Market etiquette or good manners in a minefield - page 6
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Why the software? There's an article coming out soon, I've been working on it for a while.
Software is cool! Have fun Neutron. We will support you ..... morally.
Okay, stop. What do you mean with no spread taken into account?
Without spread, the TS has one figure, with spread another, with double spread another, for each case there is a different percentage.
Neutron - I propose to create a piece of software. The purpose -- on the basis of the minimum lot report without MM, the software will give the best percentage. Is it realistic?
No, no, theXpert, "cutlets apart, flies apart." - We have two, in the first approximation, independent blocks, this trading strategy (TS), its purpose is to correctly predict the possible direction of the price, in order to enter/exit the market correctly (without spread), and the reinvestment system (MM), allowing taking into consideration the existing transaction costs of a certain brokerage company and predicative properties of TS (probability of the correct prediction of anticipated movement is 1/2+r) to get the maximum possible profitability for the MTS (TS+MM connection) in the whole universe.
I considered in details the second component of this tandem - the block of optimal management of assets when trading on the only one instrument, and got the expressions connecting the optimal size of a position to be opened, the best TP and SL levels with the TS parameters - p and the existing brokerage company commission. If there is a way to determine p - input parameter for the second block, then the problem is solved in this formulation. I already suggested above how to extract the necessary information from the Strategy Tester report.
Of course, to solve the whole trading problem successfully, we need to find a solution for the first block of this combination - an effective TS that allows you to obtain the best parameter p for a specific symbol. This task is, I think, orders of magnitude more difficult than the already considered one, but I'm sure it will be solved in characteristic time much shorter than the average life time of a human.
Next, it will be necessary to make the transition to optimal portfolio investing - this is the key to our bright, money-free future!
No, no, TheXpert, "cutlets apart, flies apart."
Well, yeah. It's just that when you have the first, you automatically have to think about the second
- We have two, in the first approximation, independent blocks, this is a Trading Strategy (TS), its purpose is to correctly predict the possible direction of price movement, in order to enter/exit the market correctly (without taking into account the spread), and the money reinvestment system (MM), allowing taking into account the existing transaction costs of a certain brokerage company and predicative properties of TS (probability of the correct prediction of anticipated movement is 1/2+r) to get the highest possible return in the whole universe for the MTS (TS+MM connection).
Predictive.
predication -- assertion.
prediction.
I considered in details the second component of this tandem - the block of optimal asset management when trading on the only one instrument. I got expressions, that connect the optimal size of opened positions, the best TP and SL levels with TS parameters - p and the existing brokerage company commission. If there is a way to determine p - input parameter for the second block, then the problem is solved in this formulation. Above I already suggested the way to extract the necessary information from the Strategy Tester report.
I have doubts. After New Year I will take up this question.
At least it's the area where neural networks work, so if I get nothing analytically, I'll try to make a neural network analyzer. That should work.
Sergei, what is "correct prediction of expected price movement" ? Next tick ? Kagi segment ? Something else ? And how often is this prediction fulfilled ? If it's really just a prediction of a sign of price change and it's performed on every tick, then p can really be determined independently of the other parameters. But if there is some other conditioning, then there may not be such a certainty.
In general I want to say that the results posted by you in this thread are impressive. Interesting work. Unfortunately, I have not yet dealt with all the details of the conclusion, so maybe my questions are silly. However, there, in your first post in the asset management branch, (if I understand correctly) it actually implies that holding time t is a set of t steps, at each of which the prediction is performed. But what one step is is not specified. Does it not matter ?
Yes, of course. This is a characteristic of TS (its predicative qualities) on a given instrument. Therefore the spread should not distort this parameter. By the way, in the tester report, the value of "Profitable trades. Percentage of all" takes into account the brokerage companies' commission. It's a pity, we could take this important value without stress.
And if we take those formulas without the spread and substitute p from the tester (with the spread included), should we get the same Lever values as from the formulas in this thread?
Should we just use those?
Predictors.
predication -- a statement.
prediction.
Or Predictive. Or "Predictive" in Russian. It's clearer to everyone, so there's no confusion. Sorry about the offtops..... >> uh, uh, that's a little off-topic.
Sergei, what is "correct prediction of expected price movement" ? Next tick ? Kagi segment ? Something else ? And how often is this prediction fulfilled ? If it's really just a prediction of a sign of price change and it's performed on every tick, then p can really be determined independently of the other parameters. But if there are some other conditions, there may not be such a certainty.
The entire variety of interactions of the Trading Strategy with the market can be reduced to three basic movements at the most: opening a "buy" position, "sell" position and "out of the market". All of the intricate subtle motives and intrigue with one purpose - to outplay the market - fit into one scheme, which is banal in its simplicity.
Now let us think whether it is optimal (vanity is the optimization parameter here - it is the DC commission that has to pay for it)? So, from this point of view, it seems strange that MTS is out of the market, because for the pleasure of being out of the market, you also have to pay a commission! Maybe the benefit of forced time off is in your face? Yeah, I don't think so! It is known that the best behavior in the absence of information (and this is the only thing that can make a trader leave the market), is not to do anything. So do we - we will hold an open position until there is a signal from the analytical unit of the TS for a rollover. Thus, the optimal behavior in the market, in terms of MTS, looks like a rollover strategy always being in the market, and we've come to only two possible states of MTS - "buy" or "sell". There is no third possibility! On the price chart, the trading activity of such a TS will look like a broken line, each segment of which is always directed in the opposite direction relative to the previous one. Doesn't it remind you anything? Right, ideally this is a Zig-Zag based on historical data :-)) There is no more profitable strategy on historical data than this one, and our task is to find such an algorithm of TS, which allows us working at the right end of the time series (without looking ahead) to approach this ideal. The degree of this approach can be estimated by calculating the number of expected price directions correctly guessed by the analytical unit.
Yura, in the estimation of the 1/2+p parameter we are speaking only about the relative number of successful deals in spreadless trading. If the TS is not optimal and the next position can be opened in the direction of the previous one (for example, profit taking by TP and the following reopening in the same direction), this task is reduced to the previous one by joining opposite segments into one general one and introducing the effective spread that will be larger than the value of an ineffective TS by the value of the average number of links in the combined segment.
In that first post it was about the meaning of multipliers included into formula to estimate deposit growth rate, and I didn't fully understand their physical meaning yet. Here is the formula with changes (written by tau):
In addition to time t in which MTS trades, it contains optimization parameters - the average value of a position to be opened and market leverage (connects the size of the open lot and the current deposit size). If optimal parameters are specified (see above for what they are), then the equation for the deposit takes the form of the equation below.
In it, tau/sigma^2 is a stable characteristic of the selected symbol, as sigma is proportional to SQRT(t). It shows the ratio of the standard deviation to the time interval at which it is found. This value is a constant over a wide range of time variations. Alternatively, if sigma is regarded as the average size of a tick, then tau is the average time of tick arrival and t (time quantum) has the size of this average time. Or if sigma, is the volatility of daily bars [pips], then tau is a day and t in the formula is measured in days, etc.
And if we take those formulas that don't include spread, and substitute p there from the tester (with spread included), should we get the same Lever values as from the formulas in this thread?
Should we just use those?
Everything would be fine if the p parameter for TS did not change together with the market. And in this static form this model will work only for a short time interval, as long as the TS is effective.
Yes, anything is possible. But this is the best lot size calculation I've seen. Not just 5% of the deposit, but optimal. And it shows what is important in TS, what parameter is important, what to look for, what to aim for.
Why overestimate? So the formulas will give different results?
I take the trading history of the same TS,
the first row without spread, I count p, then Lever using the formula that takes into account the spread.
I take the second series including the spread, I count p', then I calculate Lever using the formula that does not include the spread.
And it's also interesting to compare with Vince's optimal f.
Have you not done this, Neutron?