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The basket of Hybrids; 4 Pairs

  • #1
  • First Post: Edited Dec 2, 2007 11:41pm Nov 24, 2007 1:44pm | Edited Dec 2, 2007 11:41pm
Hi everybody!

I want to offer for discussion a method allowing to increase results of any TS. I am working at it and would be glad to any constructive dialogs.
We will use eight currencies: EUR,USD,GBP,CHF,JPY,CAD,AUD,NZD so we will be able to make twenty eight pairs by using these currencies (look on the attached picture) and one hundred five combinations called as hybrids with little correlation of pairs inside of hybrids.
Rules of the strategy are:
1. to trade no more than four pairs,
2. all traded pairs must be as the whole or the part of one hundred five of hybrids,
3*. the size of a position of each pair must be normalized by volatility of EURUSD; for example 100K EURUSD corresponds to 300K EURCHF or 90K GBPCHF.
My favorite pairs are EURUSD,GBPUSD,USDCHF,USDJPY,EURCHF,EURGBP,GBPCHF. Usually I begin to construct the hybrid with these pairs.
Currently I am waiting for reversal of some of these pairs so I hope we will be able to see how it works very soon.
* It is an necessary element of Money Management.

P.S. My TS uses a day time-frame, has the stoploss about 150-250 pips (for EURUSD) and will not be as a subject for discussion (sorry).
We will use only its signals, but all traded positions will be accompanied in detail from initiation to liquidation with description of dynamics.

Regards
Attached Image (click to enlarge)
Click to Enlarge Name: Hybrids.JPG Size: 229 KB
  • #2
  • Edited 6:39am Nov 25, 2007 12:03am | Edited 6:39am
Sizes of positions have to be taken in according to the attached picture or in proportion to these values. It was determined by volatility of pairs for last four months.
Attached Image
  • #3
  • Nov 25, 2007 12:20am Nov 25, 2007 12:20am
I found this thread and I am new to forex. What is the table all about? Can someone provide additonal info?

Thanks
  • #4
  • Edited 2:18am Nov 25, 2007 12:40am | Edited 2:18am
Quoting gonadoit
I found this thread and I am new to forex. What is the table all about? Can someone provide additonal info?

Thanks
The last table contains sizes of positions which we have to take by rules of strategy. It allows us to take same profit/loss for all pairs.
  • #5
  • Nov 25, 2007 9:14am Nov 25, 2007 9:14am
This is interesting. So, your position size is normalized to the EU. Do you do this on a dynamic basis, based on EU volatility, or do you make the determination on a periodic basis?

Also, what is your measure of volatility?

Thanks
  • #6
  • Edited 10:42am Nov 25, 2007 9:55am | Edited 10:42am
Quoting smjones
This is interesting. So, your position size is normalized to the EU. Do you do this on a dynamic basis, based on EU volatility, or do you make the determination on a periodic basis?

Also, what is your measure of volatility?

Thanks
I use a simple way to normalize.
During last four months the course of EURUSD was limited to 1.3400 from below and 1.5000 from above, so its change was 16 figures.
For EURCHF it was 6 figures.
Also we have to take into account that the price of one pips of EURUSD is to one pips of EURCHF as 1 is to 0.87 (for the equal size of a position).
As a result the size of a position of EURCHF has to be taken as 100K*16/(6*0.87)=300K (approximately).
  • #7
  • Edited 7:29am Nov 27, 2007 7:12am | Edited 7:29am
Currently among seven of noted above pairs the sell signal by GBPUSD on the opening of Wednesday or Thursday is most probable so I am waiting for it to begin to construct a hybrid.
  • #8
  • Edited Nov 28, 2007 12:08am Nov 27, 2007 11:28pm | Edited Nov 28, 2007 12:08am
Today in focus of my attention is 48th hybrid:
GBPUSD is waiting for the sell signal on the opening of Thursday;
AUDCAD is waiting for the buy signal on the opening of Thursday;
NZDCHF is waiting for the buy signal on the opening of Thursday;
EURJPY is waiting no signal.
  • #9
  • Edited Nov 29, 2007 11:28am Nov 28, 2007 11:15pm | Edited Nov 29, 2007 11:28am
I fix second hybrid (because of EURUSD and GBPJPY) to make the thread more interesting for reading.
Today I am waiting for:
EURUSD - the sell signal on the opening of Friday;
GBPJPY - the buy signal on the opening of Friday;
NZDCAD -?;
AUDCHF - the buy signal on the opening of Friday.
  • #10
  • Edited Nov 30, 2007 8:10am Nov 29, 2007 7:40pm | Edited Nov 30, 2007 8:10am
Let's begin. Probable time of "life" of the hybrid is about 15-25 traded days.
Attached Image (click to enlarge)
Click to Enlarge Name: 2th.JPG Size: 20 KB
  • #11
  • Edited 11:13am Nov 30, 2007 1:20am | Edited 11:13am
During noted 10-25 days I will be accompanying the hybrid trading its components by using signals of my system.
  • #12
  • Edited 5:39pm Nov 30, 2007 7:50am | Edited 5:39pm
So the hybrid has taken about 3.5 figures or 2800$ of profit for a day (waiting for 12.5 figures or 11400$ for a month). We can close all positions today and search new ones on the opening of Monday or continue to trade these ones. We are able to construct a new hybrid in fact every day.
  • #13
  • Nov 30, 2007 8:12am Nov 30, 2007 8:12am
I understand the concept, that by using the basket of Hybrids you are hedging until the basket is showing a profit.

Question is how do you decide on your entries or is it that with the basket concept the entries are not that important.

Some indication of your method would be highly appreciated.

Dave W
  • #14
  • Edited 12:08pm Nov 30, 2007 8:50am | Edited 12:08pm
Quoting DaveW
I understand the concept, that by using the basket of Hybrids you are hedging until the basket is showing a profit.

Question is how do you decide on your entries or is it that with the basket concept the entries are not that important.

Some indication of your method would be highly appreciated.

Dave W
Decisions about initiation or liquidation of positions inside of a hybrid are made by using signals of my system. I search two, three or four synchronous signals expected at the opening of next day to begin to trade. I usually hold a hybrid in market from 5 to 20-25 days trading its pairs.
P.S. My system is based on empirical indicators describing the market and has profit factor about 12 for any instrument. I will prepare a picture with signals for one of 28 pairs tomorrow.
  • #15
  • Nov 30, 2007 9:34am Nov 30, 2007 9:34am
it seems that you put some work in this system
Can this correlation system or the hybrid basket can be used with any other trading system? did you take in account that sometimes markets shift their form(correlation)?
"Abandon all hope, you who enter here" La Divina Commedia, Dante Alighieri
  • #16
  • Edited 1:23pm Nov 30, 2007 9:44am | Edited 1:23pm
Quoting semar
it seems that you put some work in this system
Can this correlation system or the hybrid basket can be used with any other trading system? did you take in account that sometimes markets shift their form(correlation)?
This approach can be used for any system which is equivalently able to work with noted 28 pairs allowing to increase its results.
Correlation among pairs inside of hybrids changes every day but in any case this changing is not so considerable.
  • #17
  • Nov 30, 2007 12:48pm Nov 30, 2007 12:48pm
Quoting DaveW
I understand the concept, that by using the basket of Hybrids you are hedging until the basket is showing a profit.

Question is how do you decide on your entries or is it that with the basket concept the entries are not that important.

Some indication of your method would be highly appreciated.

Dave W
This picture shows last signals of AUDNZD.
Red-sell,blue-buy,black-stoptrading. Stoploss did not trigger.
Attached Image
  • #18
  • Nov 30, 2007 5:36pm Nov 30, 2007 5:36pm
On the closing of Friday the hybrid has taken 5 figures or 3800$ of profit. It is about one third of expected profit.
  • #19
  • Edited Dec 3, 2007 12:59am Dec 2, 2007 11:29pm | Edited Dec 3, 2007 12:59am
This changing was applied on the closing of Friday since two of three positions of 2th hybrid required reversal for last throws in directions of trends in force. It is usual scenario of reversal of a main trend. After 2-5-days moving in the direction of the trend in force we will begin to move in the direction of the new one so it is the hybrid for 2-5-days trading.
Attached Image (click to enlarge)
Click to Enlarge Name: 2th.JPG Size: 42 KB
  • #20
  • Edited 1:56pm Dec 4, 2007 12:59pm | Edited 1:56pm
So 76th hybrid has taken about 7.7 figures for two days. Currently all positions are in force.
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