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Zeusjoes Market-Neutral Hedge Strategy

  • #161
  • Jul 8, 2008 10:21am Jul 8, 2008 10:21am
Quoting SwingMan
I thinked today to a solution, maybe write I in the afternoon the functions because:

in my trade from today, I maked two mistakes:
1. - I taked the chart EURUSD and not EURJPY, and I selled EURUSD.
Than, I close this oder.
2. - I taked the right EURJPY chart, but I buyed the pair!
Than I closed this order, and only in the third try I gived the right order!

All this, because I'm in office and haven't the time to think to mutch about order details.


iT HAPPENS TO ME TOO!
I don't say
  • #162
  • Jul 8, 2008 10:26am Jul 8, 2008 10:26am
PistolDave.... I know of two EAs in the works for this strategy, that will independently trade any two pairs you want. Not ready for prime time yet. Both are costing the developers $$ as they are hiring programmers to do the work, so don't know yet if they will be given away for free....

Other than that, I don't know of an EA that will do what you ask.... http://www.forexfactory.com/images/icons/icon9.gif
  • #163
  • Jul 8, 2008 10:31am Jul 8, 2008 10:31am
We really need an EA to manage specific couple of pairs, maybe someone can modify the Equity manager to make this job...
If we solve this problem, then.... everything will be just fun....
i have not the skills, but i think it's simple enough, the EA must watch simultaneous for the pairs that we will enter in the options panel (it has to be more options like EU/GU, EU/CF, GU/CF, EJ/AJ, GJ/UJ, GJ/EJ, etc) and close them separately (as basket of 2 pairs) when they reach a customizable profit level.
In this case you can trade simultaneously many baskets, which manually is very hard to follow.
Anyone interested?
I don't say
  • #164
  • Jul 8, 2008 10:32am Jul 8, 2008 10:32am
Hi everybody,
May i know why period_ratio must set 72?
Please advice.
Thanks.
  • #165
  • Jul 8, 2008 10:38am Jul 8, 2008 10:38am
It doesn't. It has to do with how SwingMans' indicator calculates the Threshold (I think?). A longer period means more bars means a different Threshold, based on the extremes of the swings of the included history.

You can set it for whatever you want, and either use or not use his threshold calc, but the main thing is to stay consistent. Changing it will re-set the bars as well, so one bar may be 120 at period 72, but 90 at period 200, changing your corresponding threshold.

I would recommend you playing with the settings. See what it does with the bars, and with the threshold. Personally, I like to look back at least a week to see the recent swings, letting that past market action help me in determining my entry points, (he calls that the threshold...)

hope that helps...
  • #166
  • Jul 8, 2008 10:45am Jul 8, 2008 10:45am
Quoting mrkam
It doesn't. It has to do with how SwingMans' indicator calculates the Threshold (I think?). A longer period means more bars means a different Threshold, based on the extremes of the swings of the included history.

You can set it for whatever you want, and either use or not use his threshold calc, but the main thing is to stay consistent. Changing it will re-set the bars as well, so one bar may be 120 at period 72, but 90 at period 200, changing your corresponding threshold.

I would recommend you playing with the settings. See what it does with the bars, and with the threshold. Personally, I like to look back at least a week to see the recent swings, letting that past market action help me in determining my entry points, (he calls that the threshold...)

hope that helps...
Thanks mrkam.
  • #167
  • Jul 8, 2008 11:10am Jul 8, 2008 11:10am
Quoting PistolDave
Hi mrkam,

This is a question I asked Swingman earlier, and I'm hoping you can help with this too:

Do you have an EA that can close only specific pairs when the profit gets to a certain level?

Now I'm using one that will close the "basket" of open trades at a certain account profit. That is fine if you only have one hedge on with two pairs, but if you have one hedge in profit and are waiting for the other one to finish up it will close that one too. Any ideas? Even better would be one that would open the trades at a certain threshold and close at a certain profit only on that hedge, but that may be asking for way too much.

Thanks,
Dave
Hi Dave,

You can try this one.

If you enter two trades for the Hedge, put the same Comment in the Trade box. In that case the EA will watch for those comments and close both pairs as soon as profit target has been reached.

I haven't tested it yet, because I am still at work, but I think this will work.

This example is for the GBPJPY and EURJPY hedge, but you can use it for any set of pairs. Each set must have their own unique MagicComment as I call it. The MagicComment in the EA must be the same as the Comment you fill at the manual entry orders.
Attached File(s)
File Type: mq4 #PH#HedgeAndTP#05.mq4   4 KB | 875 downloads
  • #168
  • Jul 8, 2008 11:24am Jul 8, 2008 11:24am
Quoting HLAng
Hi everybody,
May i know why period_ratio must set 72?
Please advice.
Thanks.
Please read my post #183 in http://www.forexfactory.com/showthre...t=85097&page=8, and if possible ALL my reamarks to new releases.
My brother is Lucky Luke, and I program faster than I can document...
  • #169
  • Jul 8, 2008 12:09pm Jul 8, 2008 12:09pm
Hello,

This ea at the following link is one of the best trade manager ea's I have seen. http://www.forexfactory.com/showthread.php?t=89371
Jeff

Quoting PistolDave
Hi mrkam,

This is a question I asked Swingman earlier, and I'm hoping you can help with this too:

Do you have an EA that can close only specific pairs when the profit gets to a certain level?

Now I'm using one that will close the "basket" of open trades at a certain account profit. That is fine if you only have one hedge on with two pairs, but if you have one hedge in profit and are waiting for the other one to finish up it will close that one too. Any ideas? Even better would be one that would open the trades at a certain threshold and close at a certain profit only on that hedge, but that may be asking for way too much.

Thanks,
Dave
  • #170
  • Jul 8, 2008 1:18pm Jul 8, 2008 1:18pm
Quoting fewhills
Hi Dave,

You can try this one.

If you enter two trades for the Hedge, put the same Comment in the Trade box. In that case the EA will watch for those comments and close both pairs as soon as profit target has been reached.

I haven't tested it yet, because I am still at work, but I think this will work.

This example is for the GBPJPY and EURJPY hedge, but you can use it for any set of pairs. Each set must have their own unique MagicComment as I call it. The MagicComment in the EA must be the same as the Comment you fill at the manual entry orders.
Hi fewhills,

Thank you for posting your EA. I'm looking forward to testing it soon. Having a way to close an individual trade/hedge at a certain profit level without affecting the other pairs would help a lot in making more profits from this system. Let's hope it works.

Good trading to you,
pd
  • #171
  • Jul 8, 2008 1:21pm Jul 8, 2008 1:21pm
Quoting azjeff
Hello,

This ea at the following link is one of the best trade manager ea's I have seen. http://www.forexfactory.com/showthread.php?t=89371
Jeff
Hi azjeff,

Thanks for the link to this fellow's EA. I'm looking forward to exploring it further. It sounds promising from what he has written about it. I'll be testing it soon.


pd
  • #172
  • Jul 9, 2008 12:22am Jul 9, 2008 12:22am
I have been involved in spread trading for years.
First for my private account and then as a hedge fund manager .

I was doing spread trading on futures but not the way it is usualy done.
I was making arbitrage between the correlated eurostoxx future and the french Fce ( cac4 future).
We were a team and made huge profits so decided to built a BVI hedge fund.
The conjonction of volatility becoming lower and automatic robots settled by banks made us change of arbitrage supports .
We built a model for spreading eurostoxx agains S&P futures with great reward.
This one was more complicated because of exchange rate and no same hours of opening for volume.

But a great advantage was because of that no robots could arbitrate it.

When i started tradinf FX my main idea had been to do the same because one of the great advantage of spread trading is that you are more confortable with your position no betting on a direction but more on differences.

There are differents way to do that on FX i will explain the simpliest one which is profitable ( i used it for 1 year with nice rewards) , now i am working with the same philosophy, same pairs but with proprietary formulas for a fine tune.

I am still trading professionaly as an asset manager on FX. With 7 figures account.


1) I am only trading eur/usd and usd/chf for 2 reasons .
First it is the most negatively correlated paire on forex on a long and short term basis.
Second, even if you find one more correlated it will be too much volatil for spread trading the way i do it (forget immediatly of thinking of gbp or jpy involved in spread trading, that is a killer account).

2) Please dont tell me that spread trading these paires is the same as trading eur/chf outright, please dont write that even if you can copy it from supposed serious web site. The ones saying that have never follow days and night as i did the 3 paires together.

3) Contrary at what i have read in this thread entry point is not that important. You have not to find the perfect entry call but one which is #acceptable# ( i will explain later).


4) dont tell me about stops there are no stops in this trading style

5) you need to be capitalised because be prepared to average. Yes i know you are not supposed to do that so please dont tell me . I never average a loosing position in trading outright, spreadtrading is very different. So dont take a 1million position with 10k tio iniate a position



6) Dont look at what was the price of eur/usd 3 years ago and same for usd/chf and tell your paire is not correlated the way you said it was because you have to reactualised the datas several times per month .



Here are the very basic and exemples:

Look at the 3 graphes eur/usd usd/chf and eur/chf : 4 hours or 1 hour candells are ok.

A raisonable entry point is when a divergence appeas on eur/chf .

The more you wait the safer you are but the less number of trades you are going to make.

In theory ( only) the divergence is suppose to stop and go back to neutral as the correlation is strong.

To neutralise the usd problem and be in market neutral ( very important point always put aside by 80% od spread traders) you have to take 1 lot of euro/usd for every 1.5 lot of usd/chf and actualise this ratio each time eur/usd mooves a lot to try to be close to a market neutral position.

So let say eur/chf is -0.20% for example you are in alert because close to an entry point, I recommand at the beginning not entering before 0.25/0.30 divergence but personaly i start building my position at 0.20 divergence.
So you wait -0.25% for exemple as yesterday when i enter a position.

I took 1 position ( meaning 1 eur/usd ans 1.5 usd/chf) long on both :

Long 1 lot euro/usd at 1.5702
Long 1.5 lot usd/chf at 1.0260

Depending on brokers you have to pay the spread let us say that you have 7 pips spread for the 2 buy.
You start with a loss of 7 pips ( 3 on euro/usd and 4 on usd/chf for exemple). You have to wait 0.05% moove your way to cover the spread

Then you wait , if the divergence goes to -0.45 you put one more position ( 1 and 1.5) if goes to -0.65 you put one more ( you can wait longer if you have a small account or want to be more conservative).
If the divergence goes more than 0.65% you wait till 1% ( almost never happen).
That means that you can handle this kind of divergence without being margin called so dont start with a 200 leverage.

Usually it goes rarely over 0.40/0.45.

Yesterday after -0.25% from my memory it goes only -0.32%.

I closed the position few hours after at 1.0324 and 1.5652 ( i closed half when divergence went back to 0 and the remaining at +0.20. We then went to +0.40% ( of course i was short now starting at +0.30( +0.30 and not 0.20/0.25 because i waited for the trend weakening). That is, with the1/1.5 ratio almost 60pips.
Usually you make small profits and some bigs one when averaging 2 or 3 times.
You could have make more ( 70 pips ) by playing eur/chf on that one but it is more difficult to keep a directional position if you are wrong than a hedged one ( from several point of vue and from a psychological one which is the most important part of trading as all of you knows...........Not all of you know that ?

I closed this one this morning ( eur/chf was -0.15%).

I am now waiting -0.30/-0.35 to get in again ( we are -0.15% but i know that compared to to days ago we are close to +0.10 so i will wait a little bit more ( that is one part of the actualisation and fine tuning i was speaking about)

One advantage to be ON on a long position is that you get the swap on the eur/usd and sone brokers are paying a + rollover on usd/chf as well.

This is the simpliest way to be profitable on FX according to me of course.

So where are the risks?

They are in case there is a huge think happening in switzerland or in europe ( i am not speaking of decision rate ( you could say i will never be in a position before an annouvement on rate for exemple) i am more thinking of a blast somewhere.
And for me these is not a risk but during these days by spread trading you can make a fortune as i wil explain 1 day if somebody is interested in.
  • #173
  • Jul 9, 2008 12:42am Jul 9, 2008 12:42am
spieler

spieler,

Could you post a screen shot of what you mentioned of the three charts and show us the divergence you were talking about?

Would appreciate it. Thanks.

Also interested in that last comment about making a lot of money. Please share that too.

Bruce
  • #174
  • Jul 9, 2008 1:01am Jul 9, 2008 1:01am
Hi Spieler,

Please do explain! Very interesting strategy.
  • #175
  • Jul 9, 2008 1:17am Jul 9, 2008 1:17am
i will post one exemple later today.
As how to trade exceptional events it needs to be experienced in spread trading first and as it occurs only 1 or 2 times per year i have time to explain .
  • #176
  • Jul 9, 2008 1:36am Jul 9, 2008 1:36am
Quoting spieler
2) Please dont tell me that spread trading these paires is the same as trading eur/chf outright, please dont write that even if you can copy it from supposed serious web site. The ones saying that have never follow days and night as i did the 3 paires together.
Would you mind going into that a little bit further. How is trading the 2 pairs separately different from trading the cross? Thanks.
  • #177
  • Jul 9, 2008 2:30am Jul 9, 2008 2:30am
Quoting fierceman
Would you mind going into that a little bit further. How is trading the 2 pairs separately different from trading the cross? Thanks.
If you read what he wrote above--- you will see he already answered you.

Quoting ;
2) Please dont tell me that spread trading these paires is the same as trading eur/chf outright, please dont write that even if you can copy it from supposed serious web site. The ones saying that have never follow days and night as i did the 3 paires together. .
  • #178
  • Jul 9, 2008 2:49am Jul 9, 2008 2:49am
Fierceman,

rolls are best paid on eur/usd + usd/chf than on eur/chf

from a psychological approach you feel more secured with holding the 2 paires that are well corelated and can cut one leg in case one dont moove and the other rallye just one minute ( it happends often).
I agree you could have a strategy based on correlation , not paying the spread and calling only eur/chf but i have never makes the big bucks i make on hedging the 2. Perhaps cutting to soon the outright trading.

When you enter a long on the 2 paires if one is rallying you eneter this one first , you have the finger on the mouse ready to catch the other one falling so thet you win precious pips in yout position .

On future spread it was different because i could be 100% market neutral that cannot be the same with only 2 paires
  • #179
  • Jul 9, 2008 3:11am Jul 9, 2008 3:11am
Quoting spieler
Look at the 3 graphes eur/usd usd/chf and eur/chf : 4 hours or 1 hour candells are ok.

A raisonable entry point is when a divergence appeas on eur/chf .

The more you wait the safer you are but the less number of trades you are going to make.

In theory ( only) the divergence is suppose to stop and go back to neutral as the correlation is strong.
Many thanks Spieler for your explanations!

I haven't understand what you mean under "divergence".
Is this maybe the divergence between EURUSD/USDCHF and EURCHF (triangular arbitrage)?
  • #180
  • Jul 9, 2008 3:12am Jul 9, 2008 3:12am
Quoting brucech
If you read what he wrote above--- you will see he already answered you.
If you read what I wrote above--- you will see that I was asking him to explain the very statement you say answers my question.

spieler, depending on your broker, you're right, rollover can be better when buying the pairs separately. I don't buy the psychological advantage bit, but I can see how you might be able to scalp a few pips by cutting one of the legs without paying extra spread. However, that exposes you to USD so your method is no longer entirely USD-neutral.

Anyway, thanks for the explanation, and good luck.
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