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Zeusjoes Market-Neutral Hedge Strategy

  • #321
  • Jul 15, 2008 3:48pm Jul 15, 2008 3:48pm
Quoting PistolDave

I'm trying to see if this is an accurate real time prediction of the profit in pips that will result when the threshold reverts back to zero. If it is accurate then you could get an EA that would close the positions when the profit is at the amount predicted by the threshold value or more. As mrkam has mentioned, the tricky part is to determine this zero point.

Anyway take a look at the charts and you will see the entry and the values for the threshold and what I am expecting as the profit from these trades.

I'll post again soon with a view of what this has done after a few hours.

Hi !

I had a trade going on since yesterday 4:00 gmt (short EJ/long GJ 4hr).
With a period ratio of 200 the "hedge range" was at about 210. exit today at range about 40 but only 80 pips profit (instead of 170 as i would have expected). I played a bit with the indicator and pairs and found out that it was absolutely accurate for EU/GU 4hr yesterday 0:00gmt (showed a range of 160 accurate to the pip +160 by the time range was zero). I really wonder what makes the difference there!! Also, The EJ/GJ range of 210 was shown on the GJ chart with EJ-overlay. When i switched to EJ-chart with GJ-overlay it was only 166 range.

So I´m fine with the indis for EU/GU but I´d really love to knoe whats wrong with the yenpairs. any ideas anybody ??
  • #322
  • Jul 15, 2008 5:34pm Jul 15, 2008 5:34pm
Here is a shot of where I entered on the EURUSD vs USDCHF and another trade on the GBPUSD vs USDCHF hedge pair.

Note the red vertical line marking the time I entered. Also see the vertical yellow line showing the price spread (threshold value) at the time of entry. The yellow x's are about the area price was at at entry on these charts. I also placed some horizontal blue lines that intersect with the price lines as they were on the chart at this time. I will post them again in a few hours and see if the price lines have changed position on the charts as we have suspected.

I'm trying to see if this is an accurate real time prediction of the profit in pips that will result when the threshold reverts back to zero. If it is accurate then you could get an EA that would close the positions when the profit is at the amount predicted by the threshold value or more. As mrkam has mentioned, the tricky part is to determine this zero point.

Anyway take a look at the charts and you will see the entry and the values for the threshold and what I am expecting as the profit from these trades.

I'll post again soon with a view of what this has done after a few hours.


This trade will not work these are opposing pairs therefore you should sell both pairs or buy both
  • #323
  • Jul 15, 2008 6:25pm Jul 15, 2008 6:25pm
Nobody ever claimed this is a "hedge" trade, at least in the traditional sense. But it IS two directional trades of two CORRELATED pairs. They are loosly "synched" each other, and it is exactly that VARIABLE synchronization we are trying to take advantage of. This has been our discussion for weeks now.

GU/EU and GJEJ are Buy/Sell or Sell/Buy pairs, EU/UChf is Buy/Buy, Sell/Sell, both because of their positive or negative correlation. I think we all get that...

And yes, PD, for some reason, the Yen pairs calc a bit oddly on the Oscillator... don't know way... I am concentrating on getting the GUEU to be consistent for now!!
  • #324
  • Jul 15, 2008 6:39pm Jul 15, 2008 6:39pm
Check out the changes here...
Attached Image(s) (click to enlarge)
Click to Enlarge Name: market-neutral hedge 3a.gif Size: 65 KB
Click to Enlarge Name: market-neutral hedge 4a.gif Size: 65 KB
  • #325
  • Jul 15, 2008 6:47pm Jul 15, 2008 6:47pm
Quoting PistolDave
Check out the changes here...

This is not neutral hedge correlation.....
I don't say
  • #326
  • Jul 15, 2008 7:05pm Jul 15, 2008 7:05pm
Quoting Angler
Hi....

I dont think these systems have been tested long enough to be starting to add indictors...

Can we keep this thread clean....by that I mean stick to the basic syetem

But if someone has an alternative idea...maybe starting another thread.
  • #327
  • Jul 16, 2008 7:18am Jul 16, 2008 7:18am
mrkam

now that you noted that the version 3.3 repaints will you write a new indicator or will use the version 3.1?

after your message about the repaint inssue in the 3.3 i don't know wich version to test...

thanks in advance
  • #328
  • Jul 16, 2008 9:32am Jul 16, 2008 9:32am
Yes, we are trying to come up with a non-repainting indicator... we'll see.

The other thing we are doing is using the real-time indicator values for entry/exit, and testing for performance. The only thing the "past" bars do is allow us to back-check with more accuracy.. and of course it would be great if an indicator bar closed at value = 106, and it STAYED value = 106 through it's life on the indicator, but in reality, if the indicator is accurate in realtime, then it doesn't matter to the trading EA what happens as it ages. That is, if 106 is a good number, and we enter at 100, then we enter. If it goes to zero, and zero is a good number, then we exit. It doesn't matter if the entry bar repaints to 40, or 400 for that matter, we have executed the trade.

Now, whether or not it will be consistently profitable, (or losing) is another matter!! and that is the testing I am looking at. But, it is not easy, still pre-beta with my EA, so I am not getting accurate trades yet on that end...

It all takes time, and nothing to be rushed.
  • #329
  • Jul 16, 2008 9:34am Jul 16, 2008 9:34am
Quoting dragosd1
This is not neutral hedge correlation.....
I agree.

This trading strategy is quite different than the one that was described on the first posts as "Market-Neutral" hedge strategy.

I don't know if you would even call this a hedge in that sense. More like a convergence/divergence of price between two pairs. Or correlation oscillation that is measured by the indicators on the chart. I'm not really sure at this point what to call it. But since it developed here, I'm testing it to see if it is profitable.

The strategy that branched off from this thread that is more like a hedge is being developed on the thread at:

"Hedge trading spieler system derived from futures spread trading"
http://www.forexfactory.com/showthre...81#post2112581

They seem to be making some progress in that direction and SwingMan has developed an EA for trading it, but so far it hasn't worked that well for me. I am still testing both ways of trading and posting the results.

What kind of results have you had with either strategy?


pd
  • #330
  • Jul 16, 2008 10:13am Jul 16, 2008 10:13am
See the chart below at 17:00 where the indicators crossed. I closed half of my position in EURUSD vs USDCHF at the hedgeRange = 0 point. I'm going to let the other half ride to see how far it will go.

pd
Attached Image (click to enlarge)
Click to Enlarge Name: market-neutral hedge 3b.gif Size: 63 KB
  • #331
  • Jul 16, 2008 11:26am Jul 16, 2008 11:26am
Quoting PistolDave
See the chart below at 17:00 where the indicators crossed. I closed half of my position in EURUSD vs USDCHF at the hedgeRange = 0 point. I'm going to let the other half ride to see how far it will go.

pd
PistolDave, could you make a template of your settings and post this? Thanks.
  • #332
  • Jul 16, 2008 11:48am Jul 16, 2008 11:48am
Quoting fewhills
PistolDave, could you make a template of your settings and post this? Thanks.
Hi fewhills,

I'm using NeutralHedge Overlay_v3 and NeutralHedge osc_v3.3 in this template. It also has an indicator iParamonWorkTime that makes those light colored bands that show the hours that the London opens/closes and the NY opens/closes. If you don't have that, don't worry it's not part of this anyway.

pd
Attached File(s)
File Type: tpl 01 - market-neutral hedge.tpl   9 KB | 904 downloads
  • #333
  • Jul 16, 2008 12:05pm Jul 16, 2008 12:05pm
Quoting PistolDave
Hi fewhills,

I'm using NeutralHedge Overlay_v3 and NeutralHedge osc_v3.3 in this template. It also has an indicator iParamonWorkTime that makes those light colored bands that show the hours that the London opens/closes and the NY opens/closes. If you don't have that, don't worry it's not part of this anyway.

pd
Great! Thanks PistolDave.
  • #334
  • Jul 16, 2008 5:27pm Jul 16, 2008 5:27pm
I'm closing the first half of the GBPUSD vs USDCHF now at 00:00 time. HedgeRange is about zero in osc_v3.3 indicator window. As in the EURUSD vs USDCHF pairs, I will close this half and let the other half of this position run to see how far it will go.
Attached Image (click to enlarge)
Click to Enlarge Name: market-neutral hedge 4b.gif Size: 64 KB
  • #335
  • Jul 16, 2008 6:25pm Jul 16, 2008 6:25pm
Did anyone catch that big move on GBPJPY vs EURJPY pairs today?

At least 120pips possible profit so far.

Too bad I didn't notice it early enough.

That's OK... there will be more.
  • #336
  • Jul 16, 2008 9:17pm Jul 16, 2008 9:17pm
Quoting PistolDave
See the chart below at 17:00 where the indicators crossed. I closed half of my position in EURUSD vs USDCHF at the hedgeRange = 0 point. I'm going to let the other half ride to see how far it will go.

pd
hi PD,

is there any specific number of hedgerange or treshold that indicate it is "good time" to enter the market?
around +\- 300 maybe for hedgerange?
  • #337
  • Jul 17, 2008 1:46pm Jul 17, 2008 1:46pm
Quoting Andrie
hi PD,

is there any specific number of hedgerange or treshold that indicate it is "good time" to enter the market?
around +\- 300 maybe for hedgerange?
Hi Andrie,
I'll try to explain what I consider a "good time" to enter a trade using this strategy and how to limit the risk.

This is a trade I placed earlier today. Let's use it as an example. It is in profit about 70 pips in this chart below. The red vertical line is where I entered.

Why did I enter there? Only because I happened to notice it earlier but I was busy with some other trading and I forgot about it.

When I looked at it again it still was an acceptable trade to enter by the rules and so I jumped in. That shows that there is many times a "window" of opportunity to enter/exit with this method instead of a very specific time to get in and out.

Allow me to give you some details about this setup...

The HedgeRange (histogram) was about 240 at my entry point -- and now the HedgeRange is about 140. The difference in the pips is about 85 including bid/ask spread. So the price change and the HedgeRange are not exactly the same -- but they are close enough to give you a good sense about when to enter and exit. The Threshold is 163.5

More to the point of your question, there is no truly "exact" way to tell when is the best time to enter. It is more a matter of probabilites. But so far I have seen the edge is definitely in your favor if you do enter near the right time.

Here is how I decide what is the right time:

The value you set the Period_Ratio at determines the upper and lower boundaries of the channel (gold lines). This gives you a general idea of what kind of variation to expect from the prices over that period of time. I have mine set at 205 which gives you a reasonable range.

So you have a good (not exact) idea of how much over the last 205 bars the prices have deviated in relation to each other.

I haven't found any way to know with certainty how high/low the prices will go before they turn back, but that's where the Threshold helps you. You definitely don't want to take a trade until the HedgeRange histogram has gone outside the Threshold boundary, and the closer to the channel boundaries (gold lines) you can enter the less risk and more potential profit there is.

So, that's it... Histogram outside the Threshold and price close to the channel boundaries. That's the way I see it. Wait for that setup and you will have the best R/R you can have in this system.

That's about as specific as I can be at this time. Try it on a demo for some time and you should start to get a good sense about how far the price will go before it turns. (But be sure to place a stop, say about 100-150 pips away on each pair just in case. )

I know that's not a very exact answer for you, but I can't be too much more specific. This is a totally different method than what I've done before so I'm a learner too.

PD
Attached Image (click to enlarge)
Click to Enlarge Name: market-neutral hedge 5.gif Size: 37 KB
  • #338
  • Jul 17, 2008 2:07pm Jul 17, 2008 2:07pm
Trading this method seems to be too tricky on yen pairs. I entered a trade today EUR/JPY GBP/JPY on the hourly chart hedge range was 130. Its 60 now but i´m down about 50 pips. And i´m sure i did enter the right direction !

Also i notice Oscillator v3.3 repainting because know i don´t see a hedge range of 130 anywhere anymore. I might keep with EU GU next time.
  • #339
  • Jul 17, 2008 3:09pm Jul 17, 2008 3:09pm
Quoting DanFX
Trading this method seems to be too tricky on yen pairs. I entered a trade today EUR/JPY GBP/JPY on the hourly chart hedge range was 130. Its 60 now but i´m down about 50 pips. And i´m sure i did enter the right direction !

Also i notice Oscillator v3.3 repainting because know i don´t see a hedge range of 130 anywhere anymore. I might keep with EU GU next time.
This "repainting" or changing of the overlay line is the main problem with this system. I really hope we can find some way to overcome it. It would make this much better if you could be sure what you are seeing on the chart is exactly what was there a few days/hours before.
  • #340
  • Jul 17, 2008 3:16pm Jul 17, 2008 3:16pm
I have seen the same thing happening today with eurjpy gbpjpy

Quoting DanFX
Trading this method seems to be too tricky on yen pairs. I entered a trade today EUR/JPY GBP/JPY on the hourly chart hedge range was 130. Its 60 now but i´m down about 50 pips. And i´m sure i did enter the right direction !

Also i notice Oscillator v3.3 repainting because know i don´t see a hedge range of 130 anywhere anymore. I might keep with EU GU next time.
Inflation in things we need, Deflation in things we want.
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