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Everything posted by Perishabull

PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
And the great problem with this is, as I'm discovering through my analysis is that whilst it is the optimum taken over the day as a whole, the probabilities develop and change over the course of the day so to use a one size fits all is the completely wrong approach. What my very recent analysis appears to be showing me is that target and stop must be dictated by market context, and that there is a random element to price action in concert with causal elements  it's fascinating to think about and study. My analysis is also showing up correlation to be a very blunt instrument, a clumsy way to try to define descriptive relationships (for that is what correlation is) within the market. It's fair to say that taking these online courses has helped show me what a proper scientific study and process looks like and keying off of that with my recent work. I need to broader the testing to see if these apparent insights I have translate to other markets, other types of instruments besides futures (I've only looked at Dow futures so far). I'm starting to get a feel for how the next strategy is going to look. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
One of the courses I'm working through is Effective Thinking through Mathematics, and although it's obviously about mathematics, it's really about how you can take existing ideas and develop them further to generate new insights. I'm finding it quite fascinating because I wasn't particularly enamoured with maths back at school, and yet the way it's being taught in this course makes it very interesting. One example is very simple, and that it the difference of squares, so the difference in the area of two squares. The area of a square is one side squared so; Area = x2 If one square is x and another is y then the difference is; x2  y2 or (xy)(x+y) This course teaches you to visualise what is actually happening which then informs an understanding of the equation. From there I was interested in how you would calculate the difference of cubes, and I worked out the equation for the difference of cubes as being; x3  y3 = ((xy)(x+y))y+x2 The above works, albeit you need to choose the higher of your two valuations for x  it's not the most user friendly way you can create the formula. This course has caused me to start questioning my own beliefs about the market, what's possible and what isn't, the chief belief is that markets are not random. In order to test this I created program that would generate random charts, here are some of the results; [/url] Most of these do indeed look quite a lot like stock or index charts  although there seems to be more structure to the bull and bear phases. Markets may have characteristics of randomness but I don't think it's accurate to say they are completely random, certainly not in the long term at any rate. Another aspect of the course is how to solve problems, principals to work through maths problems and otherwise, and this has recently led my analysis work in a different direction. What is the highest probability trade you can take on the Dow Jones future market in any given day, for a trade closed the same day? I found myself asking this question, and I wanted the answer. Investigating the data covering the last year enabled me find the most optimum ratio between risk and reward over a given day, and to my great surprise, it was the same values that I had already used previously in my trading  a coincidence perhaps. More than that, the data shows that it is simply not worthwhile at all to short for trades closed before the close, relative to the increased probability of going long, although that aspect needs work on more years data, since some years tend to be more bullish than others. Furthermore, the probabilities of a successful trade vary significantly over the duration of any given trading day, not that this should be news to anyone, but quantifying these probabilities brings it to new life. So there are commonalities across all days, that repeat. Interestingly I'm letting the data push me to a conclusion, not the other way around (I previously tried to crowbar strategies onto the market without conducting adequate research. I've been wanting to do work of this sort for some time but until now couldn't quite manage to grasp the complexities involved in it. This is completely different work to that of the Pearson correlation analysis I've been working on, so perhaps I can pull this work together to create something. 
That was some move in silver at the start of December, over a dollar lower then a jump back up. The spikes in volume since the low have been larger on the up moves relative to the down moves since then. Is the market signalling a low there?

PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
It's really been far too long since I last posted. I have been doing more analysis and reached a point where I realised I need more tools so I've been working through some online courses on statistics and probability; https://www.thegreatcourses.co.uk/, run by an award winning professor, Professor Starbird from the University of Texas. I'm looking to bring an added dimension to my analysis work, with a view to returning to trading when I have evidence of a tradeable edge. 
Thanks for your post, it just prompted a quick piece of analysis that strongly suggests that the principal factor affecting the price of silver is the price of GOLD; Not that this should be news to anybody but looking at it in a scientific way always helps.

From the Guardian on 22nd October; "Oil baron Nelson Bunker Hunt dies Texan built on his fathers oil riches but lurched into financial disaster with scheme to corner silver market Nelson Bunker Hunt, a Texas oilman who once tried to corner the silver market with one of his brothers only to see the move end in financial disaster, has died. He was 88. Hunt died on Tuesday at a Dallas assisted living centre after a long battle with Alzheimers disease, said his brother, W Herbert Hunt. Hunt had been among the worlds wealthiest men. His father was the legendary Texas oilman HL Hunt, who left behind a multibillion dollar fortune and set up Placid Oil, once one of the biggest independent oil companies." Seems especially poignant given the silver market appears to be dead. Perhaps his death will mark the low. Kim Jongil's death on 17th December 2011 created much hysteria in North Korea which peaked on 29th December, the day of an intermediate low in silver from which the market rallied $10 in 2 months. http://www.theguardian.com/business/2014/oct/22/oilbaronnelsonbunkerhuntdies

PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
I've been doing a lot of research on factors that taken together correlate with the price of Dow Jones 30.futures. The chart above shows the 4 factors (denoted N on the chart) and their relationship to the change in price of Dow Jones futures over a set timeframe.So the relationship between the change in value of N to the change in value of Dow Jones 30. I'm using the Pearson product moment correlation coefficient which is a measure of the linear correlation between two variables, and this research uses market data from 14th August 2014 until 10th October 2014. The Pearson correlation is 0.82 which is a strong correlation (Maximum is 1), what's interesting is the strength of the correlation over a large period of time using a lot of data points (over 60,000 x and y pairs), with quite a tight variance in terms of the % change in price. Whether or not this work can be progressed to a tradeable insight is another matter and needs more research. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
I've been really busy on a professional level recently (not a lot of time for posting) however have been able to work on this some more and think that I can use this type of research to inform trading decisions. There's more work to be done but what is quite interesting is that relationships between market data are assessed, this then defines what is likely to constitute a signal on a daily basis, so what may have been a signal one day may not be the next, in that sense it is dynamic and changes dependent on market conditions. All my previous strategies have been linear, not responding to the market but rather trying to force my ideas on to the market, irrespective of market conditions, which doesn't work, a two way dialogue appears to be the way to go. Anyway I have more time in the next two weeks to work on it. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
I've been doing some really interesting work recently in an effort to define an edge within the market. Through the middle of last year to the start of this year I had been successfully trading a strategy (Strategy I) using an edge that I thought I had developed based on an underlying principle I had formed on some factors that influence short term price movement in stock index futures markets. That strategy broke down and instead of having a majority positive profitable days, it changed to a majority of negative losing days, therefore I had no option but to stop trading it. I never managed to understand why that happened, however based on recent work I think I may have now found the answer. I also had traded a further strategy in recent weeks (Strategy II), which looked highly promising however calculation issues meant that I could take a signal to trade, find it to be a losing trade, then recalculate the data at day end to find myself presented with a different set of numbers that would have meant the earlier signal was not a signal to trade, or that there was a signal to trade shown, that didn't feature in the earlier calculations done in a live market setting. Faced with that conundrum I suspended trading Strategy II. Whilst the underlying principle I was seeking to exploit with these strategies was essentially the same, each strategy was implemented in a sufficiently different way such that they were effectively two separate strategies. I went back Niederhoffer's book, 'Practical Speculation' and recalled the importance of being able to quantify, whether it be a correlation, an edge, or apparent observation. Using past signals for strategy II, I assessed these against short term market moves in Dow Jones futures. The way I opted to do this was to contrast the signal strength versus the immediate market activity following the signal, to try to establish whether or not an edge exists. N on the x axis represents the signal, the stronger the signal is, the further to to the right it is shown on the scatter plot. The y axis shows the % move in Dow Jones futures, following a signal. So the bigger the percentage move, the further to the top of the scatter plot it is shown. I've then inserted a trend line that best describes the relationship between the two. The trend line is rising to the right, what this means is that we can say that based on the data set used (covering a few weeks of data), the stronger the signal, the bigger the move in Dow Jones futures. So there is a positive relationship between a signal, and a move in the underlying market. The fact that the swarm of dots do not fit very closely to the trend line is illustrative that the relationship is not a partcularly strong one, but it is there. The correlation coefficient is 0.23. Further to this I have been getting deeper into looking at different aspects of the underlying data and appear to have found some interesting results that if confirmed, provide a clear explanation as so why Strategy I broke down. Rather than looking at the relationship between what I would class as being a signal, I opted to check if there is a relationship between the underlying data sets that I combine (lets call that N) in order to find signals, and the actual market prices, and what I have found may be valuable to explore further. I looked at the relationship on individual days and what I found was that it changed from day to day. My previous understanding was that if N increased, the probability was that Dow Jones futures would increase. This meant that some days I was trading in a manner that was essentially the opposite to what I should have been doing. This scatter is particularly revealing to me since the overall relationship between N and the price of Dow Jones futures was one where if N increased, the price went down, although importantly, it's clear that there were periods within this day in questions where when N increased the price also increased, but these were smaller subrelationships within the wider picture (show by areas where the dots form lines across the main trend, perpendicular to it). I picked two other random days; Again, it's clear that there is a similar relationship here. And another day I picked at random to assess; On this day the relationship was completely different, whereby as N increased, market prices also increased, the opposite of the two other days shown. What is particularly interesting in these example is that even without the trendlines showing the given relationship on each of these days, it would be clear what the relationship was without it, and moreover that the relationship didn't change during the day, at least in these example that I looked at. This is important because these are not time bound charts, therefore what it may be possible to do is asess the first period of any given trading day, perhaps 2 or 3 hours, to quantify the relationship on a given day, and then trade accordingly. This is a potentially interesting development, but I need to do a lot more research on it. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
Thanks for posting, having had a brief scan through that looks very interesting, do you know anything about the background of the author, or have you read any of his other books, and how is your own research and trading system development going? 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
It seems to be a calculation issue with my platform, Multicharts, I've not bottomed it out just yet. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
Unfortunately I've found a flaw in this trading strategy I've been using of late that means it's not wise to continue with it. I need to be more rigorous with my research and testing work in the future. I think some of the principles I've learned are valid and relevant, but the way these are tested, applied and executed need to be far sharper. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
EMini Dow Jones futures 1 trade yesterday, 1 loss 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
EMini Dow Jones futures 2 trades yesterday, 2 losses 
PSLV is an interesting one to look at given it's premium tends to expand on upswings. PSLV vs SLV I recall buying it late 2010, on day 4 after launch, prior to the huge move up in silver. Premium to NAV is currently declared as being 3.95% on the trust website. http://sprottphysicalbullion.com/sprottphysicalsilvertrust/netassetvalue/

That's a big call, I've been looking for some recent sentiment data, but so far only have late May;

PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
EMini Dow Jones 1 trade today, 1 win 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
No trades today. 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
8th August 2014 EMini Dow Jones 2 trades, 2 wins 
The price of the Euro relative to the dollar is 8% higher than it was during the same month last year. I trade the financial markets and have done so for a number of years (mainly stock index futures). In my experience there is such an expansive and intricate network of complex factors that determine price discovery in the foreign exchange markets, such that those successful in trading the forex markets are a rarified breed indeed. It may interest you to know that there is only really one well known hedge fund that specialises in solely forex markets, John Taylor's FX Concepts, they hit the buffers a number of years ago. If the message isn't clear  forex is not something that one can predict with surety. Volatility, on the other hand, is far more stable when compared to direction. What I'm really saying here is  is a possible ±8% worth a definite 12 months?

PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
EMini Dow Jones 1 trade yesterday, 1 win 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
EMini Dow Jones 4 trades yesterday, 4 losses 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
EMini Dow Jones 1 trade yesterday, 1 win 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
Emini Dow Jones futures 5 trades yesterday, 5 losses 
PositiveDev's trading journey
Perishabull replied to Perishabull's topic in Gold, FX, Stocks / Diaries & Blogs
31st July 2014 EMini Dow Jones 1 trade, 1 win 1st August 2014 EMini Dow Jones 2 trades, 2 losses