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Zeusjoes Market-Neutral Hedge Strategy

  • #201
  • Jul 9, 2008 8:12am Jul 9, 2008 8:12am
The ratio of 1.5 lot usd/chf to 1 lot eur/usd doesn't precisely make you market neutral right? It got to be 1.5xxx to 1 I guess.
So even the pair correlation stays the same, the price movement in them can give you some money loss as they cannot balance each other well enough.
So is this kind of loss negligible?

I said that you had to ajust from time to time 1 to 1,5 is acceptable
if you trade with oanda for exemple you can do 1 and 1,57 today

To find 1,5 or1,57 you just have to find the ratio making usd market neutral very easy

Also, when I look at the eur/chf, I can see it doesn't really always have a sideway movement (i.e. they seem to have a trend in the long run, eur is worthing more and more compared to chf in the first half of this year). So their correlation seems to be unstable, making usd/chf and eur/usd cannot be hedged sometimes?

I said in my first post not to check on a long term basis as you need to adjust sometimes. You dont have to say for exemple 1 year ago euro/usd was xxx and usd/chf YYY and eur/chf zzzz so things should be the same now.
That means that you cannot take a position and keep it 1 month or 1 year.
Every day is an other day and forget about the 2 days ago correlation

I was sleeping lol i missed the short we went to +0,25% divergence and are back to 0,16 now
  • #202
  • Jul 9, 2008 8:14am Jul 9, 2008 8:14am
a position is long long or short short and never long short that is an outright position correlation is negativ on this 2 paires
  • #203
  • Jul 9, 2008 8:31am Jul 9, 2008 8:31am
Thank you for your explanation spieler
I understand much better now

Talking about correlation, we got to have a reference point where we assume the divergence is zero there, and then all current +/-% divergence we calculate would be comparing to that "starting point".

You advice us to forget about the 2 days ago correlation, so how far would you go back to find a proper reference point usually? Just use yesterday close? Or would there be a dynamic way to calculate the divergence %?
  • #204
  • Jul 9, 2008 9:09am Jul 9, 2008 9:09am
You advice us to forget about the 2 days ago correlation, so how far would you go back to find a proper reference point usually? Just use yesterday close? Or would there be a dynamic way to calculate the divergence %?

You can start to work with yesterday close and then add some dynamic things such has if yesterday finished at +0,30 you wil wait more for a long than for a short.

This is enough to be profitable so far
  • #205
  • Jul 9, 2008 9:21am Jul 9, 2008 9:21am
Quoting dreamtrader
Thank you for your explanation spieler
I understand much better now

Talking about correlation, we got to have a reference point where we assume the divergence is zero there, and then all current +/-% divergence we calculate would be comparing to that "starting point".

You advice us to forget about the 2 days ago correlation, so how far would you go back to find a proper reference point usually? Just use yesterday close? Or would there be a dynamic way to calculate the divergence %?
aNY STARTING POINT IS CHANGING!
Sorry!
Where do you think correlation was perfect in the past?
Could you point a specific date?
NO
So, everything is in movement
That's why you don't have to look in the past....too much
I don't say
  • #206
  • Jul 9, 2008 9:30am Jul 9, 2008 9:30am
Quoting spieler
You advice us to forget about the 2 days ago correlation, so how far would you go back to find a proper reference point usually? Just use yesterday close? Or would there be a dynamic way to calculate the divergence %?

You can start to work with yesterday close and then add some dynamic things such has if yesterday finished at +0,30 you wil wait more for a long than for a short.

This is enough to be profitable so far
What charting service do you use?
Metatrader didn't provide this info (+/- %)
I don't say
  • #207
  • Jul 9, 2008 9:43am Jul 9, 2008 9:43am
Quoting spieler
You advice us to forget about the 2 days ago correlation, so how far would you go back to find a proper reference point usually? Just use yesterday close? Or would there be a dynamic way to calculate the divergence %?

You can start to work with yesterday close and then add some dynamic things such has if yesterday finished at +0,30 you wil wait more for a long than for a short.

This is enough to be profitable so far
Spieler,

Divergence % for the choice of direction Long Short
Is it -25% for Long
and +25% for Short

Is that how direction for entries are deternined?

Bruce
  • #208
  • Jul 9, 2008 10:07am Jul 9, 2008 10:07am
Quoting brucech
Spieler,

Divergence % for the choice of direction Long Short
Is it -25% for Long
and +25% for Short

Is that how direction for entries are deternined?

Bruce
This is the way I understand ti too
If diff negative, then buy both pairs, diff negative then sell both.
Is this correct Spieler?
Hm, r u from Germany?
I don't say
  • #209
  • Jul 9, 2008 10:08am Jul 9, 2008 10:08am
I use prorealtime or e signal

Think of spread trading as a rubber band or as a vibrating machine

Once you stretch it is is supposed to go back and sometimes goes further the other way unless it breaks

So -0,25% means going long yes waiting correlation to take its revenge
  • #210
  • Jul 9, 2008 11:33am Jul 9, 2008 11:33am
Hi spieler,

Thanks for helping to explain more about spread trading. Right now we are in the process of learning how it all works.

Could someone using MT4 platform post a current screenshot of a trade they took and mark it showing the entry time and exit and what the correlation was at the time.

Also, is anyone using Mataf to get the correlations? If not, where can you get them?

This seems more confusing the more I learn about it, but it should be fairly simple once you get the hang of it.

I want to keep working on this until I really understand it because I think it can be very profitable like spieler says.

pd
  • #211
  • Jul 9, 2008 11:44am Jul 9, 2008 11:44am
Quoting dragosd1
What charting service do you use?
Metatrader didn't provide this info (+/- %)
Can some one make an indicator for Metatrader that could show these divergence +/-% ?
  • #212
  • Jul 9, 2008 1:05pm Jul 9, 2008 1:05pm
Quoting brucech
Can some one make an indicator for Metatrader that could show these divergence +/-% ?
Here have you an EA, but without trading orders...!
I hope I have understood the formulas.
.
Attached Image (click to enlarge)
Click to Enlarge Name: eurchf_hedge.gif Size: 7 KB
Attached File(s)
File Type: ex4 SpielersHedge EA_v1.ex4   9 KB | 1,158 downloads
File Type: ex4 NeutralHedge MACD.ex4   5 KB | 1,283 downloads
  • #213
  • Jul 9, 2008 1:58pm Jul 9, 2008 1:58pm
Spieler

Thank you for the very nice explanations, we are ready to learn more from you.

Regards
  • #214
  • Jul 9, 2008 2:33pm Jul 9, 2008 2:33pm
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.
Had to improve this EA for closing manually entered Hedge orders. Point value on second symbol was wrong.

The default setting is for the combination GBPJPY versus EURJPY with a 20 pip profit value, just for trying. Of course you can use this for any combination. Read my previous post for more information.
Attached File(s)
File Type: mq4 #PH#HedgeAndTP#06.mq4   5 KB | 734 downloads
  • #215
  • Jul 9, 2008 2:51pm Jul 9, 2008 2:51pm
I have use it (the previous version) ,but it has some bugs, I think, as it had closed twice the pairs like -48/+10, so, in total loss, so I disable it.
This is a new version?
I don't say
  • #216
  • Jul 9, 2008 3:20pm Jul 9, 2008 3:20pm
Quoting dragosd1
I have use it (the previous version) ,but it has some bugs, I think, as it had closed twice the pairs like -48/+10, so, in total loss, so I disable it.
This is a new version?
if you are referring to post 214, then yes. But as always, you must demo test it first.
  • #217
  • Jul 9, 2008 3:26pm Jul 9, 2008 3:26pm
Quoting SwingMan
Here have you an EA, but without trading orders...!
I hope I have understood the formulas.
.

Previously today it signaled a successful short trade.

It just signaled a long:

EUR/CHF was at 0%
Eur/USD = +.50%
USD/CHF = -.50%

These are all give or take .02% or so.

Doesn't that indicate a balanced situation?

Does that show any kind of divergence? I wouldn't think it does. Maybe I need to restudy the concept.

Thanks
  • #218
  • Jul 9, 2008 3:48pm Jul 9, 2008 3:48pm
Quoting billbss
Previously today it signaled a successful short trade.

It just signaled a long:

EUR/CHF was at 0%
Eur/USD = +.50%
USD/CHF = -.50%

These are all give or take .02% or so.

Doesn't that indicate a balanced situation?

Does that show any kind of divergence? I wouldn't think it does. Maybe I need to restudy the concept.

Thanks
You must waaaait.

- The EA show the trend direction e.g "long trade" for divergence < setted limit = 0.25%.
- When the divergence is over 0.25%, you'll see "LONG trade" and a vertical arrow.
  • #219
  • Jul 9, 2008 3:50pm Jul 9, 2008 3:50pm
Quoting SwingMan
You must waaaait.

- The EA show the trend direction e.g "long trade" for divergence < setted limit = 0.25%.
- When the divergence is over 0.25%, you'll see "LONG trade" and a vertical arrow.
I see.

Thanks
  • #220
  • Edited 7:22pm Jul 9, 2008 7:04pm | Edited 7:22pm
Now we can wait the trading signals!
The EA take trades on three levels: 0.25%, 0.45% and 0.65% (first level + step 0.20%), and close the trades on null.
I hope they arn't to many bugs in the EA!
.
Attached Image
Attached File(s)
File Type: ex4 SpielersHedge EA_v2.ex4   14 KB | 1,194 downloads
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