If I go long the two pairs simultaneously, trying to hedge, where can I find an indicator/ graph which plots the resultant profit /loss of the positions. Thanks
What is the average swing observed through experience in the resultant profit/loss of this hedge setup (under normal circumstances), before the profit/loss figure reverses direction.Thanks
biwy, How can the divergence be 2000 pips when the corelationship is -97 %. You have definitely miscalculated somewhere I feel!
Ignored
dont be happy of this answer, I will try to get you the excel file we did, not sure at all to find it... otherwise... i take some time to do another one ...
it wasnt maybe 2000 pip but it wasnt profitable at all...
I have been studying this hedge pair for sometime now. In fact, it is THE main strategy of a freedomrocks.com.
Hedging LONG EURUSD and LONG USDCHF, is based on the assumption that (1) these two pairs are strongly correlated AND that (2) EURCHF is bullish. Since EURCHF is currently indeed bullish since May 2006, then heding the two pair (EURUSD, USDCHF) will indeed net you profit.
But what if EURCHF started to go bearish? This hedge will no longer work.
Buttom line: If you want to hedge EURUSD + USDCHF regardless how much lot ratio you place per pair to balance the pip movements, in the end, it ends up trading EURCHF! You might as well just place your bet on LONG EURCHF.
Good timing though; EURCHF is near the 20 day support @ 1.5920
I'm not sure I understand this.
How is this a 'hedge' so much as just trading EUR/CHF and betting this pair will go up. It went from 1.5860 on 4/4/06 to 1.5450 on 5/18 and so this hegde would have lost 400 pips in 1.5 months. And as far as gains go, shouldn't you only gain as much as this pair moves up?
The pair's been bullish since May 06 (from the 5/18 low) but who's to say when it'll stop? If you could tell that it won't stop, might as well trade a cheaper pair that you can also predict.
Also to answer your question of Where can I find an indicator/ graph which plots the resultant profit /loss of the positions, just graph the EUR/CHF pair. I'm not sure all brokers have it, but my Interbankfx demo and my IB live account both have the pair (tradeable and graphable).
Such a hedge will fail utterly. Be ready for huge losses. Sorry, but only beginners try to "trade" this way. They think they are smart but in fact there is no profitable longterm "correlation" and when the faster USDCHF goes down bigtime the slower EURUSD won't be able to catch up and the negative gap becomes larger and larger and larger ....
Such a hedge will fail utterly. Be ready for huge losses. Sorry, but only beginners try to "trade" this way. They think they are smart but in fact there is no profitable longterm "correlation" and when the faster USDCHF goes down bigtime the slower EURUSD won't be able to catch up and the negative gap becomes larger and larger and larger ....
Ignored
I agree. Tell that to the hapless novices who joined freedomrocks.com thinking that its a goldmine. freedomrocks is a MLM and each member is very prolific sucking in more members.
I sure hate to see these novices loose their money when CHF rallies hard vs EUR (ie, EURCHF bearish).
And why not hedge a profitable pair like XXX/JPY? Sell the pair in Forex and buy it in futures. You'll earn much money because in futures there is not rollover.
jon167 makes me feel funny, like climbing up the rope in gym class...
Anyway, if you trade that way just trade EUR/CHF. I have found that generally, if you do the 5th grade fractional division, playing with things like NZD/USD, AUD/USD, and AUD/NZD makes it all come out in the wash. You're not hedging at all. You're fighting yourself...
"The time to act is when others show signs of tire." --W.D. Gann
Instead of bothering trying to hedge to different pairs =P I will hadge only one pair....
I discovered, looking at many different forex company that many of them had different swaps. My most recent discovery was on GBPusd.
2 opposite swaps. In one company you get swap when you sell, in the othe one, you get swap when you buy. With a 10k leverage lock, you would receive around 2 usd a day, not too bad.
Could you pl name such brokers so that we may benefit from these phenomenon.
Ignored
they are in Japanese ones:
121bank.com (broker is ifx markets inc.)
and gaitame.com ( i don t know the broker name)
and another company ( i dont have the name here, I will ask my collegues later this after noon.)
i think it will be difficult, or at least bothering for people not living in japan and not having at least 1 million dollars... or more to invest.
happy trading
ps: i dont do this coz it s too slow... if i had billions i would do it maybe... if I had billions i would do something else =) like a hedge fund or something
Jon167, So lets say buy USD/CHF in forex to profit from swap and buy features EUR/USD would be a solid hedge? Well, how easy is it to buy features? Do you have some info on this?
