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2c0ntent   Egypt. Feb 20 2013 11:11. Posts 1387 | | |
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Highcard   Canada. Feb 20 2013 11:54. Posts 5428 | | |
pretty sure it's extremely improbable to be +ev |
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I have learned from poker that being at the table is not a grind, the grind is living and poker is how I pass the time | |
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Twisted   Netherlands. Feb 20 2013 13:02. Posts 10422 | | |
| On February 20 2013 10:54 Highcard wrote:
100% sure it's extremely improbable to be +ev |
FYP |
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2c0ntent   Egypt. Feb 20 2013 13:24. Posts 1387 | | |
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Highcard   Canada. Feb 20 2013 16:52. Posts 5428 | | |
you would have a better time cutting up $1 bills and trying to tape them back together.
I don't know why google is failing you on this, there are forums dedicated to forex
In fact, if you cut up the $1 bills, tape 100% of the bill together but in a picasso like abstract you might even be able to sell the $1 for more than the cost of the tape.
That my friend, is how you make money. |
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I have learned from poker that being at the table is not a grind, the grind is living and poker is how I pass the time | |
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julep   Australia. Feb 20 2013 17:52. Posts 1274 | | |
depending on market id imagine you would get a lot of slippage |
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mnj   United States. Feb 20 2013 18:26. Posts 3848 | | |
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Spicy   United States. Feb 20 2013 18:59. Posts 1027 | | |
Just do your research on various brokers and pick a reputable one that you are comfortable with. Forex is highly liquid so spread/slippage are not something you really need to worry about if you're trading small size and entering trades only when you've identified fresh order flow (which can generate +ev trading scenarios). Another point to note is that brokers will widen their spreads during news spikes. From my experience traders who complain too much about spread aren't using limit orders enough. Using limit orders when there's no immediacy to enter a trade makes it so you're never getting filled at a price you aren't willing to pay (at the risk of not getting filled). It's a simple concept but most traders think like this "I have to be in this trade because if I'm not aggressive I'll miss out" instead of "I don't mind missing out on a trade if I can't get filled at favorable price so that my risk/reward is most optimal."
Anyways just pick a broker where you can be confident that your funds are safe and won't get screwed by their operational practices. The most important thing though is to improve your trading skillset because these skills never go away, are transferable to other markets, and you can always switch brokers later if you need to. |
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whamm!   Albania. Feb 20 2013 19:33. Posts 11625 | | |
its like 24/7 poker. havent really tried it yet but for sure its not for my personality. (i cant sleep knowing markets are trading lol) pretty sure some have made lots of money from it but its going to take a lot of tears.
+1 on TA for this |
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RiKD   United States. Feb 20 2013 19:38. Posts 8557 | | |
I'm really diggin the responses to this blog (rofl) (sorry 2c0ntent).
I am thinking about getting on that abstract art hustle. |
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AndrewSong   United States. Feb 20 2013 22:08. Posts 2355 | | |
Check out tradimo.com
It's pokerstrategy.com's sister site on trading |
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spets1   Australia. Feb 21 2013 02:11. Posts 2179 | | |
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spets1   Australia. Feb 21 2013 02:11. Posts 2179 | | |
you cant win unless u the one rigging markets |
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Funktion   Australia. Feb 21 2013 11:14. Posts 1638 | | |
Shit did I miss the post where you conquered options already? Currency should be a walk in the park. |
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2c0ntent   Egypt. Feb 21 2013 20:42. Posts 1387 | | |
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2c0ntent   Egypt. Feb 23 2013 09:43. Posts 1387 | | |
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Spicy   United States. Feb 23 2013 23:24. Posts 1027 | | |
You are right that many arbitrage strategies already exist in regards to taking advantage of the ETF mispricing inefficiencies you are talking about (most of which are automated). However, it doesn't mean that the idea is obsolete. What it does mean is that whoever is automating the strategy has an advantage in speed, routing, execution, all that good stuff. They will have an edge over you most of the time when the instruments involved are acting relatively rational and the movements are methodical (or put in another way when there's no panic or euphoria). In these periods of time, calculated models and automated strategies work well because their risk parameters are never violated so they can comfortably grind.
So for the strategy you are considering as well as most discretionary strategies (and I'm assuming you're going to attempt to do this manually), the question to answer is "what's the best way to execute on my idea?" given the information I just told you. I'll give you some time to ponder and I'll put my thoughts in a spoiler.
+ Show Spoiler +
The best time to execute most strategies is after something causes irrationality in the markets (referred to commonly as a catalyst), whether it be news driven, market manipulation, George Soros breaking the Bank of England, etc. Something completely unexpected that throws financial models out of whack and everyone to start questioning their risk models. Large levered positions are getting unwinded and automated strategies can't operate profitably because they can't deal with irrationality. The scope of the catalyst is important too in assessing the mispricing potential. A full blown crisis obviously has more opportunities than an unexpected announcement of an interest rate change.
So in regards to the strategy you brought up specifically, the first thing to note is the fact that different traders use the ETF and the currency pairs for different purposes. Therefore, it's impossible for them to have identical order flow which leads to the potential for mispricing. In normal times, automated strategies can quickly arbitrage away the dis-proportionality in the order flow, but in irrational times, the last thing you want to do is offer free unlimited liquidity to people spastically unwinding positions when you don't know how much size they are working with and you can't measure how crazy they will cause the mispricing to be. Imagine a poker game where stacks are theoretically infinitely deep and the risk/reward of your strategy is unknowable. So what they will do is wait until the mispricing becomes attractive enough to start scaling back in to the arbitrage. This is your timing window.
Anyway, as you might guess I'm not a quant who attempts to use pricing models. There are tons of ways to make money in the market. The most important thing though IMO is to understand the important players, why they make decisions in certain market conditions, how they will affect ORDER FLOW (caps because so important), and how your strategy fits in. Then formulate a game plan and figure out the best way to execute. So you understand any bias in my analysis, my trading experience is with tape reading, technical analysis, and global macro.
Disclosure: Most of my knowledge is a result of compiling everything I've learned from other successful traders who utilize various strategies and have made ludicrous amounts of money that makes me so jelly. I haven't been personally trading long enough to generate meaningful results (although I'm pretty much attempting to trade full time right now). If/when I do start making millions, you can expect an awesome blog post from me.
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hiems   United States. Feb 24 2013 02:44. Posts 2979 | | |
| On February 23 2013 22:24 Spicy wrote:
You are right that many arbitrage strategies already exist in regards to taking advantage of the ETF mispricing inefficiencies you are talking about (most of which are automated). However, it doesn't mean that the idea is obsolete. What it does mean is that whoever is automating the strategy has an advantage in speed, routing, execution, all that good stuff. They will have an edge over you most of the time when the instruments involved are acting relatively rational and the movements are methodical (or put in another way when there's no panic or euphoria). In these periods of time, calculated models and automated strategies work well because their risk parameters are never violated so they can comfortably grind.
So for the strategy you are considering as well as most discretionary strategies (and I'm assuming you're going to attempt to do this manually), the question to answer is "what's the best way to execute on my idea?" given the information I just told you. I'll give you some time to ponder and I'll put my thoughts in a spoiler.
+ Show Spoiler +
The best time to execute most strategies is after something causes irrationality in the markets (referred to commonly as a catalyst), whether it be news driven, market manipulation, George Soros breaking the Bank of England, etc. Something completely unexpected that throws financial models out of whack and everyone to start questioning their risk models. Large levered positions are getting unwinded and automated strategies can't operate profitably because they can't deal with irrationality. The scope of the catalyst is important too in assessing the mispricing potential. A full blown crisis obviously has more opportunities than an unexpected announcement of an interest rate change.
So in regards to the strategy you brought up specifically, the first thing to note is the fact that different traders use the ETF and the currency pairs for different purposes. Therefore, it's impossible for them to have identical order flow which leads to the potential for mispricing. In normal times, automated strategies can quickly arbitrage away the dis-proportionality in the order flow, but in irrational times, the last thing you want to do is offer free unlimited liquidity to people spastically unwinding positions when you don't know how much size they are working with and you can't measure how crazy they will cause the mispricing to be. Imagine a poker game where stacks are theoretically infinitely deep and the risk/reward of your strategy is unknowable. So what they will do is wait until the mispricing becomes attractive enough to start scaling back in to the arbitrage. This is your timing window.
Anyway, as you might guess I'm not a quant who attempts to use pricing models. There are tons of ways to make money in the market. The most important thing though IMO is to understand the important players, why they make decisions in certain market conditions, how they will affect ORDER FLOW (caps because so important), and how your strategy fits in. Then formulate a game plan and figure out the best way to execute. So you understand any bias in my analysis, my trading experience is with tape reading, technical analysis, and global macro.
Disclosure: Most of my knowledge is a result of compiling everything I've learned from other successful traders who utilize various strategies and have made ludicrous amounts of money that makes me so jelly. I haven't been personally trading long enough to generate meaningful results (although I'm pretty much attempting to trade full time right now). If/when I do start making millions, you can expect an awesome blog post from me.
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I don't know anything about trading but gl. |
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I beat Loco!!! [img]https://i.imgur.com/wkwWj2d.png[/img] | |
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2c0ntent   Egypt. Feb 24 2013 14:37. Posts 1387 | | |
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Gnarly   United States. Feb 25 2013 03:27. Posts 1723 | | |
inventory imbalance is what I look for
USD will be going to around 120 within the decade
AUS will be going way down, and my possibly cease to exist within the decade |
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2c0ntent   Egypt. Feb 25 2013 16:49. Posts 1387 | | |
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Highcard   Canada. Feb 25 2013 20:46. Posts 5428 | | |
good info, thanks for someone who has knowledge to chime in ^^ |
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I have learned from poker that being at the table is not a grind, the grind is living and poker is how I pass the time | |
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Highcard   Canada. Feb 25 2013 20:53. Posts 5428 | | |
Can either of you point me to good quality resources or amazon textbooks/papers?
I am thinking about buying this:
Options, Futures, and Other Derivatives and DerivaGem CD Package (8th Edition)
http://www.amazon.com/Options-Futures...ie=UTF8&qid=1361843280&sr=1-1
All About Hedge Funds : The Easy Way to Get Started
http://www.amazon.com/gp/product/0071...UTF8&psc=1&smid=ATVPDKIKX0DER
Going to read this soon
Optimal Execution of Portfolio Transactions¤ Robert Almgreny and Neil Chriss
http://www.courant.nyu.edu/~almgren/papers/optliq.pdf
Going through this presently
Computational Investing, Part I
Tucker Balch
https://www.coursera.org/course/compinvesting1
The course load looks like this
http://wiki.quantsoftware.org/index.php?title=Computational_Investing_I
+ Show Spoiler +
Week 1
Module 1: Course Overview
Video 11: Learning objectives of for the course
Who is this course for?
Logistics
Instructor background
Module 2: So you want to be a fund manager?
Video 21: Module learning objectives
Viewpoint of course
Incentives for portfolio managers
Two main types of hedge fund
Video 22: Common metrics for assessing fund performance
Annual return
Risk
Reward/Risk
Video 23: Common metrics for assessing fund performance
Sharpe Ratio
Video 24: Demo
Download historical data
Manipulate historical data in Excel
Module 3: Market Mechanics
Video 31: Module objectives
Major order types
The order book
How market orders drive prices up and down
Live example
Video 32: Order book recap
How orders flow from trader to execution
Colocated computing
Mechanics of short selling
Video 33: How hedge funds exploit market mechanics
Order book-based trading
Arbitrage
Video 34: The computing inside a hedge fund
Trading algos
Optimizers
Forecasters
QUIZ: Market Mechanics
Week 2
Module 1: What is a Company Worth?
Video 41: Intrinsic value: Value of future dividends
Video 42: How and why news affects prices (Event Study)
Video 43: Fundamental analysis of company value
Module 2: Capital Assets Pricing Model
Video 71: Capital Assets Pricing Model
Video 72: CAPM: What is Beta
Video 73: How Hedge Funds use CAPM
Module 3: QSTK Software Overview
Video 61*: QSTK software overview
Video 62*: Installing prerequisites for Mac, Ubuntu or Windows
Video 63*: Installing QSTK on Mac or Ubuntu
Video 65: Testing QSTK on Mac or Ubuntu
Video 66: Testing QSTK on Mac or Ubuntu Continued
Video 81*: Installing QSTK on Windows
Video 82*: Testing QSTK on Windows
Homework 0: Install QSTK
Week 3
Module 1: Manipulating Data in Python with Numpy
Video 51*: Numpy Part 1
Video 52*: Numpy Part 2
Video 53*: Numpy Part 3
Module 2: Manipulating Data in QSTK
Video 171*: QSTK Part 1
Video 172*: QSTK Part 2
Module 3: Homework 1: Analyze a Portfolio
Video 181*: Homework 1 Overview
Video 182*: Homework 1 Example Output
Homework 1: Create and analyze a portfolio
Week 4
Module 2: Efficient Markets Hypothesis and Event Studies
Video 91: Where does information come from? Arbitrage: Difference between real value and market price
Video 92: 3 Versions of Efficient Markets Hypothesis. Is EMH True?
Video 93: Event Studies
Video 94: Event Studies Code Demo. Homework 2 Defined.
Homework 2: Event Studies
Week 5
Module 1: Digging Into Data
Video 121: Module Objectives and Overview (Review of the "Correct Answers" to the $5 Event Studies, Survivor Bias)
Video 122: Actual vs Adjusted Prices (Dividends & Splits)
Video 123: Data Scrubbing (Checking for Sanity)
Module 2: Overview of Homework 3
Video 131: How Next Two Homeworks Fit Together
Video 132: Specification for Homework 3
Video 133: Suggestions on Implementation of Homework 3
Homework 3: Build a Market Simulator
Week 6
Module 1: Overview of Homework 4
Module 2: The Fundamental Law
Module 3: CAPM for Portfolios: Managing Market Risk
Video 141: CAPM recap, overview for portfolios
Video 142: Example use of CAPM for long/short bet removing market risk
Homework 4: Event Study into Simulator
Week 7
Module 1: Technical Analysis
Video 191*: Intro to Technical Analysis
Video 192*: Some Example Technical Indicators
Video 193*: Bollinger Bands
Module 2: Portfolio Optimization and the Efficient Frontier
Video 111: Module Objectives and Overview
Video 112: The Inputs and Outputs of a Portfolio Optimizer
Video 113: The Importance of Correlation and Covariance (in daily returns)
Video 114: The Efficient Frontier
Video 115: How Optimizers Work (In general, not just for portfolios)
Module 2: Digging Into Data
Homework 5: Implement Bollinger Bands
Week 8
Module 1: Making a Better Market Simulator
Commissions
Market Impact (Slippage)
Module 2: Things We Left out
Machine learning
Module 3: Arbitrage
Homework 6: Event Study with Bollinger Bands
and might pick this book up too
Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk [Hardcover]
Richard Grinold (Author), Ronald Kahn (Author)
http://www.amazon.com/gp/product/0070...Code=as2&tag=coursera-course86-20
Do you guys think this is a good start? anything else you recommend?
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I have learned from poker that being at the table is not a grind, the grind is living and poker is how I pass the time | Last edit: 25/02/2013 20:58 |
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Gnarly   United States. Feb 25 2013 23:45. Posts 1723 | | |
| On February 25 2013 15:49 2c0ntent wrote:
What do you mean USD to 120? The USDX index?
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The currency in which is priced against a basket of currencies, yes. |
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2c0ntent   Egypt. Feb 27 2013 16:12. Posts 1387 | | |
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