Mathematical models in trading

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Mathematical models in trading

Category : Software , Strategy

Each and every trader has to make a lot of choices every single day, from taking decision on selling or buying of an asset to selecting the proper way of trading activity. And if we talk about the last option, then it can be considered as the most difficult moment (according to my opinion), because it defines all future steps and action of a FIX APItrader.

As we all now, there are many different trading methods, which can be divided into the following groups:

– Scalping trading

FIX APIarbitraryalgorithms (

– Speculativetrading (when trades are open for not more than 1 day)

– Swing trading (when trades are kept open for 2-3 days)

– Midterm investment (when money is invested into assets for a month or a quarter)

– Positionedinvestment (when investments are made for more than a year)

Each of these methods has its own market working mechanism, as well a set of tools to define the perfect moment for investment.

Today I want to offer you one of the methods of analysis that is used by all professional FIX API traders and big companies in order to define the list of assets for investment. We are going to talk about the usage of mathematical models, which are based on the statistic information and allow understanding the future growth or falling potential of a financial asset.

Mathematical models in trading include comprehensive information and a set of specific rules, which allow making recommendations for the asset managers on the future price of the asset. In other words these models can be used to make fast and reliable forecast about the future price of the asset. No doubt, the majority of models and the method itself are widely used in the stock market. However, there are many methods, which can be adjusted to work in the conditions of FIX API Forex market.

Even if we look at the popular trading robots, they can also be considered as mathematical models due to their nature ( However, today we are talking about different model creation principles, which are based on the fundamental data, allowing the asset manager to take the right and efficient decision.

In 99% of cases such mathematical models are used as a filter, and not as a base for a decision making. It turns out that if a trader has a trading strategy that shows various buying options, the trader is able to use special models in order to analyze the fundamental data, and create recommendations and the forecast about future changes of the price. After that, if the signal corresponds with the forecast, the trader can open various trades having minimum risks.

What kind of fundamental data from FIX API Forex market can be analyzed by the trading algorithm?

In order to make your model really efficient, you have to analyzethefundamental dataon a regular basis, adding them into your database for calculations. There are specific models, which are able to forecast the future economic growth basing on the historical data. They can also predict such things as inflation or the budget. By using this method one can forecast the following indicators:

  • GDP
  • Inflation
  • Labor market
  • Budget balance
  • Volume of production
  • Level of development in specific economy sectors
  • Volume of sales

Thin information shows the highest level of volatility during the moment of news appearance. In case if you have a tool that is able to make forecasts about such information with high precisions, you will be able to improve the profitability by making speculative trades during the moment of new data publication.

No doubt, mathematical models are simply useless for scalping or arbitrary systems. But in case if you are looking for a tool to get maximal profits and invest money on the long term basis, you definitely need to use mathematical models.

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