Hedging THE HEDGE! | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Hedging System (How to really hedge) 33 replies

Math problem! How do you calculate hedge (hedging) in Excel? 0 replies

Hedge strategy (not a hedge fund) 13 replies

Hedging 34 replies

Hedging strategies 7 replies

Attachments: Hedging THE HEDGE!
Exit Attachments

Hedging THE HEDGE!

  • #21
  • Nov 20, 2007 6:43pm Nov 20, 2007 6:43pm
Quoting giraia_br
for people who know code it looks like very, very simple to do. Anyone here could make that?

there is a guy, Trendchaser, that ofered help in another thread but i allready jave asked him to make another strategy, i think he is busy. Maybe i ask him to do that.

but as i saw in your charts you allready have indicator to show all needed ratios, no?

thanks for share and sorry for my bad english.
no problemo with the english,

someone asked me how to calculate the ratios and correlations, so i responded......
  • #22
  • Nov 21, 2007 8:20am Nov 21, 2007 8:20am
Can you post those indicators?
  • #23
  • Nov 21, 2007 9:36am Nov 21, 2007 9:36am
Quoting bhale
Can you post those indicators?
you can buy them if you want!
  • #24
  • Nov 30, 2007 12:18am Nov 30, 2007 12:18am
ok the RATIO of RATIO1/RATIO2 is oversold on 11/29/07, which means to long RATIO1 and to short RATIO2, to hedge the hedge. Since RATIO1 is eurusd and usdchf, to long the RATIO1 i buy eurusd and buy usdchf. Since RATIO2 is gbpusd and audusd, to short RATIO2 i sell gbpusd and buy audusd. By looking at the ratios i determine the entries and directions which are based on classical mean reversion principals for pairs trading, eurusd/usdchf, gbpusd/audusd.

Why would i enter like that?

Ratio1 vs. Ratio2 correlation analysis:
30m: correlation30:0.4929, corr90:0.0809, corr180:0.4476
1h: correlation30:0.5136, corr90:0.416, corr180:0.8246
4h: corr30:0.5176, corr90:0.779, corr180:0.7283
1D: corr30:0.8366, corr90:-0.6712, corr180:-0.5836

notice: short term correlation is positive, which means that the ratios are moving together. In long term (Daily), the ratios are negative correlation. I noticed that since the ratios are based on 4 different instruments, this strategy is very short term, so far i only hold a max of 1-2days. So the 1h and 4h correlation is most important in my opinion.

Before entry i also look at EURUSD/USDCHF RATIO1 correlation:
30m: c30:-0.9557, c90:-0.9568, c180:-0.9852
1h: c30:-0.8896, c90:-0.8701, c180:-0.9487
4h: c30:-0.5434, c90:-0.9261, c180:-0.9716
1d: c30:-0.9453, c90:-0.8961, c180:-0.9257
notice: ratio1 correlation is high(negative)

Also i look at RATIO2 gbpusd/audusd correlation:
30m: c30:0.6243, c90:-0.0723, c180:0.0967
1h: c30:0.0966, c90:0.1172, c180:-0.3634
4h: c30:0.1385, c90:0.6840, c180:0.5896
1d: c30:0.6235, c90:0.8494, c180:0.8346
notice: ratio2 correlation has high correlation(positive) on the daily time frame.

Now, since the 4 instruments have correlation between one another. What i mean is this: eurusd is hedged with gbpusd and usdchf and audusd in this entry because short term correlation between eurusd and the other 3 instruments was high and hedged. buy eurusd and buy usdchf is hedged, buy eurusd and buy audusd is hedged, buy eurusd and sell gbpusd is hedged. Because the 4 instruments have correlation between them, i look at other ratios and their correlations.

i look at correlation between eurusd and gbpusd: since it is hedged in the entry
30m: c30:0.9083, c90:0.91, c180:0.6722
1h: c30:0.9257, c90:0.6672, c180:0.8738
4h: c30:0.5627, c90:0.0182, c180:0.3432
1d: c30:-0.0026, c90:0.8442, c180:0.8349
correlation is high, so hedge is protected!

Also, at the time of entry, short term correlation between eurusd and audusd was negative. So that position was hedged and protected.

So far there was profit, and i will keep testing the concept, and post analysis.
  • #25
  • Nov 30, 2007 8:52am Nov 30, 2007 8:52am
Quoting c0d3
no problemo with the english,
someone asked me how to calculate the ratios and correlations...
Can I ask you...?

1.
Before entry i also look at EURUSD/USDCHF RATIO1 correlation:
30m: c30:-0.9557, c90:-0.9568, c180:-0.9852

2.
Also i look at RATIO2 gbpusd/audusd correlation:
30m: c30:0.6243, c90:-0.0723, c180:0.0967
---------------------

Ratio1 vs. Ratio2 correlation analysis:
30m: correlation30:0.4929, corr90:0.0809, corr180:0.4476
---------------------

For me, -0.9557 / 0.6243 = -1.5308 and not 0.4929, and I dont understand why.

This weekend I try to develope a few indicators, and the formulas must by correct.
  • #26
  • Nov 30, 2007 11:38am Nov 30, 2007 11:38am
Quoting SwingMan
Can I ask you...?

1.
Before entry i also look at EURUSD/USDCHF RATIO1 correlation:
30m: c30:-0.9557, c90:-0.9568, c180:-0.9852

2.
Also i look at RATIO2 gbpusd/audusd correlation:
30m: c30:0.6243, c90:-0.0723, c180:0.0967
---------------------

Ratio1 vs. Ratio2 correlation analysis:
30m: correlation30:0.4929, corr90:0.0809, corr180:0.4476
---------------------

For me, -0.9557 / 0.6243 = -1.5308 and not 0.4929, and I dont understand why.

This weekend I try to develope a few indicators, and the formulas must by correct.

0.4929 is the correlation between ratio1 and ratio2, you do not divide the correlations. to get 0.4929 you have to divide eurusd by usdchf to get ratio1 and divide gbpusd by audusd to get ratio2, then perform correlation analysis on ratio1 vs. ratio2. Excel has the function, CORREL. 30minute chart: correlation for 30 time frames on 30minute chart between ratio1 and ratio2 is 0.4929.
  • #27
  • Dec 1, 2007 10:25am Dec 1, 2007 10:25am
Quoting c0d3
Download daily closing price data from metatrader, import closing prices of eurusd, usdchf.
Divide eurusd prices by usdchf prices to get ratio1.
In excel use correl function to perform correlation analysis on ratio1.
- In the data of my broker gives a problem: EURUSD havent sunday dys, but USDCHF has the sundays, and a correct calculation of correlations is not possible!

My question is if you have also this problem, or you have a solution.
  • #28
  • Dec 1, 2007 10:31am Dec 1, 2007 10:31am
Quoting c0d3
Download daily closing price data from metatrader, import closing prices of eurusd, usdchf...
Divide eurusd prices by usdchf prices to get ratio1...
In excel use correl function to perform correlation analysis on ratio1...
- in the data of my broker gives a problem: EURUSD havent sunday dys, but USDCHF has the sundays, and a correct calculation of correlations is not possible.

My question is if you have also this problem, or you have a solution.
Attached Image
  • #29
  • Dec 1, 2007 1:37pm Dec 1, 2007 1:37pm
How much are you selling your indicators for? And, how can I get them?

Thanks.
  • #30
  • Dec 1, 2007 1:58pm Dec 1, 2007 1:58pm
Quoting SwingMan
- in the data of my broker gives a problem: EURUSD havent sunday dys, but USDCHF has the sundays, and a correct calculation of correlations is not possible.

My question is if you have also this problem, or you have a solution.
Ok, even if there is an error, the probability of calculating wrong values for correlations is very small considering the full time series. I did verification for all my correlation analysis in excel and matlab, and the values are sometimes off by 1/100, if that. So in my opinion, that problem of wrong days in time series is there, but it is insignificant, there are bigger problems to worry about. You can do all the correlation analysis your self in excel, and if you find something that gives you a completely different correlation, then i would like to know about it, otherwise, i have to trust the brokers, and go the time series they provide with the errors in days.

But also, from statistical point of view, when you look at the correlation function, you will see that this problem of wrong days has no effect, my opinion.
  • #31
  • Dec 1, 2007 2:00pm Dec 1, 2007 2:00pm
Quoting SwingMan
- in the data of my broker gives a problem: EURUSD havent sunday dys, but USDCHF has the sundays, and a correct calculation of correlations is not possible.

My question is if you have also this problem, or you have a solution.
also, i use north finance broker, metatrader supports many different brokers, you are probably using interbank fx, so try different brokers.
  • #32
  • Dec 1, 2007 2:05pm Dec 1, 2007 2:05pm
Quoting fxdream
How much are you selling your indicators for? And, how can I get them?

Thanks.

I haven't really put a price on these indicators yet, they are still in prototype stage, and i would have to be there to set them up, it is not just drag and drop type stuff. Another thing, is that if i sell them, someone can just post them on the net, and it is over.
  • #33
  • Dec 1, 2007 2:53pm Dec 1, 2007 2:53pm
Quoting c0d3
But also, from statistical point of view, when you look at the correlation function, you will see that this problem of wrong days has no effect, my opinion.
- I think also you are right.

- You will not publish your indicators, and I understand this. But, allowed you that I post here indicators which I developed, related with your ideeas...?!!!!

- Have you think to use a weight matrix and to combine the correlations into a single indicator?
If I give the weighting factors:
4 = M30
3 = H1
2 = H4
1 = D1
and
3 = C30
2 = C90
1 = C180
result the Matrix:
Inserted Code
 
M30    12      8       4
H1     9       6       3
H4     6       4       2
D1     3       2       1
      C30     C90    C180
with the sum = 60

- I think that instead of M30 is better to use M15, to have similar time factors:
H1/M15 = 4
H4/H1 = 4
D1/H4 = 6
  • #34
  • Dec 1, 2007 3:02pm Dec 1, 2007 3:02pm
Quoting SwingMan
- I think also you are right.

- You will not publish your indicators, and I understand this. But, allowed you that I post here indicators which I developed, related with your ideeas...?!!!!

- Have you think to use a weight matrix and to combine the correlations into a single indicator?
If I give the weighting factors:
4 = M30
3 = H1
2 = H4
1 = D1
and
3 = C30
2 = C90
1 = C180
result the Matrix:
Inserted Code
 
M30    12      8       4
H1     9       6       3
H4     6       4       2
D1     3       2       1
      C30     C90    C180
with the sum = 60

- I think that instead of M30 is better to use M15, to have similar time factors:
H1/M15 = 4
H4/H1 = 4
D1/H4 = 6
Yeah, sure go ahead, post any indicator you have developed, that would be great!

I have never thought of combining indicators into one, i don't know if that will give me an advantage, and i never even thought of that. It will be very good, as long as it is CORRECT. That way if it is one indicator, it will be much simpler to program my EA to perform analysis, but still it will need all other indicators present for all necessary time frames. Can you please explain more on how to combine all correlations into single indicator!

Thanks
  • #35
  • Dec 1, 2007 3:09pm Dec 1, 2007 3:09pm
It's no problem to take in the M30 time frame the upper time frames H1, H4, D1, to calculate the 12 correlations and to combine this.

The only problem remains the calculation time for the correlations. In the EA is not critical.
  • #36
  • Dec 1, 2007 3:19pm Dec 1, 2007 3:19pm
Quoting SwingMan
It's no problem to take in the M30 time frame the upper time frames H1, H4, D1, to calculate the 12 correlations and to combine this.

The only problem remains the calculation time for the correlations. In the EA is not critical.

Ohh, i think i already have all of those, all i do is switch time frames, and the new correlation values show up..............
  • #37
  • Edited 3:57pm Dec 2, 2007 5:10am | Edited 3:57pm
Here is a first Version of my indicators.

- Envelopes is identical with Bollinger Bands
- I checked the correlation values of the indicators with the Excel Correl-function, and they are OK.
The problem remain for EURUSD/USDCHF. The values for every correlation and for the reverse correlation (USDCHF/EURUSD) must be identical, but for this combination isnt!
- The Combo indicator use the weighting factors 1, 2, 3.

But I think is better to use harmonic values: 1, 1.618, 2.618
In this case is maybe better to use also harmonic periods: 21, 55, 144
Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSD.PNG Size: 43 KB
Attached File(s)
File Type: ex4 HedgingHedge Envelopes.ex4   3 KB | 1,423 downloads
File Type: tpl template_HedgingHedge.tpl   6 KB | 1,240 downloads
File Type: ex4 HedgingHedge Combo.ex4   11 KB | 1,322 downloads
File Type: ex4 HedgingHedge Correlation.ex4   4 KB | 1,437 downloads
File Type: ex4 HedgingHedge MatrixMTF.ex4   14 KB | 1,439 downloads
  • #38
  • Dec 2, 2007 4:04pm Dec 2, 2007 4:04pm
In post #37 I added the first version of the correlation matrix, without calculation of the Combo indicator. This follows in the next days if somebody is interested to check and use the values.
Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSD2.PNG Size: 30 KB
  • #39
  • Dec 3, 2007 5:28pm Dec 3, 2007 5:28pm
A new version with harmonic time frames and with harmonic weighting factors (see post #37).
The calculation is performed only for the last 1000 bars, and the matrix is actualised only for new bars.
This was...
Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSD3.PNG Size: 35 KB
Attached File(s)
File Type: ex4 HedgingHedge Combo.ex4   12 KB | 1,395 downloads
File Type: ex4 HedgingHedge MatrixMTF.ex4   19 KB | 1,476 downloads
  • #40
  • Dec 3, 2007 9:25pm Dec 3, 2007 9:25pm
Quoting SwingMan
A new version with harmonic time frames and with harmonic weighting factors (see post #37).
The calculation is performed only for the last 1000 bars, and the matrix is actualised only for new bars.
This was...
Good indicators, i'll use them for my setup also.

Question: what is with the hedge envelopes? is that something special?
0 traders viewing now