Forex Optimal Risky Portfolio

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81
  1. Yes that’s true, but correlation table was built on a daily basis at NYC. By respecting this time of day to open/close trades we can avoid the issues you mentioned and using pearson information in a non-distorted way.

Pls keep following us, any help, especially on the model to apply, would be really helpful. After exams I finally found a professor that is willing to help me with this, let’s hope it will lead somewhere :stuck_out_tongue:

Best,
Cry

82

I’ve attached my calculated values. Going through them though, I’ve realised it probably won’t help me in the long run but it might help with the standard deviation.

@Richard: Personally I don’t trust Oscillators, they don’t take the market sentiment into account though I’ve not looked into trying to apply a market-wide Oscillator.

I’ll have another think about what factors should affect lot size, yes my last suggestion was rather simplistic but I prefer to have a simpler solution which works 80% of the time than a complex solution with lots and lots of assumptions.

83

Hey it’s been a while, I know my methods aren’t sophisticated but they that way because I like to be able to have a quick answer. My new idea is along the same track as the old one but doesn’t include and history in it. Okay here it is:

  1. Work out what a 1% change will be in pips
  2. Average all the pairs
  3. Work out the multiplier by dividing the pairs movement by the average.
  4. Multiply the “base” lots by the multiplier

I’ve attached a MT4 script for buying and selling, just set them a hotkey and the script will work out the appropriate lot size. As I’m in the UK and use GBP as my account currency I’ve added in the GBPUSD to convert it into dollars. Also my MT4 broker only supports lots sizes in step of 0.1 hence why the lots is rounded to 1 decimal place. Change if your settings are different.

Hope this makes sense and helps,
heelflip43

84

Hey Mate,

I’ll surely get a look into it. Sorry for slowing down my work but gathering the extra information I need seems harder than it looked :frowning: Professors are more like Gods impossible to reach lol.

Keep us posted with your improvements and post any requests you might have to help you out !

Best

85

How far did you guys get with this?

My mind was considering today a build up of the portfolio. Attempt to find the optimal risk on a two pair portfolio first. Then from there build on.

Also, I was thinking about potential risk free assets and how to create them and the only thing I could think of is some hedged version of a carry trade. I haven’t plopped down numbers to see if that is even possible. Futures or options to hedge?

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Yeah, that would work now that I keep thining about it. If there was an existing carry trade, you could hedge it with future contracts, thus creating the risk free trade. Problem is, that this type of scenario couldn’t be soley created in a forex market. And yeah, I think that’s the point of all this to begin with.

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Full hedged carry trade with same broker one part on swap free account and other on normal account. Only problem could be terms of the broker and to find big enough carry pairs