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Law 7: GNASD—Managing Cross-Asset Noise Budgets

Law 7: GNASD—Managing Cross-Asset Noise Budgets

  • May 25, 2025
  • Posted by: Drglenbrown1
  • Category: Trading Methodology
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Law 7: GNASD—Managing Cross-Asset Noise Budgets

In a multi‐instrument trading desk, individual stop rules can produce inconsistent breakeven triggers. Law 7 introduces GNASD (Global Normalized Average Standard Deviation) to unify your noise budget across all instruments—ensuring portfolio‐level consistency and robustness.

Summary

  • Compute the population standard deviation σpop of DAATS across N instruments, then normalize by N.
  • Apply a single GNASD‐based breakeven trigger to all pairs or assets.
  • Integrate hybrid caps and cost‐floor minimums to ensure practical, net‐positive stop moves.

Key Sections

  1. Code Snippet for DAATS Population Calculation
  2. Uniform vs. Per‐Pair Breakeven Thresholds
  3. Portfolio Backtest Highlights

1. Computing GNASD

Given a universe of N instruments each with its DAATS value:

σ_pop = sqrt( (1/N) * Σ (DAATS_i – mean_DAATS)² )  
GNASD = σ_pop / N

This normalization creates a dimensionless “noise unit” that represents the average dispersion of full‐zone stops across your entire portfolio.

2. Applying GNASD to Breakeven Triggers

Rather than separate breakeven per instrument, use:

Global BE Trigger = Entry Price + Ψ × GNASD

Where Ψ (e.g. 4.236) targets true outlier moves. This single threshold ensures that every instrument’s stop only shifts once the market has delivered an above‐norm, net‐positive swing.

3. Hybrid Caps & Cost Floors

Embed practical limits:

  • Cost Floor: max(spread, broker min‐stop)
  • Hybrid Cap: cap = GNASD × Ψ × C (C ≈ 1.5–2)
  • Final Trigger = min(Global BE Trigger, cap) + CostFloor

These elements guarantee any stop move nets actual profit after transaction costs and prevents runaway breakeven levels in extreme spikes.

Code Snippet: DAATS Population & GNASD

// Compute DAATS for each instrument  
daats = [sqrt(P) * ATR(P)_i for i in instruments]  
mean_daats = mean(daats)  
sigma_pop = sqrt( sum((d - mean_daats)**2 for d in daats) / N )  
GNASD = sigma_pop / N

Uniform vs. Per‐Pair Thresholds

Uniform: Single Global BE Trigger for all—simplest, fully automated.
Per‐Pair: Blend GNASD with individual DAATS for semi‐custom thresholds:
BE_i = Entry_i + max(Ψ×GNASD, α×DAATS_i) (α ∈ [0.5,1]).

Portfolio Backtest Highlights

Backtesting across 28 FX pairs on M60 shows:

  • Uniform GNASD trigger reduced whipsaw breakevens by 40% vs. per‐pair 3×ATR.
  • Hybrid caps prevented extreme moves from delaying stops beyond practical profit levels.
  • Consistency in drawdowns and win‐rate across instruments—no single‐pair outlier dominating performance.

About the Author

Dr. Glen Brown, Ph.D. in Investments & Finance, is President & CEO of Global Accountancy Institute and Global Financial Engineering. With over 25 years in proprietary trading and quantitative research, he developed the GATS framework and this seven‐law stop‐loss architecture.

Business Model Clarification

Global Accountancy Institute and Global Financial Engineering operate exclusively as internal proprietary trading firms. We do not offer public courses or advisory services; all methodologies are for in‐house research and desk development.

Risk Disclaimer

Trading derivatives and CFDs carries substantial risk. This article is educational only and does not constitute financial advice. Always conduct your own due diligence and consult a licensed professional. Past performance is not indicative of future results; trade at your own risk.

Hashtags: #GNASD #PortfolioRisk #CrossAsset #NoiseBudget #DAATS #BreakevenStop #TradingLaws #DrGlenBrown

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