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A quantitative approach to trading Forex and Forex Derivatives

  • #41
  • Edited 11:02am Sep 20, 2017 1:50am | Edited 11:02am
Quoting VEEFX
{quote} Thanks man. Interesting that nadex is allowed and available in US. It's regulated and segregated so definitely worth exploring further. I never dipped my fingers into options in the past. Why would anyone accuse you of being a scammer especially when you can limit drawdowns with a decent monthly return? Screw them and share your strategy for noobs like me bro :- A brief peek and I already have an idea how to use my weekly signals with binary options as stops. My MN+W1, MN+D1 and W1+D1 have the highest winrate but comes with bigger drawdown...
The sad truth is most people on here do not think, they follow, and for the most part they follow the wrong people. It is a pleasure communicating with open minded people such as yourself, I hope we may exchange many ideas going forward.

Incidentally Nadex is owned by the broker I use; IG Markets.
I live entirely from the growth of my personal trading account
  • #42
  • Sep 20, 2017 11:03am Sep 20, 2017 11:03am
Quoting GuyBaker
{quote} I used a quantitative approach to build my black box, the inner workings of that box only I know. I have used price data of course, some indicators and news releases as per the calendar on this site. It is the fundamentals that move the market most of the time. The system detailed on here trades only Forex fixed price options, I have another in trail which trades the EUR/USD
Tell us more dude :-)
Staying in my lane...
  • #43
  • Sep 20, 2017 11:56am Sep 20, 2017 11:56am
Quoting stt
In the quant analysis, one of the most important questions is how do you avoid data overfitting bias - there are hundreds of articles on this (pretty much every stats discussions leads here) - check the discussion here https://www.reddit.com/r/algotrading/comments/6febbf/dangers_of_backtest_overfitting_marcos_lopez_de/ So my questions is how to you make sure the correlations you are finding are not spurious by chance and have some real predictive power. Thanks!!
The rules for the correlations must make logical sense, not a shot in the dark type of model. The result and observed price behaviour confirm the basis of the rules that makes it have real predictive power, not just the positive statistical results per se. Most algos model lack badly in this logic department which fail even before the emprical test stage.
  • #44
  • Sep 20, 2017 12:27pm Sep 20, 2017 12:27pm
Quoting VEEFX
{quote} Tell us more dude :-)

The system I have currently in forward test since 1 August 2017, as of now it is about break even, it has been back tested to 2003. I call it Zen and it trades OTC EUR/USD

Please see attached simulation results.
Attached File(s)
File Type: pdf Zen.pdf   51 KB | 347 downloads
I live entirely from the growth of my personal trading account
  • #45
  • Sep 20, 2017 12:32pm Sep 20, 2017 12:32pm
Quoting skyway
{quote} The rules for the correlations must make logical sense, not a shot in the dark type of model. The result and observed price behaviour confirm the basis of the rules that makes it have real predictive power, not just the positive statistical results per se. Most algos model lack badly in this logic department which fail even before the emprical test stage.

Yes absolutely, this is where some experience comes in very handy, I spent many years manually trading from the charts and news feeds etc before finally taking this big data quantitative approach, the main difference is instead of coming up with an idea and starting to trade it, I throw tons of data at the hypothesis before risking any money at all, our hypotheses will probably make logical sense, you should be able to explain to yourself (and others) why you think it should work before testing it.
I live entirely from the growth of my personal trading account
  • #46
  • Sep 20, 2017 3:18pm Sep 20, 2017 3:18pm
Quoting VEEFX
{quote} Sorry man. Have you already explained your "big data quantitative approach" elsewhere? just trying to relate my approach with yours and hopefully learn from our experience :-

The first post in this thread pretty much says it all. The testing requires some technique and obviously the more data you have the better, but the essence of this comes down to your creativity in selecting setups to test.
I live entirely from the growth of my personal trading account
  • #47
  • Edited 4:08pm Sep 20, 2017 3:55pm | Edited 4:08pm
Quoting VEEFX
{quote} Kool. there is not a whole lot to read on the approach/journey that lead you to your edge or setup, the experience of pain and suffering and frustration converting a scientific and theoretical idea into practical implementation. You have only shared the what and the end result. It's the journey that most will find value imo particularly with your strategy with binary options. I don't care much about the OTC/EURUSD one :-) Sharing some of your results during your backtesting and data science journey would add a lot of value, how you avoided...

I cannot show the detail of what I used to create my edge, it's a combination of price data, some indicators and news release data.

It is a boring grind. Ideally with all your filters combined you want to show a meaningful statistical bias in 10,000 or more setups

For each idea that you have. For simplicity I restricted myself to 1:1 stop/target, Binary options easy for this of course.

1.Take a set of data say 1 year.
2.Test an idea, does it produce and edge?
3. if not go back 1.
4. Test it on some other years ?
5. Did it work on the other years?
6. if no back to 1.
7. Test on more years and so on

Now hopefully you have some ideas that produce a better than 50/50 result, start combining them and see if they compliment each other, back to step 1 for each combination.

It is deadly boring. You will test loads of ideas that come to nothing.

After going through this process for one Forex pair and thought I had found an edge I expanded it to other pairs to see if the model stayed true.

At this point you think you might have a system, test it forward and see if you get similar results. I tested forward about 500 setups, but of course the more the better, I saw that the win/loss ratio was the same as my back test data, bingo, bet the farm of course measure max draw down and calculate how much you can risk per trade.

That was a bit of a stream of consciousness, I hope it makes some kind of sense.
I live entirely from the growth of my personal trading account
  • #48
  • Edited 3:03am Sep 21, 2017 2:05am | Edited 3:03am
Quoting VEEFX
{quote} Thanks Guy. Not too much help to me as what I do is way too advanced of an approach. I have surpassed more than 2500 test runs on my model and assessed over 85+million signals for quality across my universal setups for over 2 years. It takes me under 30 minutes to look at any setup or strategy to assess its merit towards long term (3+yrs) sustainability. Majority as in almost 95+% of ALL strategies that I have assessed tends to DECAY within a 3 year period in spot FX. I can vouch on this finding and I have yet to find any proven trend following...

Do not worry about influence, in the end I always take my own council, I believe we all should. I do not agree with your results as Orac is tested back to 2008 and Zen 2003, time of course will tell

It has been discussed in this thread, but maybe you are trying to be too clever, the setups should be logical, there should be obvious justification for why they work, the market is driven by people, either actually trading or instructing their machines to trade on their behalf, people for the most part are pretty simple
I live entirely from the growth of my personal trading account
  • #49
  • Sep 21, 2017 12:39pm Sep 21, 2017 12:39pm
Quoting VEEFX
{quote} Not to sound like I am tooting my horn as many without the experience of trading a multi-pair mtf portfolio won't understand .... My model tries to mimic the 'overall' currency market behavior which is far more robust than participant behavior driven by order flow. This behavior is unique only to spot fx i.e. currency exchange rates controlled and manipulated by the governing economies at large. It's deeply rooted on global trade, money flows and fundamentals stripped down to pure price movements without any indicators that are mostly derived...
Fine words.. Show us the money
I live entirely from the growth of my personal trading account
  • #50
  • Edited 12:48am Sep 22, 2017 12:07am | Edited 12:48am
Quoting VEEFX
{quote} http://tradingmadeprofitable.blogspot.com/2017/04/focus-on-trading-process-not-money.html?m=1

From the article:-

Opening "It may seem a contradiction to say that you don’t want to pay attention to the profit of a trade. In fact, many of you might be saying that this guy must be smoking rope to say that profit is unimportant. Well, to clarify, that is not what is being said. Of course, profit is one of the main reasons why you are involved in trading in the financial markets."

Summary "Trading is a process oriented endeavour for those who are serious about becoming and remaining a consistently successful trader. In any one trade, it is not about the outcome. You must remain dispassionate about that and reserve all of your focus to be honed on what you are doing and how you are doing it."

Yeah for sure, focus on a profitable method and the money will follow.

But my point as I think you know was in the end the points of the game are the money you make, the proof of the pudding is in the eating, your assertions about your method being superior are worth diddly squat until you an show us the money. The internet is filled with a million articles explaining why this or that particular method is somehow the holy grail, how many authors of such articles open up their trading history and show the money? I have to date found 0.

Forgive this observation as my motives are pure, i am only on this forum to show that profitable trading is indeed possible and frankly to give myself something to do, you might find this useful http://davidhorne.me/2014/03/27/ego/ Back in the 90s when I was a contract software engineer making $200k plus per year I got so filled with my own self worth it prevented me from moving forward, I was Guy Baker, highly paid, and well just fabulous Building a couple of small businesses and being pushed closed to bankruptcy on more than one occasion finally taught me enough humility such that I could grow again.

I wish you luck with progressing your method and in the end I hope you make massive profits, if you ever want to bounce an idea around, let me know.
I live entirely from the growth of my personal trading account
  • #51
  • Sep 22, 2017 2:02am Sep 22, 2017 2:02am
Quoting VEEFX
{quote} Respectfully, let me try one last time before I move on. I have no reason to believe or judge whether you are profitable or not. I post only when I see something that is aligned with my current interest. I am still here only because of your experience in binary options (Nadex has caught my interest!) Having read this thread two times now, I have yet to understand how you intend to 1) 'show' that profitable trading is indeed possible. Just sharing some trading performance tables in pdf, excel and screenshots is enough to understand 'how'...
I have no need to compete with you in pissing or anything else, my ego observations were intended as a constructive criticism, you may take them as you wish.

On the subject of prediction, I do not see it that way, it is about correlation, a runny nose is a symptom of a cold, nothing more, it is not the cause nor is it a predictor of anything per se.

Maybe my description is too simplistic, I have detailed how I approached the problem, I hope it is useful to some people.

Fishing? Yeah I have heard that, I have more respect for my fellow profitable traders than to believe they would give up their profit secrets without good cause. I know I would not.

Assess my profitability? I have repeatedly offered to have anyone audit my results one on one over Skype, not one person has taken me up on that.

Do I have more to share? well I guess it depends on what questions I am asked. I do think that we have concluded our dealings for now.
I live entirely from the growth of my personal trading account
  • #52
  • Sep 22, 2017 2:19am Sep 22, 2017 2:19am
Quoting RondaRousey
Both of you need to post actual trades so they can be monitored to see if they are actually profitable. Come to interactive trading forum and post analysis and trades so we can all monitor them. You claim to be profitable? post some open trades. So they can be forward tested. I do it all the time in the Interactive Trading forum. Real traders trade, not talk about trading. Too scared to post open trades?
Easier said than done in my case,

1. TE does not support my brokers
2. A lot of my trades last just 60 seconds.
3. I don't want to provide a free signal service.

At the end of each month I will post here my results, anybody if they so wish may audit those results with me over Skype.
I live entirely from the growth of my personal trading account
  • #53
  • Sep 22, 2017 2:38am Sep 22, 2017 2:38am
Quoting RondaRousey
{quote} Like Betting on Greyhounds, gone in 60 secs. So you are a professional gambler not a trader. Actually both of you sound like gamblers.

Yeah I am a professional gambler, but then we all are

Gambling, Trading, Business, all the same stuff... See this post https://www.forexfactory.com/showthread.php?p=10312211#post10312211
I live entirely from the growth of my personal trading account
  • #54
  • Sep 22, 2017 2:39am Sep 22, 2017 2:39am
Quoting VEEFX
{quote} assuming 60 seconds hold period is in your binary options account, is this similar to scalping with a TP of 1pip upon entry to realize a quick $100 per contract (or whatever your broker equivalent is). Do you ever let your binary options expire? if yes, what duration do you use? This is the type of information I am looking for :-(

The options are fixed price and fixed duration, IG.com call them Sprints, Binary.com have the same concept, they always expire there is no option to sell before completion.
I live entirely from the growth of my personal trading account
  • #55
  • Sep 22, 2017 2:42am Sep 22, 2017 2:42am
Quoting VEEFX
{quote} well.. if I understand binary options, 1 contract is $100 (less fees/commissions) if the price moves even 1 pip in your favor. That's an equivalent of 1000 pips in 60 seconds for a traditional microlot in spot FX LOL

Not even a pip, the advantage is that you can profit (or lose) from a 1/10th of a pip move.
I live entirely from the growth of my personal trading account
  • #56
  • Sep 22, 2017 2:49am Sep 22, 2017 2:49am
Quoting VEEFX
{quote} Interesting. Nadex allows you to sell before they expire. So 60 seconds is your fixed duration ? if yes, this leads me to the predictive analysis question. What "quantitative approach" you are using to increase the probability for one minute candle to move in your favor? What's your winrate if it is really 60 seconds that you are targeting for?

All this data in the first few posts, I even posted 500 historical trades, win rate is 60% I use different durations, 60 seconds is the minimum I use.
I live entirely from the growth of my personal trading account
  • #57
  • Sep 22, 2017 2:54am Sep 22, 2017 2:54am
Quoting RondaRousey
{quote} Like Betting on Greyhounds, gone in 60 secs. So you are a professional gambler not a trader. Actually both of you sound like gamblers. {quote} WTF trade for 1 pip? I don't get out of bed for less than 500 pips
You are right Ronda.
A trader is a trader , conversely a gambler is a gambler .
And a simple definition from Google about "gamble" is not enough...
I've already said to Guybaker : here on FF he is in the wrong place , his right place is in Las Vegas.
  • #58
  • Sep 22, 2017 2:56am Sep 22, 2017 2:56am
Quoting redoktober
{quote} You are right Ronda. A trader is a trader , conversely a gambler is a gambler . And a simple definition from Google about "gamble" is not enough... I've already said to Guybaker : here on FF he is in the wrong place , his right place is in Las Vegas.

It really does not matter what we call it, it's all about the money, do we profit or not? the rest is just semantics.
I live entirely from the growth of my personal trading account
  • #59
  • Sep 22, 2017 3:24am Sep 22, 2017 3:24am
Quoting GuyBaker
{quote} It really does not matter what we call it, it's all about the money, do we profit or not? the rest is just semantics.
No, it's not semantic only , it's just the trader's " forma mentis" that is deeply different from that of a gambler.
You try to think of a gambler into a Casino and then think of a Goldman's pro-trader : do they have the same mentality ? Do they behave the same way ? Do they risk in the same way ?
  • #60
  • Edited 8:56am Sep 22, 2017 5:34am | Edited 8:56am
Quoting redoktober
{quote} No, it's not semantic only , it's just the trader's " forma mentis" that is deeply different from that of a gambler. You try to think of a gambler into a Casino and then think of a Goldman's pro-trader : do they have the same mentality ? Do they behave the same way ? Do they risk in the same way ?
To gamble does not mean to risk without an edge, a casino gambles when it accepts a bet, they are certainly professionals.

Have you ever heard of Edward Thorp? First came to fame with a book called "Beat the Dealer" then went on to use his significant skills in the options market making 20% annual returns over more than 30 years. Whether the terminology sits well with your or not does not change the fact that advantage players (professional gamblers) share a significant overlap in skills with traders.

Oh and by the way don't take my word for it over Ed Thorp, here is an article from Forbes https://www.forbes.com/sites/prestonpysh/2017/03/13/edward-thorp-blackjack-beat-the-dealer/#1de08a4513de

The way the retail trading brokers have the punters convinced that they are not gambling is a marketing coup, I guarantee that the majority of so called traders are not only gambling but they are gambling without an edge in their favour.
I live entirely from the growth of my personal trading account
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