F-Forex, Diary of a quant forex trader

Nitrous oxide N20

Tags: cmz, jeff kilburg

Updated statistical arbitrage results

+173 USD right now, results had been mixed. i have that feeling that to long trades are most of the times lossers. i can probably implement a new exit after some bars has passed, maybe after 250 (half of bars used to calculate mean). as this is just a feeling i don’t have any math prove, for now statistical arbitrage experts advisors will continue russing as usual.

Updated 2011/01/12 Statement

Tags: expert advisors, forex stat arb, mql, Statistical Arbitrage, statt arb

Variance, Covariance and Correlation Coefficient

While i can i will be adding more info to my arbitrage experts advisors. This will help to improve my mathematics skills and improve also mql programming skills of common statistical formulas.

so having 2 time series, each one for each pair i already have mean, standard deviations, differential, pips differential to mean(take profits), pips differential to 4 std dev(stop loss).

i also added now:

variance:
http://en.wikipedia.org/wiki/Variance

covariance, wich was a little harder to calculate than variance but very fun to do.
http://en.wikipedia.org/wiki/Covariance

correlation coefficient:
http://en.wikipedia.org/wiki/Correlation_and_dependence

Tags: correlation, correlation coefficient, covariance, finance mathematics, quant, quants, variance

Unenjoyment Number

Tags: cmz, jeff kilburg, treasury curve

April 20/30 strangle

Tags: group 1 trading, jamie tyrell, volatility sonar report

Non Farm payrolls

Tags: cmz, jeff kilburg, treasury curve

Statistical arbitrage continue

Due to holidays statistical arbitrage expert advisors were not running full time in the last weeks, i had some losses but i wasnt able to recover from them yet.

Statement.

Regarding the eurusd-gbpusd and the eurjpy-gbpjpy, they seems to be very correlated pairs, when one pair trading operation opens the other one also open. It means double reward but when the trade fails and go to the 4 or -4 std dev the loss is double. For the overall portfolio, i am starting to consider that both pairs can’t go together.

Diversification is a central theme in finance, investing on high correlated returns is not a very prudent strategy even if the chance that one investment will perform poorly is small.If one investment is making losses the other correlated ones will also make losses leading to a poor performance of the overall portfolio.

Tags: diversification, portfolio, standard deviations

Forex quant end of the week

After the 100 usd made on tuesday the markets deviated again 3 std devs so more trades were open. We had an audusd-nzdusd open from tuesday, this trade was closed at the mean yesterday with losses, the australian side ended at -23 while the new zealand at -6 usd.

Euro and Cable against the dollar and against the yen were also opened, the yen trades ended at the mean earning 6 usd and the dollar trades earned 21 usd. counting the 3 pairs i  ended up losing 2 bucks.

Even if smaller, the euro and the sterling still made earnings against the dollar and the yen; but aussie and kiwi made losses even if the mean reversion was given. This behavior is something to study mathematically; after long time inside the trade not even a mean reversion can drop profits because the mean moved so much that have nothing to do with the mean we had when we get inside the trade. The mean is dynamic, it moves as the markets advance and deserves a quant study even if i don’t know how to make it yet.

Statement

Tags: dynamic mean, experts advisors, forex automated trading, forex quants, mean reversion, mql, stat arb, trading model

Forex statistical arbitrage as it best

Finally statistical arbitrage in forex and quantitative mathematical analysis as a new method of seeing the financial markets are showing good results. Today  2 pairs of trades were open(gbpusd-eurusd  and gbpjpy-eurusd) by the expert advisors, both ended with very good results.

Check the statement here

I am making reference to the last 4 entries of the statement , this were done today, we already had USD 162 from last week. On monday a trade was also made with audusd-nzdusd also with positive results but lets focus on this:

Both trades were opened almost at the same time at 11:56 and 12:09 server time.
They were closed at the exact same time at 18:23, this means that the yen and the usd as base currencies have almost the same results, double risk but also double profits if we trade both as i am doing.
Note here that no manual intervention was needed at all this week, after calibrations made last week and during the weekend the 3 experts advisors are running 100% alone in a linux machine with wine and forex.com meta trader.

USD trade ended with 63 usd of profits(75 – 12) and JPY trades with 45.33 usd(44.14+1.19). This is more than 100 usd made on a single day wich is more than ok for my purposes, this encourage my trader spirit and give me signals that i am again in a good track. Mathematical and quantitative finance, mean reversion techniques, time series, simulations, learn, learn, patience;  is the only way to succeed in the forex financial markets without depending on luck or pseudo vodoo science.

Tags: forex statistical arbitrage, mathematical finance, mean reversion, quantitative analisys

17 straddle on VIX

Tags: group 1 trading, jamie tyrell, vix, volatility sonar report