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16/21
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Introduction I start to be interested at Forex during my PhD thesis when I read with interest some old papers about Hidden Markov Processes in Economy. As part of the thesis I decided to investigated if it was possible to apply this methodology utilized in areas like speech recognition, Macroeconomy, Physics in the FX market .I found some good articles like Stylized facts of financial time series and hidden semi-Markov models written by Bulla. But the objective was to create a HMM model that outperforms simple technical indicators.So I start to built my own HMM model, I ask to Andrea Procaccini a funny and great Matlab programmer to cooperate to do something that could have interest also out of the University walls. Cyclex We call Cyclex the model investigated. I would try to explain with no mathematical formulas some of our results.Cyclex is an exchange rate forecasting model that outperforms a random walk at short horizons and appears to be robust and efficient over different sample spans. So an easy way to translate could be THE MODEL IT IS BETTER THAN TO FLIP A COIN AND DECIDE. Later we would try to answer to the questions How better is our model compared with the flip of a coi…
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Pirjetta avatar
Pirjetta 19 Aug.

hea job.if ühendada matemaatika psühholoogia siis lõpptulemus võib olla vapustav :)

TaishaRiccara avatar

very interesting and great to see someone approach this in a more scientific manner!

ilonalt avatar
ilonalt 20 Aug.

I see that this article is very popular among girls :)  As for beginner, my advise to you - evaluate your trading abilities and be patient. And of course it is important to have your own trading strategy and keep it. Good luck!

Durden avatar
Durden 20 Aug.

Thx for the suggestion, probably a yoga trainer could be profitable 

bharatholsa avatar

Nice article ) Congratulations on your success in building a running predictive forex model ) I am also very much interested in applications of applied statistics, econometrics and modeling to trading ) Hope to hear more from you on this subject )

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15/39
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In this article, I’m going to share with you a little secret of mathematics and risk management. I formulated a simple law that expresses a win-win situation in risk management coming from risk/reward ratio analysis and the different mathematical outcomes and ideas that spiral off these simple and yet powerful notions. As we all know, good trading comes from the triple intersection between good trade location, good risk management and your ability to master yourself. This tripod cannot function properly if one of the elements is out of balance. So, in here I’m going to give you the key and some wise concepts about the second element: risk management. If you apply these principles, you’ll notice that your trading will become more solid and consistent over time. Also, you’ll have the ability to be wrong in your trading decisions most of the time and still come out with a little profit or at least breakeven. By having that in the back of your mind, you'll be able to eliminate some of the bad emotions about trading like risk aversion and the desperate need for absolute accuracy all the time. Before we worry about how much precise we can be with out strategy with need a insurance pla…
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alifari avatar
alifari 4 Sep.

Nice article +

Likerty avatar
Likerty 11 Sep.

I would concentrate on risk management in the charts rather than risk management on the capital. Its almost garanteed for a newcomer to loose its capital anyway. I would suggest to focus on price action trading - sort out the KEY levels which to bet against and manage the risk acording to support/resistance

ebiesczad avatar
ebiesczad 12 Sep.

I agree. You have to focus on price action to get good trade location. However, in this article I'm just talking about risk management and how it can give you peace of mind in relation to risk taking. I am talking about risk management in the charts and in the capital.. Bottom line, I just proved mathematically which risk/reward levels you should srtive for in order to have an statistical edge over time. Sure you'll need trade location, but that's a different animal. I'm just talking about capital protection over time and consistency.

Likerty avatar
Likerty 21 Sep.

Statistical edge is sure the necessary thing, but with bad entries/exits - it wont help anyway:) Piece of mind comes with understanding of what you doing (understanding what market movers are doing) - not just putting less of your equity on single trade. And on stressfull conditions one is surelly analysing PA more closely - so its not a bad thing - you dount need to avoid stress - it makes your iron harder:)))

Likerty avatar
Likerty 21 Sep.

I agree on your points here, but What I'm trying to say is that most of newcomers are way undercapitalised to be able to adopt text-book money/risk management and because of lack of understanding what PA is doing - they will lose anyway.. So, in the end - after loosing several deposits, if one still has any motivation left - the only way to make up in this business is to analyse hard the PA and try to make more than loose..

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8/40
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Building a trading strategy is part of a very special category of problems. First, it is time dependent meaning that the data you analyze is all the same (prices) but shifted in time. Therefore the problem consists in recognizing patterns within charts. Secondly, you don’t want to predict anything about the chart itself, you usually want to predict something about the future, as in weather forecasting or sports bets. In that regards, trading is a lot like gambling.But what exactly do we want to predict? Do we want to predict the high of the following period or perhaps the overall movement of said period? Here are two things that are more logical and easier to predict.The parameters discussed are used to grade single trades, not to mistake with techniques that asses the quality of an entire strategy. These are parameters on which to optimize your strategy.Profit over time The idea behind this parameter is that a trade should make the most profit in as little time as possible, in fact, money that is invested in a trade cannot be invested elsewhere and long-lasting trades will occupy your money and your attention while you could have perhaps made better profit elsewhere. With this ide…
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Efegen avatar
Efegen 28 Mar.

Nice work you are soing but it is sometimes too complex. This on i understood+1

nippur72 avatar
nippur72 16 Nov.

how do you calculate "p", is it just the sum of theorical profit at day 0 + profit at day 1 + .. + 9 ?

e.g. if r[t] are the returns at day t,

for(t=0;t<9;t++) p+= r[t] > 0 ? r[t] : 0;

olga avatar
olga 18 Nov.

The sum of profits depends on the time-scale, if you look at daily bars, one bullish day will add to total profits and a bearish day will add to total drawdowns. You'll get a more accurate value by looking at smaller time-scales. The values for profits and drawdowns will be very different Wether you look at a small or a large time-scale but the proportion of one to the other should stay about the same.

olga avatar
olga 18 Nov.

Actualy what i just said isn't true, a smaller time-scale will push the proportion of profits to drawdowns towards equality but the sign of the ''profits over drawdowns'' indicator will stay the same.

nippur72 avatar
nippur72 21 Nov.

ok, thanks for the clarification. I like your articles on neural networks, I hope you post more articles.

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