Using Basic Statistics to gain an EDGE. - page 2
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should the code not be =If(C25>=C24,C25-C24,"") with extra = since your saying only record the result if its OVER the high (hence you get 100% winning rate on 1 pip) but sometimes it matches the high which would start the trade but then it would fall back. such as 04/10/1996 and 04/11/1996 had the same high but your code doesnt see it.
date 03/04/1998 has a minus MAE not sure why though
FX Sniper,
Nice thread you've got started here. I've done some very similar work and have found with IBFX data that a 10 pip T/P with a 30 pip S/L has a win rate of about 80%, this is on a break of the daily high or low. A break of the 10 day SMA with similar parameters gives similar results.
I like using statistics also, although I have very little formal training. Currently working on an indicator to calculate correlation between two pairs...If I don't find it here I'll post it when I have it finished.
BW
amazing thread
FX Sniper,
Amazing thread, would point and figure be a help in anaylising pip movement,also is there an EA or indicator that tabulates 10 pip increments from a daily starting price, and finally is there any reading material that would be helpful to newbies like myself to learn more about statistics and how to use them especially with Metatrader, thanks again for opening my eyes ,jonmem
To: BWILHITE
Thanks for your post, stats sure are fun and not necessary to kill oneself with all those “heavy theory” etc to make use of some of the basic stuff which still has a lot of value. I think some threads all over the net that deals with this topic quickly looses appeal to the larger audience because of all the mind numbing theories etc…I do not care much for all that although I do not dismiss it’s importance. I suppose it all depends one what one wants to achieve in the end or the type of answers one is seeking.
I have various neural net software packages that can do great tricks and deep research into patterns etc, but I most often soon return to simple Excel spreadsheets to quickly do some “looking”.
I think I already mentioned that I have many good entry strategies as do most other people I suppose. I am however always hunting for better exit methods, ways to cut down on the time and drawdown it takes for me to know confidently that my trade has gone wrong or that I have reached maximum profit for now. I think this could easily be the crux of the whole success goal we are all chasing.
This past weekend, I did a small experiment using absolute random entries in combination with a simple take profit and stop loss rule set. I was quite amazed to see the thing actually made money and if tested back long enough out performed the basic buy-&-hold return over the same time period. It was just a rough test of course and the equity chart does not imply a smooth ride, but the fundamental value of this experiment to myself lies in the fact that the entries where random and the exits controlled, thus underlining the importance of using a statistically significant exit. I just got to work a bit harder, hopefully later during the month as things go quieter on the markets; I will have more time to play around with these things again.
To: JONMEM
I have Point & Figure charting in my Amibroker software, which I link to Metatrader 4. Sometimes I do not have the time to write 100 lines of code to do a simple thing quickly and then just jump over to Amibroker to do it there in a few lines to check it out etc… How do you propose Point & Figure could be studied?
With regards to the 10 pip increment EA you enquire about, I am not aware of such a thing, although I do have a RENKO indicator which I find handy sometimes, you set it’s block size to say 10 pips, and it will only draw a new block up or down if the previous blocks high or low has been breached by more than the 10 pips or whatever you set the block size to, it really also smoothes out the noise etc and is a great trend indicator on it’s own.
With regards to reading material, well, there are ton loads all over the net, just do a Google for search strings such as “introduction to statistics”, “basic statistics” etc…. here are three links to start you off with some basics, like I said earlier, no need to complicate things to much with to much theory, learn the basics, if you can start using it, your need to have more sophisticated will evolve over time and you will gradually slide into more complicated knowledge, this at least is how I usually tackle complicated or boring looking stuff, before I know it, I am deep into the “heavy stuff” without breaking a sweat LOL.
This is a great complete online book:
http://www.statsoft.com/textbook/stathome.html
This is an easy read I think:
http://www.andrews.edu/~calkins/math/webtexts/stattoc.htm
Lots of PDF’s here:
http://www.sjsu.edu/faculty/gerstman/StatPrimer//
As I also said, I use Excel mainly for quick stuff, though there are many apps all over the place that can be used to process data and extract readings form it, I just find it difficult to sometimes customize them and for trading it is quick to place some formula’s in Excel to simulate simple entry systems and filters etc…
I have a small indicator I made for MT4 which I just drop on the chart and remove it again. It would then simply export as much data as I specify to a CSV file which I then use in Excel.
For further complicated research, I also customize a similar script to export together with the price data, other indicator values etc…this way I do not have to know how to code Jurik MA in Excel, I just grab the values from MT4
Ok, guys, 9am here now, time to start watching the paint dry on Euro, best wishes to you both and post some samples and ideas so we can check’em out.
FX Sniper
Using Standard Deviation.
Standard Deviation
Standard Deviation is a statistical measurement of volatility. It measures how widely values range from the average value. The larger the difference between the closing prices and the average closing price, the higher the standard deviation will be and the higher the volatility. The closer the closing prices are to the average price, the lower the standard deviation and the lower the volatility.
High volatility levels can be used to time trend reversals such as market tops and bottoms. Low volatility levels can sometimes be used to time the beginning of new upward price trends following periods of consolidation.
From the attached screenshot based of the 1 Minute EUR/USD chart, it is quite clear and fairly easy to spot possible reversal zones or exhaustion zone using the StdDev indicator included in Metatrader 4 as default set to 14.
I toyed with the idea that when the StdDev rises above 0.0004, it would signal that a change in the direction of the current price leg is imminent. On the chart I highlighted a couple of these points. (The point 0.0004 has been chosen based on a quick visual inspection although I am sure it is possible to determine the most significant level, there are some other issues that I am aware of that motivates me to use this level also, I will discuss this perhaps in future posts if anyone is interested).
If you care to look at point A for example, and notice that on the StdDev it just closed above 0.0004, thus signaling that a change is imminent and closing or partially closing out a open SHORT position would be prudent.
Point B signaled the end of a possible LONG position, Point C the end of a possible SHORT position, point D the same, point E also the same.
Point F formed on the second bar after the StdDev signal, see the next paragraph for possible usage.
I am toying with a few possible rule sets for example; to use the HIGH of the bar that just caused the StdDev to close above 0.0004 as the immediate exit if it is breached by subsequent bars. If the next bar makes an even low high, this exit stop would be adjust down to fit the new lower high etc until stopped out.
A second idea I am toying with is to do the same as the above, but only start applying it when the StdDev close down the first time.
Which ever way it will end up, I think one can hardly ignore the accuracy and significance of using a simple statistical tool in this manor.
Uhm now who said statistics are boring and difficult to relate it to trading
In future posts, I will indulge in some more uses of statistics especially using my favorite statistical indicator the R-Squared, I will share my research into using it to pinpoint entries with a high degree of accuracy and low risk.
If there is anyone out there thinking in these lines or doing some other lite statistical research, let us know what you are up to.
It is general knowledge that the markets are not linear or at least not linear most of the time, knowing when it is, can reveal interesting results
Catch you laters,
FX Sniper
In future posts, I will indulge in some more uses of statistics especially using my favorite statistical indicator the R-Squared, I will share my research into using it to pinpoint entries with a high degree of accuracy and low risk.
If there is anyone out there thinking in these lines or doing some other lite statistical research, let us know what you are up to.
It is general knowledge that the markets are not linear or at least not linear most of the time, knowing when it is, can reveal interesting results
Catch you laters,
FX SniperHi FX Sniper. Very interesting article. I'm waiting for you to continue this subject. Unfortunately I'm not able to give some thoughts about statistics( my background only music) but will glad to test R-Squared for entries. I enjoy using your FX Snipers's MA thanks for that.
Best regards
viat
FX Sniper
I am 2 into appling math into trading and found your post VERY interesting.
Please tell us how do u use the Stat's for trade's enrty.
T.
How about filtering out to only include breakouts in which the previous days close is higher than its open. So, only days that captured 10 pips above the previous close when the previous day was a up.
FX_Sniper you have an email at the address listed in your profile. Thanks. Matt
EDIT: Nevermind that email doesn't work apparently. Here's the email I sent you except I've removed the links since I am unaware if this forum allows posting of links to other forums.
Hello Forex Sniper,
I am not a big poster on forex-tsd, although I do frequent it from time to time. I noticed you started a thread with the same ideas that I have been discussing on other forums; using statistics to succeed in forex. You can read my posts at (LINK REMOVED)
That thread is titled, "Probability System Theory and Money Management." I approached the idea based on the idea that the market either goes up or goes down. There is no third option. So at any point on a chart we have a 50/50 shot of hitting our TP so long as our entry is equidistant from the TP as well as our SL. From there how can we improve our odds of winning without using indicators to confuse things. Also, how can money management capitalize on this scenerio?
Another thread more closely related to your approach of the system is at
(LINK REMOVED
That thread is titled "daily range strategy."
I understand your not one to care for the heavy theory stuff. I try not to go that way, but I end up getting pretty in depth.
Anyways, I'd love to get in touch with you on a personal basis to discuss some ideas, programming EA's, and furthering our trading. You can reach me through MSN messenger at (edited)@hotmail.com or Yahoo! messenger at checkerndrums. Look forward to hearing from you. Matt
P.S. - Anyone can contact me through Yahoo! I use that only for forex discussion. Feel free to also PM me for the links.