about this business - everything is fine. But where does the fifth sign come from, if large players do not have it, in general.
I do not mean that the fifth digit is bad, the question is where it comes from and what is behind it.
With an Instant Execution I can specify the slippage and simply disagree with the retracement.
Not to agree, and what - not to open at all? This option is for arbitrage strategies (you should open at a certain price only, otherwise there is no point in opening).
For all other strategies, we will have to send the same request for a new price. What is the difference then?
And if the strategy says "you need to enter only at this price or better", then you need a limiter, the instant execution has nothing to do with it.
Calm average spread on NDD shows 5 pips (5-digit), the commission for the transaction in the recalculation of the spread is 4 pips (5-digit).
It turns out that the average loss is 1 standard pip. In this situation, any additional slippage of 1 standard pip
nullifies the advantage, because on the fixed 2 pips spread, and there is an opportunity not to agree on a new price.
Of course the advantage is the execution speed.
If you don't "go to the broker for pips" then the difference will not be so noticeable.
If we are talking about the type of execution, it makes sense only if it (type) is part of the strategy.
The sampling step is set based on some logical considerations. For example, in an auction, you can't increase the bid by $1 if the lot is worth millions. Otherwise the auction would be very delayed, and there is not much sense in such flexibility of determining the highest price. Therefore, the step of discretization at the auctions is some kind of conditional percentage of the initial price of the lot.
In market pricing and electronic bidding, however, the reasonableness of the choice of the sampling step should take into account technical and manipulative possibilities. Even if there are no technical limitations, it is not reasonable to reject the sampling step, because a manipulation component is introduced: for example, a market maker can set a price that is one 20-digit better than the current BestPrice price in order to attract additional liquidity.
The current five-digit price allows for much more accurate and flexible pricing, which many market participants are happy to take advantage of. And the absence of a broker (most likely due to technical problems and a desire to make extra money - rounding bank prices down to 5 pips) of a full-fledged five-digit price is a bad argument. All market participants, including the big ones, quote "five digits" on spot-FOREX.
Moreover, the commission is considerably less than a four-digit point. Many LPs give a commission-free feed by putting commission in the spread (markup), so they really need the five-digit. For example, in Integral the commission is less than in Currenex, so many LP go to Integral, as a result giving better prices for some symbols (by several five-digit pips) than in more expensive Currenex.
On the importance of execution. Every extra pip of profit, every cent of commission - a direct impact on the MO of the strategy. Even a small change in the IRR out of hundreds or thousands of trades gives significant results. But in addition to IR there is the concept of the re-ject, and it means that the result on the real account can differ significantly from the result even on the most accurate tick-tester with the number of deals measured in units.
P.S. The DC cannot compete with ECN/STP on trading conditions. Therefore it has long been irrelevant to talk about a DC.