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Hedging THE HEDGE!

  • #41
  • Edited 4:53am Dec 4, 2007 1:26am | Edited 4:53am
Quoting c0d3
Question: what is with the hedge envelopes? is that something special?
No. I wrote that the envelopes are identicaly with the Bollinger Bands ( 2 StdDev). I thinked that later I can switch between StdDev and % Bands.

The Combo lines repaints, and I must improve the calculation algorithms, but for a first version is OK think I.
I suppose that the calculated values are OK, you can test in Excel and confirm the values.

Next step can be to calculate the two matrixes in a single chart, and to calculate the correlation of the two Combo lines.
  • #42
  • Dec 4, 2007 2:25pm Dec 4, 2007 2:25pm
Quoting SwingMan
Next step can be to calculate the two matrixes in a single chart, and to calculate the correlation of the two Combo lines.

you mean, the ratios? and then correlation on the ratios? eurusd/usdchf, gbpusd/audusd...........
  • #43
  • Dec 4, 2007 2:45pm Dec 4, 2007 2:45pm
Quoting c0d3
you mean, the ratios? and then correlation on the ratios? eurusd/usdchf, gbpusd/audusd...........
Yes.
  • #44
  • Dec 4, 2007 4:52pm Dec 4, 2007 4:52pm
For a quick analysis of trading decisions, here an indicator with open and close values of the correlation pairs.
The trend line is a SMA.
Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSD4.PNG Size: 44 KB
Attached File(s)
File Type: ex4 HedgingHedge Trend.ex4   3 KB | 1,612 downloads
  • #45
  • Dec 4, 2007 5:45pm Dec 4, 2007 5:45pm
Quoting SwingMan
For a quick analysis of trading decisions, here an indicator with open and close values of the correlation pairs.
The trend line is a SMA.
u rock!

do you have skype, aim, msn, or any other chat? Lets' connect outside this forum, i'm sure we can trade ideas.
  • #46
  • Edited Dec 5, 2007 3:04am Dec 4, 2007 6:16pm | Edited Dec 5, 2007 3:04am
Sure. But, my computer with Skype is out of order until next week, and I work only with the left hand on my notebook...
You can mail me.
  • #47
  • Dec 5, 2007 2:25am Dec 5, 2007 2:25am
Quoting SwingMan
For a quick analysis of trading decisions, here an indicator with open and close values of the correlation pairs.
The trend line is a SMA.
can you explain how you use trends for entry on a hedge? Since they are moving together in the same direction for gbpusd and audusd, how do you know which one to short and which one to long? i use ratio analysis for that. is there a different way of entering?
  • #48
  • Edited 3:47am Dec 5, 2007 3:28am | Edited 3:47am
I cant give answer to a strategy, becouse I calculated only the harmonic multi time frames matrix of relations. With the correlation of relations can I give pearhaps more answers.

In a first step (e.g. EURUSD-USDCHF, negative correlation):
- Evelopes make a squeeze (see the ideea with many BBands in the pivot thread http://www.forexfactory.com/showthread.php?t=57426)
- Combo line cross the trigger line from above to below the line.
- If the EUR trend is up and close above the trend line, and
the CHF trend is down and close below the trend line -> buy EUR, sell CHF.
- Exit when EUR close is below the trend line, or CHF close is above the trend line.

This is only an ideea, and the results are not bad...
For positive correlations (GBP-AUD) I dont tested, but must be similar (long-long or short-short).

(Because my english verry poor is to give detailed explanations, I think that is better I mail you).
  • #49
  • Dec 5, 2007 1:50pm Dec 5, 2007 1:50pm
Trading chances for the last two days:
Attached Image (click to enlarge)
Click to Enlarge Name: EURUSD1.PNG Size: 46 KB
  • #50
  • Dec 5, 2007 3:09pm Dec 5, 2007 3:09pm
Quoting SwingMan
Trading chances for the last two days:
Entry: long eurusd and long usdchf on entry? or short eurusd and short usdchf?

Profit?

What about hedging the hedge?
  • #51
  • Dec 5, 2007 3:35pm Dec 5, 2007 3:35pm
I wrote in the two trend windows:
- EURUSD Long and then Short
- USDCHF Short and then Long

For Hedging the Hedge I havent programmed the correlation of relations to know what is to trade.

I havent calculate profits, but if you have the indicators, is easy to do this.
  • #52
  • Dec 5, 2007 8:37pm Dec 5, 2007 8:37pm
Quoting SwingMan
I wrote in the two trend windows:
- EURUSD Long and then Short
- USDCHF Short and then Long

For Hedging the Hedge I havent programmed the correlation of relations to know what is to trade.

I havent calculate profits, but if you have the indicators, is easy to do this.
I see that you wrote down to long eurusd and short usdchf, but that is not a hedge, that is essentially the same direction since eurusd and usdchf have negative correlation. To hedge, you would have to long long or short short, and not long short or short long. The long eurusd and short usdchf is the same transaction, since the pairs have negative correlation. The true hedge cancels volatility, hence short usdchf and short eurusd, or long usdchf and long eurusd.
  • #53
  • Dec 6, 2007 1:21am Dec 6, 2007 1:21am
Quoting c0d3
The true hedge cancels volatility, hence short usdchf and short eurusd, or long usdchf and long eurusd.
You are right, because the correlation is up.
To trade the same direction for this pair, on must take the opposite crosses with the triger line. If I change the entry points Entry/Exit in the chart, the correlation is down in the next move.
  • #54
  • Dec 6, 2007 7:03pm Dec 6, 2007 7:03pm
Quoting SwingMan
You are right, because the correlation is up.
To trade the same direction for this pair, on must take the opposite crosses with the triger line. If I change the entry points Entry/Exit in the chart, the correlation is down in the next move.
yeah, that is why i was asking how do you determine which way to go, short short, or long long.

in the classic mean reversion, you would get the ratio of eurusd/usdchf and then apply bollinger bands to the ratio to determine mean and 2 standard deviations. The entry would be on upper bollinger band, or lower bollinger band. From my memory, if the ratio touches upper band, then short short, if the ratio touches lower band below mean, then you long long.
  • #55
  • Dec 6, 2007 9:35pm Dec 6, 2007 9:35pm
Quoting digimix
I have never been able to make consistently money with hedging. Account always blow up.
draw down?

I wonder how the hedge funds do it......................
  • #56
  • Edited Dec 17, 2007 12:49am Dec 16, 2007 6:52pm | Edited Dec 17, 2007 12:49am
From post #17
Using the "Hedging Hedge MatrixMTX" indicator for correlation analysis between correlated pairs, eurusd, usdchf, gbpusd, audusd.

Ratio of (ratio1/ratio2) is oversold from last week moves. Ratio1 is eurusd divided by usdchf, ratio2 is gbpusd divided by audusd.

Now, correlation between ratio1 and ratio2 is strong negative. On negative correlation when ratio is oversold, LONG ratio1, and LONG ratio2, is the entry.

To LONG ratio1, buy eurusd and buy usdchf.
To LONG ratio2, buy gbpusd and sell audusd.

 Hedging Hedge MatrixMTX indicator analysis:
eurusd vs. usdchf: -0.95
eurusd vs. audusd: 0.694
gbpusd vs. audusd: 0.739
gbpusd vs. usdchf: -0.802

All pairs are correlated!

Let's see what happens.
  • #57
  • Dec 17, 2007 12:51am Dec 17, 2007 12:51am
Quoting c0d3
From post #17
Using the "Hedging Hedge MatrixMTX" indicator for correlation analysis between correlated pairs, eurusd, usdchf, gbpusd, audusd.

Ratio of (ratio1/ratio2) is oversold from last week moves. Ratio1 is eurusd divided by usdchf, ratio2 is gbpusd divided by audusd.

Now, correlation between ratio1 and ratio2 is strong negative. On negative correlation when ratio is oversold, LONG ratio1, and LONG ratio2, is the entry.

To LONG ratio1, buy eurusd and buy usdchf.
To LONG ratio2, buy gbpusd and sell audusd.

 Hedging Hedge MatrixMTX indicator analysis:
eurusd vs. usdchf: -0.95
eurusd vs. audusd: 0.694
gbpusd vs. audusd: 0.739
gbpusd vs. usdchf: -0.802

All pairs are correlated!

Let's see what happens.

50% profit on investment reached, quick!

50 pip, gain.
  • #58
  • Dec 18, 2007 10:26am Dec 18, 2007 10:26am
Swing Man, your indicator are'nt working.

should theses indicators works with cod3 strategy?

btw. could anyone make indicator to do it ofr free? thanks.
  • #59
  • Dec 18, 2007 2:00pm Dec 18, 2007 2:00pm
Quoting giraia_br
Swing Man, your indicator are'nt working.

should theses indicators works with cod3 strategy?

btw. could anyone make indicator to do it ofr free? thanks.
They do work on 15m and 30m charts, these indicators are only for correlation analysis. Not ratios correlation analysis or the ratios them selves.
  • #60
  • Dec 21, 2007 3:10am Dec 21, 2007 3:10am
Quoting giraia_br
Swing Man, your indicator are'nt working.

should theses indicators works with cod3 strategy?

btw. could anyone make indicator to do it ofr free? thanks.
go check the first post, i included the indicators for all the ratios and correlation.
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