the 14-pairs config, at the very beginning of Trader101's thread, is to make 7 pairs hedge against the other 7 pairs.
fully hedged, like a perfect RING of 14 pairs.
this "fully hedged" concept (also found in many other threads like "phantom 6"), is meaningless to my understanding. i'd truly appreciate if anyone can show me why it is otherwise.
but i do seem to feel the 14 pairs together somehow moves more smooth than one single pair does. that's the only point that i can see why we trade 10+ pairs here. its move is more smooth/stable, or "predictable".
this 14-pair config is invented in 2008. but we know Swiss Central Bank since 2011 hook CHF with EUR. therefore apparently CHF is no longer in the game(if you have EUR). i can't see why ppl would have CHF pairs here which has no contribution to the basket performance at all. reversing CHF pairs has no difference than increasing trading size on EUR. and EUR gains overweight in the basket, which seems not a good thing to the basket.
i feel that to represent the overall market, we might need to consider THREE things:
1. USD
2. JPY
3. the other small currencies.
in my experiment, i use 10 pairs or 8 pairs. AU, AJ, EU, EJ, GU, GJ, NU, NJ, (+ UJ and EurAud, if 10 pairs.) That's how I decide the pairs. I know my selection doesn't contain CAD, but that's fine with me.
fully hedged, like a perfect RING of 14 pairs.
this "fully hedged" concept (also found in many other threads like "phantom 6"), is meaningless to my understanding. i'd truly appreciate if anyone can show me why it is otherwise.
but i do seem to feel the 14 pairs together somehow moves more smooth than one single pair does. that's the only point that i can see why we trade 10+ pairs here. its move is more smooth/stable, or "predictable".
this 14-pair config is invented in 2008. but we know Swiss Central Bank since 2011 hook CHF with EUR. therefore apparently CHF is no longer in the game(if you have EUR). i can't see why ppl would have CHF pairs here which has no contribution to the basket performance at all. reversing CHF pairs has no difference than increasing trading size on EUR. and EUR gains overweight in the basket, which seems not a good thing to the basket.
i feel that to represent the overall market, we might need to consider THREE things:
1. USD
2. JPY
3. the other small currencies.
in my experiment, i use 10 pairs or 8 pairs. AU, AJ, EU, EJ, GU, GJ, NU, NJ, (+ UJ and EurAud, if 10 pairs.) That's how I decide the pairs. I know my selection doesn't contain CAD, but that's fine with me.
Dislikedcharvo,
just calculated aprox,the u/chf gbp /ch and e/gbp, on a sell basket from rollover gmt.if the u/ch was traded reversed,ie long basket short,overall your basket would show a profit of 50 pips more than if you eliminated all 3 ,if you iliminated u/ch and gb/c keeping the e/g in, the profit would be 22 pips,not sure how that all works with cancelling pairs out ect.
as i said my mind goes into scrambled mode when i try to anaylise to muchIgnored