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HEDGE looks good

  • #21
  • May 17, 2007 6:20pm May 17, 2007 6:20pm
Quoting tiku

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.
Tiku,

You are right, but you are fighting a losing battle trying to convince these people of that.

It can't be done

There is another thread going about this same "magical" hedge. They've even got an EA...LOL
  • #22
  • May 17, 2007 6:32pm May 17, 2007 6:32pm
Thx Billbss,
I just found out that there are several threads like this. You are right. It seems that they are don't able of understanding the simple math behind it. I posted twice and had taken a lot effort to make it understandable the first time, but I will forget it better. EA ... what you need ...
Keep on happy trading,
Regards
tiku.
always expect the unexpected!
  • #23
  • May 18, 2007 7:14am May 18, 2007 7:14am
Quoting tiku
Thx Billbss,
I just found out that there are several threads like this. You are right. It seems that they are don't able of understanding the simple math behind it. I posted twice and had taken a lot effort to make it understandable the first time, but I will forget it better. EA ... what you need ...
Keep on happy trading,
Regards
tiku.
We do understand the math, EVERYBODY DO. But you DON'T understand the SYSTEM, cause if you did you wouldn't suggest long EUR/CHF.
Hedge means keep low risk with a good reward, been long in just EUR/CHF you wouldn't be protected.
Well i won't waste my time with people who don't even try the system and don't understand it.

If you tried the system your opinion is very welcome.

Thanks for the post.

Bruno
No Brain, no Gain.
  • #24
  • May 18, 2007 7:24am May 18, 2007 7:24am
Quoting BGazzoni
We do understand the math, EVERYBODY DO. But you DON'T understand the SYSTEM, cause if you did you wouldn't suggest long EUR/CHF.
Hedge means keep low risk with a good reward, been long in just EUR/CHF you wouldn't be protected.
Well i won't waste my time with people who don't even try the system and don't understand it.

If you tried the system your opinion is very welcome.

Thanks for the post.

Bruno

Unbelievable
  • #25
  • May 18, 2007 7:25am May 18, 2007 7:25am
I've got an EA which does this but also has some added features so as closing trades at defined profit level, and also opening trades if EURCHF (in this case) rises out of lower Bollinger band.
TRADE FOR SWAP
  • #26
  • May 18, 2007 7:33am May 18, 2007 7:33am
BG,

I'm afraid you're being a little naive...while the math doesn't work out EXACTLY as a 1:1 ratio of the EUR/CHF, the truth of the matter is that the "hedge" is an amplified version, as your hedge will be prone to fluctuations in the EUR more than the CHF or USD. I'm afraid there isn't really a scenario (should the EUR/CHF decline) where the hedge would fair better, even in terms of draw-down.

Both of these threads that are going on fail to see this point. They are blinded by the possibility that this really is a hedge, when in reality, it isn't...there just hasn't been much fluctuation recently AND the EUR is somewhat of a long-term rally.

It will be hard to convince anyone of this, but if you look at chart of the EUR/CHF, you'll see my point...buying ANYTHING EUR recently probably netted you some profit.

But seriously, man...you need to take the rose-colored glasses off and see the reality...you're not running a hedge by any stretch of the imagination, and while you'll probably make a profit this year holding onto the EUR, you'll be hard pressed to understand what went wrong when the EUR begins to weaken and your returns aren't so hot.

I'm not saying this system won't work...what I am saying is that it's not working because of the reason you think it is...and that's dangerous..

Quoting BGazzoni
We do understand the math, EVERYBODY DO. But you DON'T understand the SYSTEM, cause if you did you wouldn't suggest long EUR/CHF.
Hedge means keep low risk with a good reward, been long in just EUR/CHF you wouldn't be protected.
Well i won't waste my time with people who don't even try the system and don't understand it.

If you tried the system your opinion is very welcome.

Thanks for the post.

Bruno
  • #27
  • May 18, 2007 7:45am May 18, 2007 7:45am
BGazzoni
Have you looked at FPI stuff
I have attached an EA here and I just change it for only
Euro and cheif

I am trying 1 lot each and take profit 40 or 50
still testing





Quoting BGazzoni
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
Attached File(s)
File Type: mq4 Predictive_Price_FPIv2.2.mq4   6 KB | 549 downloads
  • #28
  • May 18, 2007 2:01pm May 18, 2007 2:01pm
Quoting cgldsmth
I've got an EA which does this but also has some added features so as closing trades at defined profit level, and also opening trades if EURCHF (in this case) rises out of lower Bollinger band.
I was think about EA but in my opinion the system wouldn't perform so good, becuase it would close the positions where you set and sometimes its not the best time to close.

But your ideia seems very good. Nice work.

Could you send me the EA?

Thanks, have a nice weekend.
No Brain, no Gain.
  • #29
  • May 18, 2007 2:27pm May 18, 2007 2:27pm
Quoting mrmikal
BG,

I'm afraid you're being a little naive...while the math doesn't work out EXACTLY as a 1:1 ratio of the EUR/CHF, the truth of the matter is that the "hedge" is an amplified version, as your hedge will be prone to fluctuations in the EUR more than the CHF or USD. I'm afraid there isn't really a scenario (should the EUR/CHF decline) where the hedge would fair better, even in terms of draw-down.

Both of these threads that are going on fail to see this point. They are blinded by the possibility that this really is a hedge, when in reality, it isn't...there just hasn't been much fluctuation recently AND the EUR is somewhat of a long-term rally.

It will be hard to convince anyone of this, but if you look at chart of the EUR/CHF, you'll see my point...buying ANYTHING EUR recently probably netted you some profit.

But seriously, man...you need to take the rose-colored glasses off and see the reality...you're not running a hedge by any stretch of the imagination, and while you'll probably make a profit this year holding onto the EUR, you'll be hard pressed to understand what went wrong when the EUR begins to weaken and your returns aren't so hot.

I'm not saying this system won't work...what I am saying is that it's not working because of the reason you think it is...and that's dangerous..
Hi MrMikal.

I really not saying that i'm right, if i was, i wouldn't begin this thread. And i really appreciate advices and opinions, but when people say that we do not understand the maths is a little to much. (I know it's not you, just saying).

Well, i want to understand what exactly you are saying, because to me my hedge seems very simple. We buy E/U and U/Chf to try protecting our margin, and if i understand, you are saying that we could only open E/Chf cause it's the same. But if we only Buy E/Chf and it goes against us we are fu**ed.
But with this system you wouldn't cause USD/CHF will hold in profit when EUR/USD is going down.

And about EUR rally, there is no problem with that, since it will correct anytime. Of course it may take a looong time (or not), but that's why we keep a large free margin.

I really don't understand why it wouldn't workout in long term, if you could explain with more details i'll really apreciate.

Thanks for the post.

Have a nice weekend

Bruno
No Brain, no Gain.
  • #30
  • May 18, 2007 2:30pm May 18, 2007 2:30pm
Quoting toddanderson
BGazzoni
Have you looked at FPI stuff
I have attached an EA here and I just change it for only
Euro and cheif

I am trying 1 lot each and take profit 40 or 50
still testing
Thanks Todd I will take a good look at it.

Have a nice weekend

Bruno
No Brain, no Gain.
  • #31
  • May 18, 2007 4:27pm May 18, 2007 4:27pm
Bruno,

a couple of people have tried to explain this to you, but it is not sinking in...

This will unfortunately fail if the EUR turns against you.

I was going to write out some examples for you, but the best thing to do is to search in google for EURCHFRelationship

paste that exactly into google and read the article called making sense of the Euro/Swiss Franc relationship. It will give you an exhaustive explanation as to why this won't work long term.

Good luck
Follow my advice at your own peril....
  • #32
  • May 18, 2007 6:17pm May 18, 2007 6:17pm
This thread's hilarious.

I hope it doesn't die
  • #33
  • May 18, 2007 6:30pm May 18, 2007 6:30pm
Quoting str8deals
Bruno,

a couple of people have tried to explain this to you, but it is not sinking in...

This will unfortunately fail if the EUR turns against you.

I was going to write out some examples for you, but the best thing to do is to search in google for EURCHFRelationship

paste that exactly into google and read the article called making sense of the Euro/Swiss Franc relationship. It will give you an exhaustive explanation as to why this won't work long term.

Good luck
Thank you very much. I started this thread cause i want know if the system was that good. Cause it was to easy and i use to think that if it was that simple everybody would do it. But i had to know why it not works in long-term.

Thanks for the info, is that kind of people who make this forum alive.

Regards

Bruno
No Brain, no Gain.
  • #34
  • May 18, 2007 6:31pm May 18, 2007 6:31pm
Quoting billbss
This thread's hilarious.

I hope it doesn't die
Wow another great post.

Nice guy...
No Brain, no Gain.
  • #35
  • Edited 8:26pm May 18, 2007 7:04pm | Edited 8:26pm
Someone said Freedom Rocks is a failure....why ??? I personally don't use it but I see the concept behind it...let's forget GBP and JPY (too risky even though the carry can be higher, same thing AUD and NZD) and talk about EUR USD CHF which is what Bruno is interested in.

Obviously you would buy both....somebody mentioned selling but how would you get interest if you sold both ?

Buy EURUSD...long of EUR short of USD
Buy USDCHF...long of USD short of CHF

In substance you are long of EURCHF but "hedged" because the correlation between the two is around -0.95 (with -1 being a perfect correlation, tick for tick, one goes up the other goes down).

Goggle that: Currency Correlations and you will find some info

I do these kind of trades, you can buy 500 EURUSD and 520 USDCHF and make around $8.000 pa interest only. I personally don't hold the position that long. If the market moves in my favour I close, take the profit and wait for it to retrace. If it moves against me I will buy 50 and sell 50 and wait for retracement. What is wrong wih this ? IBFX pays good rates but, if I am not mistaken, GFT pays slightly better. I personally am with SaxoBank which does the job.

Why hedge against futures ??? Where is the carry interest ?....I see you buy EURCHF and sell EURO futures and get carry on EURCHF...mmmm do you really believe Euro futures will move against CHF...I think more against USD, hence the hedge against USDCHF sounds like a better option. Obviously the position would need to be monitored, as all positions do but, unless the USA or EU declare war on Switzerland, I don't see a major drawdown on the account.

PS: have some of you ever heard of carry trades ???
The quality of your life is brought about by the quality of your thinking.
  • #36
  • May 18, 2007 7:15pm May 18, 2007 7:15pm

http://www.powershares.com/images/DBVName_Banner.gif

The PowerShares DB G10 Currency Harvest Fund is based on the Deutsche Bank G10 Currency Future Harvest Index - Excess Return (Index) and managed by DB Commodity Services LLC. The Index is comprised of currency futures contracts on certain G10 currencies and is designed to exploit the trend that currencies associated with relatively high interest rates, on average, tend to rise in value relative to currencies associated with relatively low interest rates. The G10 currency universe from which the index selects currently includes U.S. Dollars, Euros, Japanese Yen, Canadian Dollars, Swiss Francs, British Pounds, Australian Dollars, New Zealand Dollars, Norwegian Krone and Swedish Krona.

http://www.powershares.com/images/In.../DBV_chart.png
The quality of your life is brought about by the quality of your thinking.
  • #37
  • May 18, 2007 8:35pm May 18, 2007 8:35pm
should you miss what they all try to said, let's read it again,:
you should understand why the currency is correlated, don't use it only because it has the highest number in your list.

about the "hedging" do it piece by piece, or scaling up, you yourself know that the price is fluctuating, so you should pick the entry point wisely and still "profiting" while waiting the moment.
  • #38
  • Edited 8:49pm May 18, 2007 8:45pm | Edited 8:49pm
I saw a presentation for Freedom Rocks and it does not just buy EUR/USD and USD/CHF only. It also requires to place a buy and sell orders and when the price hits one of the orders, the number of lots change and new buy and sell orders are set again. Its true that your equity will fluctuates from positive to negative, but it always revert to the mean. So, why not close the positions when equity is +10%, open a demo and place another hedge position until you see a -10% equity and open a real hedge position since the premise is it will revert to the mean?

Rick

P.S.
Swap for USD/CHF is larger than what I pay for EUR/USD, so I should still get some swap daily especially on Wednesday where its higher.
I'm a disciplined trader and that's the only way I trade.
  • #39
  • May 19, 2007 2:58am May 19, 2007 2:58am
Quoting drick008
I saw a presentation for Freedom Rocks and it does not just buy EUR/USD and USD/CHF only. It also requires to place a buy and sell orders and when the price hits one of the orders, the number of lots change and new buy and sell orders are set again. Its true that your equity will fluctuates from positive to negative, but it always revert to the mean. So, why not close the positions when equity is +10%, open a demo and place another hedge position until you see a -10% equity and open a real hedge position since the premise is it will revert to the mean?

Rick

P.S.
Swap for USD/CHF is larger than what I pay for EUR/USD, so I should still get some swap daily especially on Wednesday where its higher.

Rick, Rick, what a smart people you are, you solve the problem for me, using a demo, nice idea!

o, by the way, "the premise is it will revert to the mean" is what led "long-term capital management" to total chaos, but here for us, the assumption can be perfect!!!
  • #40
  • May 21, 2007 3:09am May 21, 2007 3:09am
Quoting BGazzoni
We do understand the math, EVERYBODY DO. But you DON'T understand the SYSTEM, cause if you did you wouldn't suggest long EUR/CHF.
Hedge means keep low risk with a good reward, been long in just EUR/CHF you wouldn't be protected.
Well i won't waste my time with people who don't even try the system and don't understand it.

If you tried the system your opinion is very welcome.

Thanks for the post.

Bruno
Dear Bruno,
please understand: You ARE long EUR/CHF. For recall, here my example again:
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

So your risk comes from your position of EUR against a larger position of CHF and a minor position of USD. As there is no negative correlation between the pairs of EUR/CHF and EUR/USD like the one you watched with EUR/USD and USD/CHF (besides, one of the first things I have checked out when I first came to forex years ago) you will win as long as EUR/CHF goes up and loose when it comes down. Watch your equity, when we will get a longer countertrend in EUR/CHF.
If you just wanted to reduce your risk in EUR/CHF when trading one lot, just trade the reduced position of 0,8 Lot EUR/CHF and you will get basically comparable results, with some aberrations due to the remainder of USD 34,980.
Greetings
Tiku
always expect the unexpected!
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