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Profit on Fluctuation System: Hedged

  • #21
  • May 16, 2007 1:41pm May 16, 2007 1:41pm
Please see below...

Quoting mrmikal
Mike,

I know this is new for you, and i'm not saying that it's a horrible system (yet :-)) but, I want you to see the point of view I'm taking.
Yes, this is new for me, and I'm not willing to say this is a great system (yet :-)).

Quoting mrmikal
Ok, here's some more math...the first day, the hedge goes up 1%, and the second day, the hedge goes down 1%...in the real world, this would be equivalent whether you bought and sold in between. The BIG difference is that when you open the next position, you pay the spread...
In my system, I may have taken profit once or even twice before the hedge goes down a percent or two.

Quoting mrmikal
I realize that you don't want your loss to evaporate, but face it, the math works out the same way...you have an account of $10K...so the first day, you make 1%. At the end of the first day, you have $10,100. The second day, you LOSE 1% so at the end of the second day, you have $9,999. Well, guess what...if your investment starts at 100% and it goes up to 101%, and the next day you lose 1% of 101%, you end up with 99.99% of your original balance. The math works out no matter what way you do this since you're ALWAYS betting in the same direction.
Again, there may have been 1, 2, 3, maybe 5 intrad day moves that I may have captured here.

Quoting mrmikal
I see where psychologically, you don't want to turn a winner into a loser, sort of thing, but if you're ALWAYS betting long and you're ALWAYS in the market, then at some point, the price will retrace. Maybe it won't ever go back to the original price, but since you're never out of the market during a retracement, it makes no difference (other than you paying the spread).
Which will retrace, the EUR/USD or the USD/CHF? I don't care about a retrace, I care about one of them retracing slightly more than the other.

Quoting mrmikal
My recommendation (if you're going to go with this "the price of the hedge will ALWAYS go up, and if it goes down, the swap will save us"-mentality) is to always keep 40% invested...so as your margin grows to a point where you can add positions, do so...otherwise, you're unnecessarily paying the spread. The only time you should sell your positions is when you need to actually withdraw money.
Unless I can grab 1, 2, maybe 3 take profits during this time. I do understand your point though, and it is well taken. Might give this a try.

Quoting mrmikal
This is the only problem I have with this, is that you're still betting that the hedge will always have to rise in value, continuously. It's different if you were to buy the hedge at 3pm EST every day, and held until the swap passed and then if you made 1%, then close it and wait for the next 3pm EST period. Then, you run the possibility of the price of the hedge coming down during that period. Obviously, if you catch it at a lower price than you previously sold for, that's where you start to take advantage of compounding.
As I'm watching the market, it rises and falls. It was just down $25.00, it's now down $31.00 (3% of my account value), and earlier this morning it went up by $25.00. It fluctuates quite a bit. Would be nice to grab 1% or so every time it peeks its little head above water.

Quoting mrmikal
So for example, let's say you monitor the price of the hedge. At 3pm, it's at price X. You collect the swap, and the price rises to Y which is > than X * 1.01 (1% gain). If at 3pm the next day the price goes to Z which is < Y, then you start to see some benefit because you're counting on the price of the hedge to rise continuously. Even if the price were to rise to W which is > than Y, you have no expectation of the price until the next 3pm period.
It seems to dance around quite a bit every couple of hours. I wish I could watch it more, but that is what the EA will do. Grab 1% every time it happens.

Quoting mrmikal
It's like the whole dollar cost averaging thing...Dollar cost averaging has it's best performance if the price dips and then comes back up (and you buy lower as the price goes down). If you buy as the price rises, you only benefit if the price continues to rise because the BEST position to be held will be the lowest price (which would be the first).
Makes good sense. Thanks again for your input.
  • #22
  • May 16, 2007 1:43pm May 16, 2007 1:43pm
I just posted a thread witch is exactly the same system.

I'm triyng about a 1 month and seems to be very profitable.

For more details http://www.forexfactory.com/showthre...39#post1442939.

Sorry i really really didn't see that you have this thread open.

I was check if my thread is open and then i saw yours

Let's share opinions and make the system even better.

Take care,

Bruno
No Brain, no Gain.
  • #23
  • May 16, 2007 1:46pm May 16, 2007 1:46pm
No problem at all Bruno, I think this will be good for all of us. I think the key thing needed is an EA so that it can automatically grab a profit 1% when its available.

Quoting BGazzoni
I just posted a thread witch is exactly the same system.

I'm triyng about a 1 month and seems to be very profitable.

For more details http://www.forexfactory.com/showthre...39#post1442939.

Sorry i really really didn't see that you have this thread open.

I was check if my thread is open and then i saw yours

Let's share opinions and make the system even better.

Take care,

Bruno
  • #24
  • May 16, 2007 1:55pm May 16, 2007 1:55pm
Mike,

In response to your post above, I'm not sure you understand what I'm saying. Sure you can "capture" 1% a few times a day, but once you "capture" that 1%, you put it right back in the market at the same price (AND you're paying the spread). This makes NO SENSE.

You THINK you're capturing profit, but you're not since you're buying at whatever price you just sold it at + the spread. This is what I'm trying to tell you.

Unless you're waiting for the price (and by price, I mean the total cost of the hedge) to come back down before you buy again. Even though you have 2 separate entities you're buying, mathematically, that's the same as giving you a price for the hedge and buying it at that price.

Like I said, unless you're closing the hedge, and then buying back at a lower price, this strategy would perform better if you were to just buy and hold and add positions as margin becomes available.

I have a feeling that you're being blinded by the little bit of success you're having right now. Trust me, if your hedge falls 25% or more, you'll have issues and wonder where you went wrong.

You keep saying "grab" 1%...but grabbing 1% 2 times in a row is the mathematical equivalent of 2.01%.

So, unless you're waiting for the price of the hedge to retrace before you buy it again, you're just betting on the continuous upward movement of the prices involved...which begs the question as to why you're ever letting go of a position?
  • #25
  • May 16, 2007 1:59pm May 16, 2007 1:59pm
Nice to see that you understand me

I really don't like the ideia to take 1% profit. I think we should let the system goes and when we have a nice swap profit AND a pip profit we should close all positions and wait it related again to open a new position.

This way you profit at both sides, and i assume you already testing this system for a while, so you might noted that this really happens sometimes.

My question is if EUR raise rates and US cut rates how much do we lose in swap profit?

See ya
No Brain, no Gain.
  • #26
  • May 16, 2007 2:02pm May 16, 2007 2:02pm
You can bet it would be more than 50 basis points. :-)

Quoting BGazzoni
Nice to see that you understand me

I really don't like the ideia to take 1% profit. I think we should let the system goes and when we have a nice swap profit AND a pip profit we should close all positions and wait it related again to open a new position.

This way you profit at both sides, and i assume you already testing this system for a while, so you might noted that this really happens sometimes.

My question is if EUR raise rates and US cut rates how much do we lose in swap profit?

See ya
  • #27
  • May 16, 2007 2:11pm May 16, 2007 2:11pm
Quoting mrmikal
You can bet it would be more than 50 basis points. :-)
hmmm.

That is what scaries(?) me...

EUR and CHF may raise Interest rate this would F***K our system.

I tried to look for more pairs to hedge but this 2 seems to be the nicest ones.

Did you tried another pairs?

See ya
No Brain, no Gain.
  • #28
  • May 16, 2007 2:12pm May 16, 2007 2:12pm
I think I definitely DO understand what you'rre saying, and if I were blinded by my temporary success I would be trading live . (which I'm not)

Thanks again for your comments.

Quoting mrmikal
Mike,

In response to your post above, I'm not sure you understand what I'm saying. Sure you can "capture" 1% a few times a day, but once you "capture" that 1%, you put it right back in the market at the same price (AND you're paying the spread). This makes NO SENSE.

You THINK you're capturing profit, but you're not since you're buying at whatever price you just sold it at + the spread. This is what I'm trying to tell you.

Unless you're waiting for the price (and by price, I mean the total cost of the hedge) to come back down before you buy again. Even though you have 2 separate entities you're buying, mathematically, that's the same as giving you a price for the hedge and buying it at that price.

Like I said, unless you're closing the hedge, and then buying back at a lower price, this strategy would perform better if you were to just buy and hold and add positions as margin becomes available.

I have a feeling that you're being blinded by the little bit of success you're having right now. Trust me, if your hedge falls 25% or more, you'll have issues and wonder where you went wrong.

You keep saying "grab" 1%...but grabbing 1% 2 times in a row is the mathematical equivalent of 2.01%.

So, unless you're waiting for the price of the hedge to retrace before you buy it again, you're just betting on the continuous upward movement of the prices involved...which begs the question as to why you're ever letting go of a position?
  • #29
  • May 16, 2007 2:15pm May 16, 2007 2:15pm
Quoting mikejody
Were you taking profit of 1%? And then it just stopped profiting again? I think had you continued on you would be profiting again, as I have been the previous 5 days.

Thanks for sharing your experience.
Profit was 1-2%,sometimes only once a 24 hours.But then I started shorting on EUR/USD,and now I understand why I might not succeed.I am going start it again,only going long.that was my mistake.
{Promotion Removed}
  • #30
  • May 16, 2007 2:23pm May 16, 2007 2:23pm
Quoting Pinkpanter
Profit was 1-2%,sometimes only once a 24 hours.But then I started shorting on EUR/USD,and now I understand why I might not succeed.I am going start it again,only going long.that was my mistake.

That makes sense, let us know how you do.
  • #31
  • May 16, 2007 2:24pm May 16, 2007 2:24pm
Quoting Pinkpanter
Profit was 1-2%,sometimes only once a 24 hours.But then I started shorting on EUR/USD,and now I understand why I might not succeed.I am going start it again,only going long.that was my mistake.
Going long in both sides you earn swap, going short you PAY swap
No Brain, no Gain.
  • #32
  • May 17, 2007 7:59am May 17, 2007 7:59am
Quoting mikejody
No problem at all Bruno, I think this will be good for all of us. I think the key thing needed is an EA so that it can automatically grab a profit 1% when its available.
MikeJody,

Here is an EA that will help with your strategy. You will have to set UseDCA=false, Symbol1ScaleIn=false, and Symbol2ScaleIn=false to make this work with your strategy.

I am not the author of this EA.

TimeFreedom
Attached File(s)
File Type: mq4 HedgeDCA_V2.4.mq4   10 KB | 605 downloads
  • #33
  • May 17, 2007 11:14am May 17, 2007 11:14am
Quoting TimeFreedom
MikeJody,

Here is an EA that will help with your strategy. You will have to set UseDCA=false, Symbol1ScaleIn=false, and Symbol2ScaleIn=false to make this work with your strategy.

I am not the author of this EA.

TimeFreedom
Thank you for this. Would you happen to know how to tell the EA to open orders at 40% of account balance or available margin, and how to take profit (close orders) at 1% increase?

By the way, I made another 1% on this today, which brings the weekly total to 6% now.
  • #34
  • May 17, 2007 11:57am May 17, 2007 11:57am
Hi:

I too made money today.
If this strategy will bring profits every day or not is remains to be seen, but I think it will work since you are not going for a big gain.

I thought there are a few programmers who wants to write this EA. I think experienced coder shouldn't have a big problem to write this EA as what you are requesting.

Quoting mikejody
Thank you for this. Would you happen to know how to tell the EA to open orders at 40% of account balance or available margin, and how to take profit (close orders) at 1% increase?

By the way, I made another 1% on this today, which brings the weekly total to 6% now.
  • #35
  • May 17, 2007 12:32pm May 17, 2007 12:32pm
A) What exactly does this "correlation" refer to? Does it mean that if E/U rises 100 pips, that U/C will fall 100 pips...98% of the time?

OR

B) Does it mean that if E/U rises some amount, then U/C will fall some amount, but not exactly by the same amount?

A) I dont think it can be the former because if that were true, then E/C would be stagnant at the same value all of the time.
1)Lets say initially E/C is 1.0000
-The E/U is at 1.5000
-The U/C is at 0.5000
2) E/U and U/C are 100% correlated
-E/U goes up to 1.5100
-U/C goes down to .4900
-Average of E/U and U/C is still 1.0000 = E/C

Now lets say that this is true only 98% of the time...
1) You could profit if the E/U went up more than U/C went down
2) You could lose if the U/C went down more than the E/U went up
3) Either one of these cases would result in E/C moving by the same amount
a) It would mean that, yes, E/C would fluctuate, but only barely and this is NOT the case - E/C fluctuates and trends like any other currency pair


B) If it is the latter, then yes, the profit that you make is due to the fact that E/C is rising in value. All that E/C rising in value means is that the E/U rises more than U/C falls (dollar got weaker). If the E/C fell, that would mean that the E/U fell in value as compared to U/C (dollar got stronger) and you would lose just as much money as if you traded the E/C...

Please correct me if I am wrong in my reasoning...
  • #36
  • May 17, 2007 5:46pm May 17, 2007 5:46pm
Quoting fx4_ever
Hi:

I too made money today.
If this strategy will bring profits every day or not is remains to be seen, but I think it will work since you are not going for a big gain.

I thought there are a few programmers who wants to write this EA. I think experienced coder shouldn't have a big problem to write this EA as what you are requesting.
Yes, I've actually made 2% today now, instead of 1.

Anyway, we do have an EA for this now, unfortunately I cannot get it to open trades. Can someone check this?

Thank you.

Mike
Attached File(s)
File Type: mq4 EU_UCH_Longs EA v2.mq4   4 KB | 497 downloads
File Type: ex4 EU_UCH_Longs EA v2.ex4   4 KB | 397 downloads
  • #37
  • May 17, 2007 9:45pm May 17, 2007 9:45pm
Hi:
Just put it on demo and it opens right away without any problem.
However, it opened over 90% of total margin available, which is too close for comfort...
I am going to take a look and see if I can adjust this.

What is your problem? Did you enable Live Trading for EA settings?

Quoting mikejody
Yes, I've actually made 2% today now, instead of 1.

Anyway, we do have an EA for this now, unfortunately I cannot get it to open trades. Can someone check this?

Thank you.

Mike
  • #38
  • May 17, 2007 9:47pm May 17, 2007 9:47pm
Quoting fx4_ever
Hi:
Just put it on demo and it opens right away without any problem.
However, it opened over 90% of total margin available, which is too close to comfort for me.
I am going to take a look and see if I can adjust this.

What is your problem? Did you enable Live Trading for EA settings?
Yes, I got it to work just fine; the reason I have the available margin so high is because of the close correlation of the pairs. You can adjust it to whatever you are comfortable with.
  • #39
  • May 17, 2007 10:19pm May 17, 2007 10:19pm
There's a problem with this EA.
Since EA is opening based on tick movement, when there is no movement on 1 pair, If it doesn't open both pairs at the same time. It only knows to open whatever pairs moving at the time with 90% (what ever your setting maybe) of total margin on that 1 pair only.
I think this EA needs some fine tuning.

Quoting mikejody
Yes, I got it to work just fine; the reason I have the available margin so high is because of the close correlation of the pairs. You can adjust it to whatever you are comfortable with.
  • #40
  • May 17, 2007 10:22pm May 17, 2007 10:22pm
Quoting fx4_ever
There's a problem with this EA.
Since EA is opening based on tick movement, when there is no movement on 1 pair, If it doesn't open each pairs at the same time, it only knows to open with 90% (what ever your setting maybe) of total margin on 1 pair only.
I think this EA needs some fine tuning.
How is this one? I believe it is for minis, but it opened 2 orders at exactly the same time for me.
Attached File(s)
File Type: mq4 EU_UCH_Longs EA v3.mq4   4 KB | 532 downloads
File Type: ex4 EU_UCH_Longs EA v3.ex4   4 KB | 426 downloads
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