Introduction
This is a project used to test out the tool I created previously.
Implementation
The strategy
The idea of the strategy is that by combining the Forex pair into a new instrument and finding the stationary characteristic for trading the overbuy and oversell opportunities in around 2 sigma.
Model building flow
Here shows the model building flow. In this project, I am using the tool to connect MT to python so that it is easier for me to use python’s libraries. The idea here is that we will have a rolling window for statistical observation to find the stationary pairs and predict if those pairs are still stationary in the coming week so that we can make our trading decisions.
The rolling windows step is a week and the windows size is a week also. The time frame we picked is 15 minutes.
Stationary and linear regression
Once we picked the Forex pairs, for example: EURUSD ~ GBPCHF. We should be the new combined instrument, the scatter diagram and the normalized price diagram.
After that, we can implement the execution logic and run the back-test on the MT platform.
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