Has anyone tried index trading?
I wonder if no one has thought about trading "pure" USD or GBP?
Why does everyone analyse their ratio and trade it specifically?
Roughly speaking, why predict the ratio of the price of potatoes to the price of petrol? Wouldn't it be easier to look at each price separately?
Of course, and the ratios have their patterns. But they seem to me to be much less pronounced and much more difficult to formulate.
Who would be interested in looking at a chart of a pure currency and trading a basket that follows the movements of that currency as closely as possible?
Who has any thoughts on making and balancing this basket? Or maybe actual experience?
I don't get it...
You mean in a market where there are only "potatoes", "petrol" and, say, "a bottle of vodka" to express the value somehow:
There were:
1 "potato" = 3 "petrol".
1 "potato" = 4 "bottle of vodka".
Became:
1 "potato" = (3 "petrol" + 4 "bottles of vodka")/2.
And the resulting value of "potato" in "petrol and vodka" coordinates trade? + take into account weight coefficients
I don't get it...
You mean that in a market where there are only 'potatoes', 'petrol' and, say, 'a bottle of vodka' to express the value somehow:
There were:
1 "potato" = 3 "petrol".
1 "potato" = 4 "bottle of vodka".
Became:
1 "potato" = (3 "petrol" + 4 "bottles of vodka")/2.
And the resulting value of "potato" in "petrol and vodka" coordinates trade? + take into account weight coefficients.
There is no such market, you need a ratio of something to something. If we talk about forex, we need an exchange of something to something.
P.S. Or a separate market for potatoes or tomatoes is needed. Go for stocks)
No such market, you need a ratio of something to something.
Yeah... No... :)
1 EUR = 1.36568 USD
1 EUR = 0.80891 GBP
I don't get it...
You mean that in a market where there are only "potatoes", "petrol" and, say, "a bottle of vodka", to express the value somehow:
And the resulting value of "potatoes" in "petrol and vodka" coordinates to trade? + take into account weight coefficients
I wonder if no one has thought about trading "pure" USD or GBP?
Why does everyone analyse their ratio and trade it specifically?
Because price is the ratio of money per unit of commodity. There is no 'just change in EUR price', there is 'change in EUR price in money (in USD for example)'...
OK, then let me rephrase the question: why not value a currency through a portfolio of other currencies, thereby eliminating the dependence on one particular counter-currency? I mean, we have every opportunity to do that.
Yes, we assess the value of vodka in rubles, but then the real value of the ruble is also factored into that price. Although, this is not a very good example - vodka is produced for the same roubles, so the correlation should be very good.
And if we take whisky? What do we get when we analyse the cost of whisky on the world market, expressed in Russian roubles? How much will it depend on the exchange rate of the rouble? And how do we interpret the sharp rise in the whisky/ruble exchange rate - as an increase in demand for alcohol or as bad economic news for Russia? It is more likely to be the latter.
That is why I propose to evaluate not "whisky/ruble", but "whisky/(ruble-dollar-frank-yen)".
That's what I'm suggesting, not "whisky/ruble" but "whisky/(ruble-dollar-franc-yen)".
To do that you need to invent some kind of reference currency against which to measure everything. Until the mid-20th century, gold was such a currency. Now there is no such standard.
There are methods for calculating the index, the whole question is whether they can be profitable.
That's why I created the thread, it's interesting to find like-minded people or to hear that the topic has been studied and "there are no fish here".
There are methods for calculating the index, the whole question is whether they can be profitable.
That is why I created this thread, it is interesting to find like-minded people or to hear that the topic has been studied and "there are no fish here".
I have not traded it myself. I only know that hrenfx has written a lot on this topic both by code and by posts. But I guess it's not news to you :)
IMHO, such a synthetic should have a very small RMS, because there is no fundamental reason for rapid change in the exchange rate of one currency against ALL other currencies...
IMHO, such a synthetic should have an extremely small RMS, as there is no fundamental reason for one currency to change rapidly against ALL other currencies...
Really?
I am wondering, has no one ever thought about trading "pure" USD or GBP?
Well, it's quite testable. We create a synthetic, run the strategy, then (if it works) see if portfolio adjustment affects the result.
The question is that the patterns there will be different - not the same as in pure traded instruments, though this may be better)
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I wonder if no one has thought about trading "pure" USD or GBP?
Why does everyone analyse their ratio and trade it specifically?
Roughly speaking, why predict the ratio of the price of potatoes to the price of petrol? Wouldn't it be easier to look at each price separately?
Of course, and the ratios have their patterns. But they seem to me to be much less pronounced and much more difficult to formulate.
Who would be interested in looking at a chart of a pure currency and trading a basket that follows the movements of that currency as closely as possible?
Who has any thoughts on making and balancing this basket? Or maybe actual experience?