Absolute courses - page 104
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Good afternoon. I've been away for a while. Been working on the maths, so to speak.
Starting a new branch. Let's keep it simple. Demo trading from Dr.F. Trading will be based on new principles developed over time.
TC has somehow strayed away from the topic of the thread. The new principles do not seem to be emerging.
Let's solve the simple task of matching the vector to the basket being traded. One day, during the week, the TS opened the following positions
The lines show the value of 1 lot of the position in USD lots. Volume - the real open position volume (in minimum lots). Total - the sum of columns, taking into account the volume, the total volume of open positions for each of the currencies (in minimum USD lots). The following position is fundamental here:
The sum of the components of the total vector is always zero.
40.47 is the sum of the positive components of the total vector, it is the real measurement of the volume of the traded basket.
Below the line "Total" the unit vector of the traded basket is written. The sign of the scalar product of the vector of the basket traded and the vector of market direction (this is where indices are needed) shows how in-tune we are.
Ideally, the scalar product of the indices and the basket vector should give a profit estimate.
That's the task!
The most interesting thing is that I could solve it several years ago, when I placed the CurrencyIndexC indicator in Code Base. It calculates currency indexes in some way. It contains only two errors that do not affect the result. The indices were built as relative changes from some starting point in the past. I wanted the indices to be additive: C(t0, t1) + C(t1, t2) = C(t0, t2), where C(t0, t1) is the change of the index relative to the starting point t0. To be additive, the logarithms of the relative changes were taken.
It was then completely unclear how to see the direction of market movement.
In this example of a traded basket 5 currencies are involved. To build a direction vector we select corresponding 5 indices and construct a vector from them. Then the sum of vector components is calculated and divided by the number of currencies. Then each of 5 components is reduced to its average (I always use 8 components vectors). This vector has a sum of its components equal to zero. And, it is the direction of movement for a subset of the selected five currencies.
Now, the scalar product of the direction vector calculated this way and the basket vector gives an estimate of the profit.
Thus, the direction vector cannot be seen without deciding which currencies we are going to trade.
Good afternoon. I've been away for a while. Been working on my maths, so to speak.
Hello, Dr.F.
Have you found a solution to the problem of absolute rates?
I know it's been a long time... But still interesting.
See
I remember this thread thanks to the links I've recently introduced in the forum under posts. It is a useful thing.
Hello Dr.F.
Have you found a solution to the problem of absolute rates?
Yes, I have. And just recently demonstrated. Quietly awaiting profit, it seems... here.
Hello Dr.F.
Have you found a solution to the problem of absolute rates?
Explain briefly what are absolute rates?
Yes, it is. And just recently demonstrated. Quietly awaiting profits of sorts... here.
That's not...
That's not the one...
But this is the one (sort of).
Explain briefly what are absolute rates?
A currency pair in forex - a currency A/B ratio - has its own dynamics, which depend on the dynamics of its components, the exchange rate of currency A and the exchange rate of currency B.
These are what are referred to here as absolute rates.
But that's the one (sort of).
Well, if that's the one, maybe he'll tell you his results.
the exchange rate of currency A and the exchange rate of currency B.
Exchange rate to what? (A/ABS)/(B/ABS) = A/B and what? What's the point of that?
Suppose we know which currency in a pair is more volatile, how do we use that?