Who trades on levels share their experiences - page 23

[Roman Kutemov]

Alexsey Minchenko:

@Sergey Lazarenko

https://www.mql5.com/ru/forum/122468/page149#390639

Imagine you are tradingthe Dow Jones index. Such indices are synthetic financial instruments, whose prices are formed by the exchange according to a certain algorithm. These synthetic financial instruments are a set of real financial instruments with different numbers of each.

You can trade indices or you can trade the set of symbols, making calculation of indices by yourself instead of the stock exchange.

Exchange allows you to trade only several indices, and you can create as many indices as you want with the same principle. Further, such an index will be called a portfolio.

An example of a portfolio:

The portfolio contains +100,000 EURUSD, -200,000 GBPUSD and +500,000 AUDUSD

. How do I view the price movements of such a portfolio? Simple:

Buy 100,000 EURUSD, sell 200,000 GBPUSD and buy 500,000 AUDUSD. Now the BP(time series) corresponding Equity(current profit) is the price BP

of our portfolio.

What is spread trading (paired trading):

We construct a portfolio of two financial instruments, with different amounts of each. The financial instruments and the amount of each are selected in such a way that the portfolio price always "fluctuates" around zero- co-integration. Trading such a portfolio is extremely simple. As the price is always near zero, the portfolio has to be traded in the channel from its limits, e.g. RMS(Standard Deviation).

To achieve cointegration, they usually take highly correlated financial instruments. The higher the correlation, the better the cointegration (not a numerical measure).

For example, if EURUSD and GBPUSD were always highly correlated, EURGBP would be in a flat all the time. Which could be traded from the border of the channel to the inside. But there is no high stable correlation between EURUSD and GBPUSD. Moreover, there is very poor cointegration. This can be seen on the EURGBP price

chart, which has trends.

"Spread trading" is cointegration.

A common case of paired trading is statistical arbitrage. You must put together a portfolio that has a high price "return".

Such a portfolio does not necessarily have to consist of two financial instruments, it can consist of any number of financial instruments. Moreover, the entering quantity of each financial instrument can be different and vary over time. Such a portfolio is called market-neutral. It is traded exactly as I wrote above.

To create a market-neutral portfolio one should study all available financial instruments for interrelations and analyse their (links') properties.

I have stated it briefly, I can't go into more detail. There's a bit more informationhere.

Extremely useful and interesting information.

"Investigate all available financial instruments and analyze their (relationship) properties" - are there any special tools for such investigation? Or how to do it ?

[Alexsey Minchenko]

Roman Kutemov:
Extremely useful and interesting information.

"All available financial instruments should be examined for correlations and their properties analysed" - are there any special tools for examination? Or how is it done?

Go to hrenfx profile there is a lot of useful stuff, including indicators, but they are on old builds.

[Roman Kutemov]

Alexsey Minchenko:

I've got a lot of useful stuff in the hrenfx profile, including indicators, but they are on old builds.

but dick says you can't make money on market-neutral positions

there's too little deviation from the average.

[Alexsey Minchenko]

Roman Kutemov:

but dick says there's no money to be made on market neutral positions

there is too little deviation from the average.

You have to use at least 3 pairs, paired trading is not effective. https://www.mql5.com/ru/forum/130430

[Roman Kutemov]

Alexsey Minchenko:

You have to use at least 3 pairs, paired trading is not effective. https://www.mql5.com/ru/forum/130430

pairs must be fundamentally and economically dependent ?

not just build a portfolio and take profits?

[Sergey Lazarenko]

Alexsey Minchenko:

@Sergey Lazarenko

https://www.mql5.com/ru/forum/122468/page149#390639

Imagine you are tradingthe Dow Jones index. Such indices are synthetic financial instruments, whose prices are formed by the exchange according to a certain algorithm. These synthetic financial instruments are a set of real financial instruments with different numbers of each.

You can trade indices or you can trade the set of symbols, making calculation of indices by yourself instead of the stock exchange.

Exchange allows you to trade only several indices, and you can create as many indices as you want with the same principle. Further, such an index will be called a portfolio.

An example of a portfolio:

The portfolio contains +100,000 EURUSD, -200,000 GBPUSD and +500,000 AUDUSD

. How do I view the price movements of such a portfolio? Simple:

Buy 100,000 EURUSD, sell 200,000 GBPUSD and buy 500,000 AUDUSD. Now the BP(time series) corresponding Equity(current profit) is the price BP

of our portfolio.

What is spread trading (paired trading):

We construct a portfolio of two financial instruments, with different amounts of each. The financial instruments and the amount of each are selected in such a way that the portfolio price always "fluctuates" around zero- co-integration. Trading such a portfolio is extremely simple. As the price is always near zero, the portfolio has to be traded in the channel from its limits, e.g. RMS(Standard Deviation).

To achieve cointegration, they usually take highly correlated financial instruments. The higher the correlation, the better the cointegration (not a numerical measure).

For example, if EURUSD and GBPUSD were always highly correlated, EURGBP would be in a flat all the time. Which could be traded from the border of the channel to the inside. But there is no high stable correlation between EURUSD and GBPUSD. Moreover, there is very poor cointegration. This can be seen on the EURGBP price

chart, which has trends.

"Spread trading" is cointegration.

A common case of paired trading is statistical arbitrage. You must put together a portfolio that has a high price "return".

Such a portfolio does not necessarily have to consist of two financial instruments, it can consist of any number of financial instruments. Moreover, the entering quantity of each financial instrument can be different and vary over time. Such a portfolio is called market-neutral. It is traded exactly as I wrote above.

To create a market-neutral portfolio one should study all available financial instruments for interrelations and analyse their (links') properties.

I have stated it briefly, I can't go into more detail. There is some more informationhere.

My guess is that the market is a place where you convert one currency into another.

[Ольга Деменева]

Alexsey Minchenko:

Go to the hrenfx profile there is a lot of useful stuff, including indicators, but they are on older builds.

Can you tell me why the quotes are stagnant? I can't trade.

[Sergey Lazarenko]

Ольга Деменева:
Can you tell me why the quotes are stagnant? I cannot trade.

Today is a holiday, Catholic Christmas, most brokers do not quote, and those who quote have wild spreads, so there is no one to trade with

[Alexsey Minchenko]

Ольга Деменева:
Can you tell me why the quotes are stagnant? Can't trade.

Christmas!

[Alexsey Minchenko]

Sergey Lazarenko:

@Alexsey Minchenko, it's a bit complicated and goes against the basic idea that the market is a place where one currency is converted into another.

If you visualize it, everything appears simple. The basic idea is invented for the masses who successfully drain their deposits))