Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I was looking into trying to reduce market noise for strategy development and I read the best way to do that is to create a synthetic index market, such as (Gold + Silver + Platinum). In your guys opinion what do you think the best formula for creating this market? its not as simple as Gold + Silver + platinum due to the way they move and silver being drastically different in price.
any suggestions or pointers?
thanks
Can you help answer these questions from other members on NexusFi?
market noise:
the actual definition is to complex for me to try to explain but a simple example is if you take Gold and Silver and create an index and for example you have a 1min bar that goes up on GC and a 1 min SI bar that goes down on the same 1 min bar a properly scaled index should be able to take that into consideration and create a chart that is less noisy than looking at two separate charts. add three or four commodities and the less noisy it can get.
goals :
the easiest way would be to compare it to something like the S&P 500 except with a few commodities and not stocks. To combine stock its much easier but with futures you have big point value/ contract size and price to try to figure out how to properly create a synthetic market.
So my end goal would be a index where when the strategy buy's 1 contract of it, in reality its buying 1 GC 2 SI and 1 PL or what ever the current sizing would be.
so the question being how to properly create the index when it comes to commodities.
I've also created synthetic products, but I wouldn't say it was to eliminate noise exactly.
One reason is to actually trade the synthetic product, if it's made up of 3 other products you scale and weight them and then when a signal is produced on the synthetic you take positions in the underlying accordingly.
Is this what you are trying to accomplish? Will you take both a gold and a silver position in your example, or are you interested in using this synthetic product as some sort of "filter" where you would take only a position in one product?
I cannot offer any advice, I've played with this idea but never followed thru with it in live trading due to a long list of "wish list" items that I never seem to have time to get to.
But keep us posted on your findings, because I do believe this has value.