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HEDGE looks good

  • #1
  • First Post: Edited 2:05pm May 16, 2007 1:18pm | Edited 2:05pm
Hello everybody.

I'm kind a new in Hedge strategies and i create a system that seems nice.

I really apreciate if you guys give me any opinions and sugestions cause the system seems to good to be true (to me )

So let's get it on:

Broker: InterbankFX

Initial account: $10,000

Buy EUR/USD with 3.38 std lots

Buy USD/CHF with 4.10 std lots

Note: Try to Buy at the same time, starting with U/C then E/U.

This lots should give you $2,520 of free margin

1 pip EUR/USD = $33.80
1 pip USD/CHF = $33.50

(I didn't found the right lot size to keep $/pip the same )

Let's assume pip value $33.65, this gives you 74 pips to "lose".

It's needed because it's not correlated all the time, kind a 92% of the time

Swap rates IBFX:

EUR/USD: -$20.45

USD/CHF: $36.49

TOTAL : $16.04 / day

It gives you $5854.60 a year!

To me it sounds very good, it's close to 5% a month w/out doing anything

I really advice close position at a good profit and them you open again (To earn margin)

Regards,

Bruno
No Brain, no Gain.
  • #2
  • May 16, 2007 2:26pm May 16, 2007 2:26pm
Reply, cmon guys
No Brain, no Gain.
  • #3
  • May 16, 2007 3:10pm May 16, 2007 3:10pm
Dear Trader
if u mean u will profit from the swap its completely wrong because the size of movement of usdchf and eurusd not same so may be u can not get the profit ever for long time or may be ever it depend on the direction of postions and u are likey or not.

let us explain it by numbers

from 1.4.2007 to 30.4.2007
USDCHF opened at 1.2136 and closed at 1.2074 it means moved down 62 pips
At the same interval time the EURUSD opened at 1.3371 and close at 1.3641 it means moved up 270pips
so if u open put of them buy then u are lucky and get the profit from the difference between the movements but if u opened them sell u will get big lose due to the diffrenece in pips between two currencies that is very big compared the profit u will get it from swap
so the only way if u want to get profit from the swap that is u will open the two opsitions sell and buy at the same time at same currency and that is u can get it when opened two accounts in two brokers one of then count the swap and other free swap and in this case u need to take care from call margin of one of the accounts

i wish good day trading
Abudu
  • #4
  • May 16, 2007 3:34pm May 16, 2007 3:34pm
Quoting benkhaled684
Dear Trader
if u mean u will profit from the swap its completely wrong because the size of movement of usdchf and eurusd not same so may be u can not get the profit ever for long time or may be ever it depend on the direction of postions and u are likey or not.

let us explain it by numbers

from 1.4.2007 to 30.4.2007
USDCHF opened at 1.2136 and closed at 1.2074 it means moved down 62 pips
At the same interval time the EURUSD opened at 1.3371 and close at 1.3641 it means moved up 270pips
so if u open put of them buy then u are lucky and get the profit from the difference between the movements but if u opened them sell u will get big lose due to the diffrenece in pips between two currencies that is very big compared the profit u will get it from swap
so the only way if u want to get profit from the swap that is u will open the two opsitions sell and buy at the same time at same currency and that is u can get it when opened two accounts in two brokers one of then count the swap and other free swap and in this case u need to take care from call margin of one of the accounts

i wish good day trading
Abudu
Yes Abudu sometimes it will get difference between each other, and its expected since they aren't 100% correlated, and thats why i keep a free margin.

This discrepancy of 200 pips is extremely rare and then it turns equal.

At the begin i planned to let 300 pips of free margin, but i've seen (real account) that's no need to let such a free margin.

But as i posted 74 pips maybe is not safe.

What i trying to say is that in a long-term you will profit cause swap will be higher than pips :surprised . Of course that we need a large free margin, but that is the easy part.

Please try to do this for just 1 month and let me know what you think.

Thanks for the post.

See ya
No Brain, no Gain.
  • #5
  • Edited 4:54pm May 16, 2007 4:38pm | Edited 4:54pm
I trying another SWAP method ant FXDD. And make this one at FXDD and IBFX. First of all, this SWAP Itīs better at IBFX, donīt work at FXDD.

I really think this idea can rocks!!! But you have to open the trades a litlle time before the Swap and close ASAP. The USD/CHF closes at 0x0 and EUR/USD closes at 2x0

Now. I have closed the EUR/USD, and waiting to close USD/CHF.

The system can support 190 pips of drawdown.
  • #6
  • May 16, 2007 5:55pm May 16, 2007 5:55pm
Have you backtested your idea? Are you sure the swap is bigger than the pip difference between the pairs?

You have to realize that what you are doing is equivalent to trading long the EUR/CHF pair.
Pablo
  • #7
  • May 16, 2007 5:58pm May 16, 2007 5:58pm
Quoting ptejerina
Have you backtested your idea. Are you sure the swap is bigger than the pip difference between the pairs?

You have to realize that what you are doing is equivalent to trading long the EUR/CHF pair.
Pt-
They've been told three or four times that this is the equivalent of a long EUR/CHF (unhedged). I don't think they understand it. There is another thread going just like this one.
  • #8
  • May 16, 2007 6:34pm May 16, 2007 6:34pm
Quoting ptejerina
Have you backtested your idea? Are you sure the swap is bigger than the pip difference between the pairs?

You have to realize that what you are doing is equivalent to trading long the EUR/CHF pair.
Yes, the only advantage to this is if the swap is better trading both the pairs instead of just EUR/CHF. However, analysis still must be done on the EUR/CHF pair itself.

What is interesting is that many find this "hedge" to be working very well. Yeah, looked at the EUR/CHF pair lately ... up up up. : )
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #9
  • May 16, 2007 6:41pm May 16, 2007 6:41pm
The hedging theory suppose NO CORRELATED instruments for reducing risk and capture the trends.
  • #10
  • May 17, 2007 6:38am May 17, 2007 6:38am
Quoting ptejerina
Have you backtested your idea? Are you sure the swap is bigger than the pip difference between the pairs?

You have to realize that what you are doing is equivalent to trading long the EUR/CHF pair.
Hellp Pablo.

Yes i backtested, but i just made the backtest on range periods so i could see the higher discrepancy between them.

Swap will be bigger than pip if you hold for a long time.

And i was think y/day that we might open positions for time to time, this way you don't have such a big drawdown cause you're going to do avg price

I do understand that this strategy is kind a trade long EUR/CHF but the ideia is keep E/U and U/C long enough to profit swap AND profit in pips cause sometimes it will be in profit, and when this happen i suggest to close the position and re-open again.

Try this strategy just for a month. You'll be surprised

Thanks for the post.

Bruno
No Brain, no Gain.
  • #11
  • May 17, 2007 6:56am May 17, 2007 6:56am
Quoting cesarpoli
I trying another SWAP method ant FXDD. And make this one at FXDD and IBFX. First of all, this SWAP Itīs better at IBFX, donīt work at FXDD.

I really think this idea can rocks!!! But you have to open the trades a litlle time before the Swap and close ASAP. The USD/CHF closes at 0x0 and EUR/USD closes at 2x0

Now. I have closed the EUR/USD, and waiting to close USD/CHF.

The system can support 190 pips of drawdown.
Hi Cesar, i think the next step is find a broker who pays better swap instead Ibfx, but for now it seems very good.

Obs: Eu sou do Brasil tambem, vou adicionar voce no msn ok?

Até mais

See ya
No Brain, no Gain.
  • #12
  • May 17, 2007 7:24am May 17, 2007 7:24am
Sounds alot like freedomrocks.
The basis of a democratic state is liberty. ~ Aristotle
  • #13
  • May 17, 2007 7:48am May 17, 2007 7:48am
It virtually is freedom rocks, and we all know thats a failure..
  • #14
  • May 17, 2007 7:56am May 17, 2007 7:56am
Quoting Takisd
It virtually is freedom rocks, and we all know thats a failure..
I didn't try the FreedomRocks but this hedge really seems to work.

Give it a shot and then you can say if its failure.

Thanks for the post

See ya
No Brain, no Gain.
  • #15
  • May 17, 2007 8:11am May 17, 2007 8:11am
Let's just do it for a year.
5/06 E/U to yesterday cl = +956 pips
5/06 U/C to yesterday cl = -196 pips
net + 760 pips x 33.65 = +$25575.00

WOW... GREAT!!!
THIS YEAR...

My point is, if there can be this great a difference for you, then there can be just as great a difference against you.
System needs some work.
  • #16
  • May 17, 2007 8:33am May 17, 2007 8:33am
Quoting mmont
Let's just do it for a year.
5/06 E/U to yesterday cl = +956 pips
5/06 U/C to yesterday cl = -196 pips
net + 760 pips x 33.65 = +$25575.00

WOW... GREAT!!!
THIS YEAR...

My point is, if there can be this great a difference for you, then there can be just as great a difference against you.
System needs some work.
Yes, thats why i'm saying that you should close the position when you have profit in both sides. And when it goes against you, you should add more positions to avg price. This way you won't have such drawdown in pips.

Thanks
Bruno
No Brain, no Gain.
  • #17
  • May 17, 2007 9:14am May 17, 2007 9:14am
you should add more positions to avg price. This way you won't have such draw down in pips.

Averaging only helps if the pair moves your way.
If it continues to go against you the losses only mount exponentially.

I think a carry trade is safest if you hedge it in the futures market on a straight one to one basis.
You get the full swap points and it's cheaper to trade futures.

There are still risks and you have to fund two accounts if your in the USA, but IMHO it's considerably safer.
  • #18
  • May 17, 2007 11:34am May 17, 2007 11:34am
Quoting mmont
you should add more positions to avg price. This way you won't have such draw down in pips.

Averaging only helps if the pair moves your way.
If it continues to go against you the losses only mount exponentially.

I think a carry trade is safest if you hedge it in the futures market on a straight one to one basis.
You get the full swap points and it's cheaper to trade futures.

There are still risks and you have to fund two accounts if your in the USA, but IMHO it's considerably safer.
I always listen to people saying that hedge works better on futures market, but i don't know this market. I never traded and don't know the rules, but this may be is the way.

When i say to add more positions you should do when the market is going against you, let's say that EUR/USD make a big range then you should open more positions so the retreacement will cover the difference.

I'm still concerned about margin call, and I am trying find a way to make the system safer.

But i really know that the system is profitable if you have a big free margin.

If someone could help with this i'll be greatfull.

Thanks
No Brain, no Gain.
  • #19
  • May 17, 2007 4:12pm May 17, 2007 4:12pm
Quoting mmont
you should add more positions to avg price. This way you won't have such draw down in pips.

Averaging only helps if the pair moves your way.
If it continues to go against you the losses only mount exponentially.

I think a carry trade is safest if you hedge it in the futures market on a straight one to one basis.
You get the full swap points and it's cheaper to trade futures.

There are still risks and you have to fund two accounts if your in the USA, but IMHO it's considerably safer.
Just curious, is there a thread going on about hedging using forex and futures?

Wondering what FOREX pair(s) and direction with which FUTURES market(s) and direction.

David
  • #20
  • May 17, 2007 5:59pm May 17, 2007 5:59pm
HEDGE looks good
Hello everybody.

I'm kind a new in Hedge strategies and i create a system that seems nice.

I really apreciate if you guys give me any opinions and sugestions cause the system seems to good to be true (to me )

So let's get it on:

Broker: InterbankFX

Initial account: $10,000

Buy EUR/USD with 3.38 std lots

Buy USD/CHF with 4.10 std lots

Note: Try to Buy at the same time, starting with U/C then E/U.

This lots should give you $2,520 of free margin

1 pip EUR/USD = $33.80
1 pip USD/CHF = $33.50

(I didn't found the right lot size to keep $/pip the same )

Let's assume pip value $33.65, this gives you 74 pips to "lose".

It's needed because it's not correlated all the time, kind a 92% of the time

Swap rates IBFX:

EUR/USD: -$20.45

USD/CHF: $36.49

TOTAL : $16.04 / day

It gives you $5854.60 a year!

To me it sounds very good, it's close to 5% a month w/out doing anything

I really advice close position at a good profit and them you open again (To earn margin)

Regards,


Dear Bruno,

as you presumed in the intro, your system is "too good to be true". What a pity.

Buy 1 EUR/USD: Long EUR 100K Short USD 134.980
Buy 1 USD/CHF: Long USD 100K Short CHF 122.750

Net position: Long EUR 100K Short USD 34.980 and Short CHF 122.750

nice try, but your just doing the same as buying EUR/CHF. It is not a hedge. It works as long as the Swissy devaluates against the EUR.

Proof:

Buy 1 EUR/CHF: Long EUR 100K Short CHF165.620

CHF 165.620 equals USD 34.980 plus CHF 122.750 in the moment of trade. Why? USD 34.980 was at the given price (1.2275 USD/CHF) in the moment of trade representing CHF 42.870. These CHF 42.870 - oh wonder - added to CHF 122.750 sum up to CHF 165.620.

Regards
t.
always expect the unexpected!
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