Three Directional Hedging (Trident)

What the F*** is three directional hedging ??

Well This technique involve 3 forex pairs made up of combinations of 3 currency only.
For example EUR, USD and JPY make EURUSD, EURJPY, USDJPY.

The concept involve is taking 3 trades with opposing nature with the three pairs, so that each currency has a buy and sell order in the market.
As a result, two out of the three will always go into positive while one goes into negative. The combine result is what makes the profit.

For example: EURUSD - buy, EURJPY- sell, USDJPY- buy . or just flip the trade if required.
There is no TP or SL .
Trades are closed when certain percent of gain is made or certain percent of loss is made.
in one pair EUR is Buy while another pair EUR is sell. and same goes for rest two currency. This protect itself from any kind of news related movement and even in case of extreme movement, the overall balance is maintained.

When you open trade take all three and when you close trade, close all three. That's all to this logic.

Here is the EA attached which does all this.

Please note that back testing the EA is not possible in MT4 as it does not allow multiple pair test at the same time. You can put the EA in VPS and run it on live market .

I have tested for few days and the EA always keep the risk very very low and sooner or latter brings the overall amount to positive,.
Most of the time , i manually close the trade after some positive result, when i feel, Ea is not reaching the target profit.

I feel like there is no wrong direction to trade this EA, as it always stabilizes itself.

Still the EA needs a lot of testing. If anybody is able to back test the logic please let me know.

Just a small note on two ancient but interesting threads:


Zeusjoes Market-Neutral Hedge Strategy

and

Hedge trading spieler system derived from futures spread trading


.

Yes those links have hedging strategy, but its not helpful for me.
The strategy used in those links involve 2 pairs.
While this strategy trade with 3 pairs, and i want to know what is the long term effect of trading this strategy.


Strategy in the link shared, trade like buy- EURUSD and sell EURJPY . but if we look closely, its in fact sell USDJPY, with extra spread. and if the resulting pair goes into negative, nothing can stop it.

In #Post 9 @spieler says that is trading three pairs:
https://www.forexfactory.com/thread/...12#post2104212



I don't want to talk much about the old threads and useless ideas that are more than 10 years old ...
@spieler was someone who managed realy large funds, and if one can understand what he was doing, one can learn something and maybe trade better than him.

Thanks man. These are definitely old ideas.

I also finally able to do some back testing. The result was average.

I modified the EA for back testing. In the EA input parameter, there is a back testing mode, which should be true during doing back testing in mt4 and should be false during live trading.

Its a very crude method, i was only able to access the open, close , high and low price of candles of other pairs, so i calculated the pips movement based on those data.
The back test result will not take any trade, but rather calculate pips gain or loss as if virtual trades are taken on 3 pairs.
With the risk :reward ratio of 1:2 the back test was showing 50% profitable trade, i guess i have to look at better entry conditions.

This updated EA will allow you for back testing. Just put it on any pair, it does not matter. Just make sure to provide the desired parameters correctly. On the chart most of the important calculation results will be displayed.

Updated Ea at the top.

Hi @D.s, I wish you every success in developing new ideas in Triangle Trading!

As you can see, 13 years ago a lot of people were interested and active, and invested time to understand and use the system. Some of them who have been hard working are now members of our millionaires club ...

I hope that also today, active members will also show interest in your thread.

@spieler explained some of specific details for triangle trading, and from what I kept it was important to take into account the pair corellation, and the divergence in the main pair. I also posted some indicators back then.
One should always take the lot size into account, because it has to be different for different pairs.

These two details are certainly old ideas: who still takes into account pair correlation today, or makes adjustements of lots... ugh!


Just a little note for backtesting results:
When I did the first tests with triangles, I quickly realized that all the results are wrong compared to results in live trading!

The explanation is that the creation of the candles (OHLC) does not happen at the same time.
There are always differences, and if, for example, there is a high in EURUSD for the candle from 10:00, the high in EURJPY with which you do the evaluation, is definitely not from the candle at 10:00, but corresponds to the high a few milliseconds earlier or later!

Yes I understand now.

I was never considering about the pairs correlation or divergence , thats why my trading direction signals were randomized. I will look into that matter.

Next is lot size, Well I take equal percent in each pair and use a lot calculation function to generate lot for each pair so it will be different where needed.

And i have mentioned in the previous post, the back testing result is just a crude imitation. So they will not be completely exact. It just shows the overall output of the EA if traded for long period of time. And i was also back testing using last candle closing price, as it will never change, so all results are calculated after a candle closes, but i noticed, they are almost similar even when i check for current candle closing price.
Only way i can refine the back testing result further by taking the data from 1 minute time frame. anything lower is not possible.
And even if result vary for few millisecond, as they are hedge against one another, I dont think they can have a huge impact on the test result.
Still I will always keep in mind that back testing is not accurate, so i will focus on increasing the profit ratio, so that even if few more losses happens, the account still remains in green.

I forgot to add a crucial part to the back testing calculation, that's why my back test result was looking average. So i added spread with few more improvements and finally produced the worst result i could imagine....

All calculations are made after the candle closes.

Well after adding spread, realized 1:2 risk: reward is giving bad result, so i decreased MY RR to 1: 1.5, now having some result.

I have updated the EA at the beginning.