Random Flow Theory and FOREX - page 3
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2 Prival:
Couldn't resist making some cosmetic changes to the indicator code
By the way, the trouble of any "limited" indicator, i.e. the one usually represented in a separate window, is its actual unlimitedness: you never know in advance if it has actually reached an extremum, will crawl further together with the price or will draw a divergence. But the continuous equivalents of these inventions of inflamed trader's minds could make you wonder what to do with the initial price to reach the actual limit.
Forex is a system with its own state. As a result, the same inputs, depending on the current state, may lead to completely different results. The system memory, expectations, etc. are also involved. You can take the response to nonfarms as an example. The last publication, which turned out to be much better than expected, resulted not in a strengthening but a steep fall of the dollar.
Therefore, if we model forex, we should model its internal structure in addition to the incoming flow. From my point of view, there are two completely different subsystems: speculative, which has (with certain limitations) positive feedback, and financial and economic, with negative feedback. They differ greatly from each other also in other parameters: speed and strength of reaction to events, relaxation time, etc. If I was asked to build a theory out of all this, which would be able to predict somehow, I would shoot myself on sight. :-))
In my view this is all correctly noted, however, the reasoning is not quite right in my opinion.
Forex (with a caveat about terminology) is a complete system with a lot of characteristic parameters and it obeys some laws. In a sense, these laws can be considered its "own state", but I wouldn't say so. I think that price movements on the financial market are a strict lawful result of external influences. If it were possible to know all external influences and the general formula without exception, it would be possible to make predictions with a 100 percent guarantee.
The results are different only from the point of view of an observer based on a certain model. The difference in results does not characterise the quality of the market, but the extent to which the adopted model describes the market. In other words, we need a different model that takes into account other influencing factors. And the researcher's work, in my opinion, is reduced to searching for the maximum number of disturbing influences, selection of those that have the greatest influence and combining these factors into the resulting empirical formula (in the case of MQL - in the form of an algorithm).
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One pre-revolutionary entrepreneur kept a brothel (not to be confused with DC:). When the place was no longer profitable, he claimed that it was necessary to change the personnel instead of rearranging the beds.
In my opinion this is all correct, however, the reasoning is not quite right in my opinion.
Forex (with a caveat on the terminology) is a complete system with many characteristic parameters and is subject to certain laws. In a sense, these laws can be considered as its "own state", but I would not say so. I think that price movements on the financial market are a strict lawful result of external influences. If it were possible to know all external influences and the general formula without exception, it would be possible to make predictions with a 100-percent guarantee.
The results are different only from the point of view of an observer based on a certain model. The difference in results does not characterise the quality of the market, but the extent to which the adopted model describes the market. In other words, we need a different model that takes into account other influencing factors. And the researcher's work, in my opinion, is reduced to searching for the maximum number of disturbing influences, selection of those that have the greatest influence and combining these factors into the resulting empirical formula (in the case of MQL - in the form of an algorithm).
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One pre-revolutionary entrepreneur kept a brothel (not to be confused with DC:). When the establishment was no longer profitable, he argued that you should not rearrange the beds, but change the staff.
I allowed myself to highlight a few things.
1. I didn't say that laws and one's own condition are the same thing. On the contrary, they are completely different things. Just to give an example from physics: the coordinate and momentum of a system at a given time is its state, and Newton's 2nd law is the law by which this state changes. Or from mathematics: a differential equation is a law, and the value of a function at some point is its state. And this function may or may not be a solution to that equation.
2. You sound like a hardened determinist. Determinism in philosophy usually corresponds to fatalism in life. Are you a fatalist, Sergei ? :-)) I believe that absolutizing determinism, as well as absolutizing randomness, is an expression of extremes and therefore wrong. The path of truth lies in the middle. I don't think you will argue with that. As well as the fact that apart from external influences there are also internal driving forces in forex. Otherwise it would be a dead puppet, which moves only when its strings are pulled.
There are a lot of people alive in the forex market. And since God gave man the right to choose, some of them play up, some of them play down, some of them overshoot, etc. But all are looking around in doing so, as no one wants to be under the feet of the crowd. And so periodically the crowd reflex kicks in, a chain reaction occurs and the crowd rushes off in some direction. Those in the game rush after it. Hence, there is a positive feedback. And all these are internal forex processes. They are of course subject to some laws out there, the human psyche, for example. But it is unlikely that these laws will ever become a formula. That would mean that everything in the world (even these lines and your answer) is predetermined.
And on the subject of staff - totally agree with you. Since forex is not making me any profit at all, the entire staff on it needs to be changed urgently ! :-)))
By the way, the trouble with any "bounded" indicator, i.e. the one usually displayed in a separate window, is its actual unlimitedness: one never knows in advance whether it has reached the actual extremum, will crawl further with the price, or will draw a diver... But the continuous equivalents of these inventions of inflamed trader's minds may suggest what to do with the initial price to reach the actual extremum.
Exactly, that's why I'm so interested in solving the rationing problem in a correct and self-consistent way.
Far from this topic (the theory of flows), but I will add my opinion. All the theories are appropriate, but on a limited time frame, but when the switch from one law (theory) to another occurs - it is the same as when to determine when the flat ends and the trend begins or when the trend ends and the flat begins. Good point about the trend and the flat at the beginning of the topic - it is relative, but it depends on the value of the target. A small target and a small movement will be considered a trend, with large targets and small trends will be considered a flat.
Hello all!
I agree! With a small caveat: it's not the staff that needs to change, but your attitude to (expectation of) forex. I'll allow myself to quote my beloved:)
... In general, I have, on an intuitive level, the impression that every tool on the Forex market a priori there is an absolute arbitrage strategy, allowing to get the highest possible average yield (pips per transaction) and this yield (on average) does not exceed the brokerage company commission!!! This does not mean that the DCs are so smart that they know this strategy and therefore can determine the level of commission from above, but it means that the human gnawing at the market with everything possible, adiabatically approaches the tail of the Distribution function of profitability to this theoretically possible limit, defining it asymptotically for DC ...
Any problem can be solved in two ways - strictly and mathematically correct, and approximated by statistical (and/or iterative) methods. In the case of the market, there is a collective, approximate solution. Which, it seems to me, tends towards the exact one with great accuracy (because of the huge number of players). In other words, no matter what we invent, the statistically reliable return of our strategy will not (cannot) exceed the average brokerage company commission for the given instrument!
And here's more: see. "Attached files".
The conclusion attracts attention, which the author has come to, I quote it:
It seems that one can only make money in this market by opening up as many instruments as possible to positive swaps. I think those present in this thread do not need to talk about the almost random nature of the pricing mechanism and, as a consequence, the best price prediction is its previous value. There is a very sluggish but constant trend (in order of magnitude - 1 pip/day), determined by the difference in interest rates of the currencies included in the instrument - perhaps this is the only thing we can afford to "grab" from the market, and this is a fair PAYMENT TO US for raising OUR funds! - Any arbitrage is evil - it is covered by the existing transaction fee in favor of the market (CA).
The daily volatility of currency instruments is approximately 100 points/day with positive swaps at 1 point/day. If we create a multicurrency portfolio consisting of n instruments, its integral volatility can be estimated as V=100*SQRT(n) points/day, and return - S=n*1 points/day. We can see that increasing the number of instruments in the portfolio and, we can achieve the acceptable risk value K, which will be defined as the ratio of the stochastic componentV to the deterministic one S with the certain proportionality coefficient k: K=k*V/S=k/SQRT(n). The annual return for this strategy will be 100-200 pips of profit. The maximum leverage can be estimated by calculating the probability of a chain of successive unsuccessful market moves against the open aggregate position (for example, 10 consecutive days of 100 pips "wrong" = 1000 pips), probability 1/2^10=0.1% and no deposit, i.e. the leverage must be in the range 5-10. We have 200 points with 10 leverage, it is 20% p.a. taking into account reinvestment. It is possible to take more risks and raise the yield to 30-40% per annum... I think this is the limit of what the Forex market can share with us, all the rest is Roulette.
Here you have the most "high-yield" business and the price of this trivial truth is 4 years.
Perhaps, I shouldn't have done it that way. If you remember how it all started at ForexBest on a real account with a hundred or so bucks, see fig...
350 transactions were made on EUR/GBP pair during about a month before I was banned from pips... In fact, there was a strong antipersistence of the instrument on ticks, which was beaten. So arbitrage, though not for long, is possible.
I would like to give some explanations about some arbitrary function chosen for connection between flow of events in the world and flow of measurements (see page 1). Maybe there is a phrase about it, I do not remember whose, but it is very good. "The world is ruled by a number (some function), knowing this number (some function) you will know the world, and by controlling this number (some function) you will control the world." The brackets are my insertions :-).
The task is not to determine this mythical function and by the flow of measurements to reconstruct the events of the world and manage it. I would like to manage with my wife and children :-).
I want to attract the conceptual apparatus of the random flow theory and methods of its analysis to the forex market.
It seems to have all attributes and I will try to describe them in relation to the flow of measurements (what we see on the screen).
One of methods of the flow analysis is the analysis of a kind and parameters of ACF of this flow. Therefore I consider it very important to create an ACF indicator that allows for analysis (visual) and collect the necessary statistics on ACF parameters.
If someone is ready to help, I will try to lay out all the details of how to calculate and display it. Examples of calculating ACF, I posted on MathCade above.
Candid Candid may not resist once again and make ACF, and you will go down in history of those who won Forex. Thanks a lot for the edit, it was exactly what I needed, I was sitting for half an hour just to see it :-).
It seems that one can only make money in this market by opening on as many instruments as possible towards positive swaps. I think those present in this thread do not need to talk about the almost random nature of the pricing mechanism and, as a consequence, the best price prediction is its previous value. There is a very sluggish but constant trend (in order of magnitude - 1 pip/day), determined by the difference in interest rates of the currencies included in the instrument - perhaps this is the only thing we can afford to "grab" from the market, and this is a fair PAYMENT TO US for raising OUR funds! - Any arbitrage is evil - it is covered by the existing transaction fee in favor of the market (CA).
The daily volatility of currency instruments is approximately 100 points/day with positive swaps at 1 point/day. If we create a multicurrency portfolio consisting of n instruments, its integral volatility can be estimated as V=100*SQRT(n) points/day, and return - S=n*1 points/day. We can see that increasing the number of instruments in the portfolio and, we can achieve the acceptable risk value K, which will be defined as the ratio of the stochastic componentV to the deterministic one S with the certain proportionality coefficient k: K=k*V/S=k/SQRT(n). The annual return for this strategy will be 100-200 pips of profit. The maximum leverage can be estimated by calculating the probability of a chain of successive unsuccessful market moves against the open aggregate position (for example, 10 consecutive days of 100 pips "wrong" = 1000 pips), 1/2^10=0.1% and no deposit, i.e. the leverage should be around 3-5. We have 200 pips with a leverage of 5, that's 10% p.a. It is possible to take more risks and raise to 30-40% p.a. . I think that this is the limit of what the Forex market can share with us, all the rest is Roulette. Here you have the most "high-yield" business!
Well, not exactly roulette, but as long as you play fair :) DC.
During last 2 weeks DS lost 8 trades opened in right direction and in time. He just removed trailing armature :). And instead of +100 pips you get -60. And constantly sitting at the computer...........
And this is in manual trading. And on automatic.................
It reminds me of a game of cards, when your opponent has trumps up his sleeve and you know it, but you play anyway :)
I apologise for being off-topic.
To Prival
Thanks for the files, everything works.
Except that obvious correlation with fundamental events is very rare.
Don't you think that measurements themselves can influence events quite calmly? After all, an officially announced measurement "the dollar exchange rate is so-and-so" is also an event.
We will have to prove our positions to each other for a long time. I took a fundamentally different view of quotes and only then, an opportunity to create a "mechanical system" arose. Once upon a time, I heard a wonderful phrase, "there is no chaos, there is a wrong point of view". And this point of view implies that there is no "noise" in quotes.
In my opinion, it is a very bold statement that the observed curve is the energy that drives the forex in motion. I have never been a proponent of transposing "physics" to quotes. I think it is a phenomenon of an entirely different nature.