A Squirrel Splash

 Sharp arcs crossing the air by a fluffy tail -
Bringing nuts to my pantry, straightline without fail.

Find something usual, yet useful to hoard -
That's why is a Squirrel like a drawing board.

Naughty Cat

"It's a cat, Lady Mother. Oh, some naughty cat!
He rumbled through my boudoir just like that!"

Free translation of the chorus of the song from the polish play "Zemsta" ("The Revenge") written by Count Aleksander Fredro.

The Plaything

Once a homeless man was trapped by a King,
The King ordered him to stay
In a beautiful garden and take care of it,
But only for one day.

Does CAPM model make sense for trading systems in the Forex market?

With this question I want to initiate series of reflections about the construction of a separate, not discussed here before, methodology of the speculations on derivatives. The practical realization of this idea, which I will develop in subsequent posts, will be carried out using the methods and achievements of the modern theory of portfolio selection. One of the concepts operating within it is known as CAPM, i.e. Capital Asset Pricing Model. The model mentioned here was originally formulated for equity portfolios, and naturally is followed by the idea - good or bad - to transplant its prey on the ground of derivative instruments, including Forex.

Formulas for gains and losses in trend contrarian strategy

Following the previous post, I now present a model that defines the size of the gain or loss arising from the use of anti-trend strategy. This strategy, the assumptions presented here, is a simple mirror image of that which follows the trend.

Formulas for inverting the position in trend contrarian strategy

In the current section I suggest another portion of mathematical formulas. Earlier models were discussed, which define the conditions of a strategy to reverse the position of the player who is following the trend and remains constantly in the market. Currently I present similar formulas for anti-trend strategy, sometimes called contrary.

Playing against the trend - assumptions for the transaction system

In the early texts appearing on this blog, I started providing basic assumptions of transactional systems, starting from a simple trend following strategy. The simplicity and triviality of these approaches is justified by the plan to use them as basic building blocks to design more advanced systems. And all this will be implemented through an adaptive selection of parameters which control the operation of these systems. Selection on the basis of the results of auxiliary systems, which operate in a hierarchical structure.

So much for the reminder of basic aims of my descriptions that I put here. Today I present the assumptions of the second elementary component of my design - simple contrarian system.