~Russian Bear’Z Blog~

I suppose that I don t have to say that the market in Russia is the growing market of the developing countries as sometimes this market drops. And the thing that it is the trend market doesn t raises any doubts. It means that on the Russian market the trend strategies operate best of all.

The trend strategy operates in this way: when some fixed level makes his way the execution of the stop-order happens. Taking into account that the commission on the Russian market is rather small (0.05%) and the liquidity on many instruments leaves much to be desired it is very important how the stop-order will be executed.

Continuation

If you buy at the market price even for example 1 lot of Surgutneftegaz (SNGS) it will amount on average 0.03 more expensive that is 3 times bigger than the commission. And if you buy 1000 lots it will be 0.06. It is better not to mention the other “blue chip” Sibneft (SIBN) as its spread is 2 rubles. In such cases it is better to set the limit order lower than the market price is and wait until it will be executed. For example, in my opinion, in respect of RAO EESR such losses are 0, 004: 80 % of the orders are covered in the next minute and only 2 % are covered manually.
These are the disadvantages of the trend systems and it is better to take them into account within a period of testing, before the period of real trade takes place. For the determining of such losses you can use this table in which the average values of the spread as per blue chips are included.

The column price is the close price of 10.06.2004. Spread is not an average between bid and ask. It is the average value of the transactions that took place in a short period of time (01.05.2004-10.06.2004). The calculations are made with the help of the indicator in Trade Station Omega on M1 graph. On the tick graph you may see the initial code of this indicator.


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~ Spread Measure
~ Statistical Indicator
~ EasyLanguage code for TradeStation Omega - spread.els
~ whiteline Group Copyright (c) 2004
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var:
spread(0),
count(0),
up(0),
dn(0),
str(”");
if
time < time[1] {Gap Safe}
then
begin
up = 0;
dn = 0;
end;
if
    DownTicks > 0
then
    dn = (open+low+close)/3;
if
    UpTicks > 0
then
    up = (open+high+close)/3;
if
    up <> 0 and
    dn <> 0
then
begin
    count = count+1;
if
    up > dn
then
    value1 = up-dn
else
    value1 = 0;
    spread = spread*(count-1)/count + value1/count;
end;
if
    LastBarOnChart
then
begin
    str =
        GetSymbolName + “,” +
        NumToStr(spread, 4);
    print(str);
end;


The final result is the average magnitude and it doesn’t t reflect the value of spread at some particular moment especially in the cases when very strong levels forces their way (for example, the support level or the level of resistance)and it is very difficult to say in what direction it will change. If there are some players interested in returning back the price, the spread will take on a value of zero if there are any of them the spread will increase¸ but as a rule it declines while approaching to the level and increases after the punching of the level. This fact also illustrates the difference between the real trade and test trade. And if the measure of the order is comparable with the average minute volume the penalty may become twice as much.

But what is the advantage of the trend strategies? The main point is that the average profit under the transaction may be higher than the value of the commission and the operating expenses. Everything depends on the scale of the movements and the time frame in respect of this strategy. For the trend strategies it is impossible to reflect the good results on M1 graph as all the positive results will be spent on creeping and commission. For the daily systems these expenses will not play any role. As if it is not true it would be more profitable to strike only one bargain of opening a deposit in the bank than receiving a profit of 2 commissions under a transaction once a week, 60 times a year – 5 %. Thus, it is necessary to decide which time frame will be appropriate for this strategy. As for me I prefer H1 graph.

In respect of stop-loss this claim is also executed with the help of stop-order. While spending 60 of the trade session near the computer I have received the results of testing of the trend systems. These results display that any of the possible stop-orders (stop-loss, trailing-stop and others) have not led to the significant increase in profit. As in the real trade on the H1 graph I have seen this situation. After an opening of the position, the price goes in the opposite direction and in a day it returns and closes with profit. Thus, it may be better to wait till the drop is over and wait until the signal of the turn of the trend happens. In general it is typical only for the mechanical trade systems as when you open a position on coming out of the news or when you are guided by you previous trading experience it make sense to utilize the stop-order. So, it is up to you whether to play against spread while opening or closing a position.