Cross Hedge EURUSD USDCHF

Sorry about the charts. Typically we get 2 entries a day if you're aggressive and like to stare at charts for 10 hours.
This image of GBPCHF is a trade I entered after London Open just after UK trade balance. I consulted the 1hr CCFp then the 15min then the 5min. All agreed that GBP was overvalued against the CHF so I was looking for a short entry. The CC agreed on smaller time frames so I knew there would not be much retracement before the major selloff. Normally I will enter a limit order at 5-10 pips better than market to avoid drawdown but this trade was set to selloff quickly. The trade was worth 78 pips max but I only took 10 during US session. I exited the trade because the 15min had rolled over and looked like we could go long on a strong retracement.

Thanks a lot, great explanation and nicer chart.

Sorry I have not been contributing to this thread as much as I'd hoped. I've been scalping EURJPY and focusing on methods to scalp EURJPY. This is a correlation image using an index indicator for EUR(blue) and JPY(pink). When we see EUR appreciate and JPY depreciate the EURJPY exaggerates a long move. It is at this time I'm looking to buy the bid and take profit at 2-5 pips.
Also notice I'm scalping around the round numbers when there is no direction.

Hi to everyone.

Just want to share another simple correlation method:

When to trade: Wednesday, few mins. before SWAP-calculation
What to trade: LONG GBPJPY

I wait until 30 min. after swap-calculation.
If no profit or breakeven es reached, trade a proper lot-size in the opposite direction EURJPY until breakeven or small profit.

That´s it ;-)

cheers

hi there, i am a new kid on the block and these two i have been working on.Could anyone please give me a sound strategy for beginners to use on them.Thanks

Dear Thread,

At the end of the day, even with the best analystics, which seem to have been found on this thread by The Fxorce---thank you very much---you're still trying to predict the direction of the spread of EURUSD vs. USDCHF. The important question then becomes, is trading a spread more predictable than trading the outright? Granted, the spread appears less volatile, but is there more intrinisic edge in spread trading---really, really? A second idea: you could add two more pairs to EURUSD and USDCHF: CHFJPY and EURJPY and trade them all in tandem, normalized for vaolatility. For instance, go long EURUSD and USDCHF and then long CHFJPY and short EURJPY. The particular currencies cancel each other out and the CHFJPY and EURJPY correlations are, according to the Mataf table, 96.5 correlated vs. -85 for the EURUSD and SDCHF correlation.
Appreciate all thoughts.

Lenoxer

Thanks Lenoxer.
I'm thinking about opening up a new thread devoted to the CCFp and technical analysis. I just don't see anyone else using the CCFp and I feel it's extremely valuable.
You're 90% accurate in saying long USDCHF + long EURUSD is like buying EURCHF. I don't trade this way but rather this thread served as a proving grounds for the cross hedge concept.

In the attached image I expect USDCHF to appreciate until July 3rd. The image was taken during US session July 1st. To execute the trade I would prefer to buy a trendline break on the 15 minute chart.

Dear FXorce,

Please keep me informed of the new thread. As well, where does one access CCFp analysis and what does it stand for and can you stick it into eSignal?

Thanks so much,

Lenoxer

I put on a short NZDUSD due to this setup which coincided with resistance at .7614. Time of day suggests NZDUSD should be done running and the index indicator suggests we have seen the top here.

Lenoxer,
CCFp is a Complex Common indicator used to establish trends. You can read more about it here: http://articles.mql4.com/422
Complex Common (CC) is used to establish cycles or triggers to enter or exit trades in the direction of the CCFp. Use CCFp to establish trend direction and then enter based on CC.
In the above image you see NZD is most overbought and USD and CHF are most oversold. Of the majors there is only one tradable FX pair; NZDUSD. Since we expect NZD to revert to the mean at the end of the day we would sell NZD. Since USD is oversold we would buy USD.

It's important to note that 90%+ of all daily candles retrace to 50% of the previous day and 90%+ of all FX positions are 1 day duration; so end of day mean reversion is one of the most accurate and low risk methods of trading FX. Also worth noting is that all currencies are related to each other, so when we make an FX trade we are; to some degree, intrinsically hedged.

Our goal when taking one of these EOD mean reversion trades is to identify a pair that has moved near it's average daily range. Then find a support/resistance level for entry. The CCFp assists us in finding the best candidate by showing us the underlying currency indices and their individual overbought or oversold valuation against all majors. EOD can occur during NY 8am, Noon, or 3pm.

Dear FXorce,

Sounds fine, FXorce. Thanks for the descriptive email. Good thinking as usual from you. So, may I ask you how are the profits, the DDs, the MAEs (maximum adverse excrusion), the MFEs (maximum favorable excursion), your nerves, your ruminations, in short how much money can you really make with what edge and with what risk control? Does it sound like I want everything?

My best to you and yours,

L.

Sounds like someone owns a hedge fund
I don't have any numbers for you unfortunately. I've used the CCFp for a long time to formulate low risk trades and this EOD style seems to be natural for the CCFp so I'll post the trades going forward as a means of forward testing for you, but I'm live and doing the same thing I do every night, Pinky. Trying to take over the world.

Dear FXorce,

Is EOD mean end-of-day? So, then, essentially, you put on hedged trades, say long GBPUSD and long USDCHF---stuff with high correlations---according to the indicator and then just hold until you swing in to profit? If so, how do you manage the trade---stops, profits, etc.?

Thanks,

L.

End of Day trades today are weak at best. Wall Street put in a massive reversal and spent daily range which decreases our potential reward for EOD trades.
In the images here you see Blue and Red are coming together so we short EURGBP. Also EURUSD short looks good. I'm going to wait a few more minutes and try to get them at highs. I'll go half position size today based on the weak movements. There isn't much demand for mean reversion today.

Edit: BOE rate talk today precludes GBP trading so take EURGBP off the board. I'm looking more to AUDUSD short and USDCAD now. Still waiting for near or new highs on AUDUSD to short.

AUDUSD short from highs or .9646 would be great. It looks like AUDUSD will resume its uptrend for another day or two so I will take profits at 38% and 50% retracement of today's move.

Excellent thread keep it going and good luck. Links in with other strategies on the board. Also similar idea to bird watching book where he is looking for currencies to revert to mean value. I shall look at how it relates to weekly and monthly pivots.

Gordon12

Is this thread... dead?

I'm still using the index concepts to trade but I haven't been updating threads on FF.
Looks like EURGBP will continue down today into tomorrow and AUDUSD should start it's recovery soon.

I'm looking for GU to touch 1.9500 and EURGBP to touch .7890. Once EURGBP touches we should see USD weakness. Until then USD should remain strong. I'm also looking for oil to sell off quickly to $110 while USD is strong. Once that happens we'll see USD weakness for 2 weeks.

FOMC sounds usd bearish to me. We've seen a strong run up in the usd thanks to a weakening euro and oil. The situation in the US hasn't improved and looks like another round of bank writedowns could impact soon. The concept to capitalize on right now is finding the strongest ccy against the dollar.
It looks like USDJPY will move first and fastest followed by USDCHF. We are looking at a 4hr chart here so moves should be measured after a week rather than a day. I don't like the Aussie ccy's because they are going through the first parts of their writedowns and it would be possible to be on the wrong side of Aussie.