Zeusjoes Market-Neutral Hedge Strategy

FXFORCE has posted a couple of indicators that determine the relative strength of the individual currencies. It might be a good idea to start this indicator when the currencies in question show parity. We can determine that by looking back at his indicator.

Hi billbss,
May i know what is FXFORCE (name?)
Thanks.

I've done something in Excel, this are 59 M5 bars for EU/GU.
All indicators repainting because they are build like I build it in Excel, cumulative number of bars range.

We need indicator, in which we can set date from which range bars will be calculated. But what time it should be? Different times, different market picture.

But there will also be different entry and exit points, so this is very interesting.

There could be also this situation, that if we set time e.g one week ago and calculate the bars, then we could have exit signal (line cross e. g.) but if we set time to 2 weeks ago, then we could get entry signal because of interesting wide spread between two pairs.
Most important then will be exit at the same time set, as entry.

OK... here is where our discussion can really be valuable.

My indicator is just that, an indicator. I want to start REALLY simple, and work from there. Now, we can "see" the currencies move closer and further apart. We can start to build a method to capitalize on this movement.

Several questions need to be addressed:
1) Whether to buy or sell a particular currency.

2) When to enter.. .as mentioned above, there is a whole string of "long" bars showing us the prices are far apart. We can look back as far as we want with the indicator and see how this distance relates to the past.

Since they are "far" apart, we have a greater probabilty that they will now move "closer", so it is THAT probability that we trade. If we enter, and they move farther apart, that is our risk, and our virtual Drawdown. We should have a stop in place because ALL correlations WILL breakdown, and re-establish themselves at some point. But as it moves further apart, generally, we have increased probability of the gap closing.

Specifically, on the above note, with a whole lot of long bars, it says to me the currencies have "settled" a bit, and that they "probably" won't shoot off further apart. Kind of like a pendulum. The have "swung" apart, and now sort of hanging up, ready to swing back to the middle, or back to shorter bars. I would see that as a good place to enter.

3) When to exit. We can exit at the Zero Line, or wait for the bars to "swing" to the shorter side. I see the ZeroLine as a conservative exit, and the Shorter side as a more aggressive exit. Or we can exit at a fixed profit, whatever you think you want to go for... (again, all has to be developed.)

My personal approach from here will be:
1) Try to determine a method for an entry threshold. If you look at the indicator, with some past history, and sort of scrunch your eyes, you can sort of "feel" a good entry area...

2) I will exit at ZeroLine.

3) Work on a method for determinining which to buy, which to sell. I will start with the NeutralHedgeOscillator indicator. It repaints, but I am not using it for the length of the bars, only the color... BillSS mentions some other indicators. We all can contribute here. This perhaps will be toughest part of this method.....

4) Work with only the GU/EU SynchPair right now... (I like simple!!)

Thanks all for your support and help. I still think this is a unique approach, not tried by many, and certainily not addressed with custom indicator/EA programming to date.

OK, last example for me.... then I will let you guys talk!! (I've been a thread hog recently!!)

Here is another example, taken on the "short bar" end of things, and using the SwingMan indicators for trade directions... 15m chart, quick 29p net profit!

Please look at this:

Idea is to have trade opportunity all the time. Only what we have to do is to changing time when start the calculation.

Look at pictures below, first calculation start from 12:35 GMT+1 for M5 candles. Values of each point are differences between O-C (+ digit if candle up, - digit if down) then they are add to previous one and so on, hope you get it. So in first picture we've got opportunity to SELL EU and BUY GU and it's correct.
Here is the trick, if we start calculate values in different point in time (in second picture it's 15:10 GMT+1), then picture of the market is completely different and now we've got opportunity to BUY EU and SELL GU which is also correct (I know that the spread between pairs is small but it's only example).

That could means that always are trading opportunities, and the trick is to find the best starting time for calculations. And entry end exit must be at the same calculation time. So if it will work, then we don't have to search different currancies but only different time.

Hope it's understand, sorry for my english

We are on the same track!!! Working to find a way to represent the corresponding price movements of two currencies. Your approach of plotting the difference between open and close for each currency is really interesting! You end up with a chart of the MOVEMENT of each currency over the 5m time period.

I think I can get this coded! But, I need to think about the calcs a bit more... Would it be possible for you to post a link to your spreadsheet, or PM me for my email, and email it to me?? This is very interesting. A different way of looking at the same thing. The SynchBar indicator shows this price relationship as well, also in a very simple way, but needs another way to determine which to buy and sell. I need to see how you plot your data, where to start your series, etc...

thanks for the idea....

Here is the link for spreadsheet: http://www.sendspace.com/file/d6i12e

Please check this indicator, I think is not identical with magictrader calculations...
.

hello Swingman,
Thanks for your great indicators.Where can I get your price idifference indicator thays on your last post 389,
thanks and cheers
Dave

I've completed yesterdays calculation till todays morning, and here it is what I've got. It looks that the spread between pairs is not so important. I've randomly selected some points and sometimes when spread was about 25 pips, gain on cross was 6 pips. But when spread was about 60 pips, then gain was about 85 pips. So sometimes gain is bigger then spread, sometimes smaller. I don't know what relationship cause it. But what is important, it looks that there is no possibility to loose if we get transaction in some spread, and then on cross (it seems) we will always have some profit (maybe because of it not repainting). Relaying on that will be some cross in the the future.

One more thing for Overlay, or SwingMan's indicators which are great (I've made over 500 pips in 5 days with maximal drawdawn about 140 pips).
Sometimes when we see some good spread for transaction, then on cross we could loose. In my strategy I've add position when the first is loosing about 15-20 pips, then wait what happen. If next position loosing then wait for 15-20 pips loose and add next position and so on. My record 14 open positions (7 long, 7 short) because of early entry. And then your next positions will cover the lost from first transactions.

magic

can you please port some charts and the indicators that you are using for this.

to keep adding position averages every 20 pips or so... are not paying too much spread/slippage for each trade?

For Excel it was not indicator, just manually I've add difference between open and close of each 5 minute candle on EU and GU. Then I've made cumulative series and here is the chart. On previous page is link to spreadsheet.

I've made summary from monday, I've earn 358 pips in 74 transactions using NeutralHedge indicator by SwingMan..
Is it good or bad result? For me it's very good.

which indicator you using from swingman - as there were some that were repainting.

Yes that seems the logical thing that you have done on the spreadsheet, I will download and take a look at that.

I use NeutralHedge Overlay_v3 and NeutralHedge osc_v3.4 with very usefull alarms.

I trade basically on EU/GU and UCHF/UJ on M5 TF, sometimes on M15.

I'm waiting for about 30 pips HedgeRange, and then as mention earlier I build up my positions. PeriodRatio is set to 205 as PistolDave has it.

We can use DDE and extract this information from MT4 rather than inputting it manually - what do you think?

Live streaming of data from MT4 to selected cells in Excel of every selected time frame will be good. I don't have possibility to use different program, cause I'm not a programmer and I don't know how to do it simpler

I don't know is this way of comparing two pairs is better from what we have now, but we could test it. If we have time, close prices and no repainting then it is easy to do the backtest.

And one more clue for smaller timeframes, the best way to compare candles will be close price - previous close price because of sometimes opening 2-3 pips gaps.
On larger timeframes it is not so big difference.

I will send you a quick link, I am looking for it now.

right ok -

http://www.forexfactory.com/attachme...02008%208:28pm

this from brians rollover strat - on forex discussion forum.

a guy called hornet (michael) created this spreadsheet that extracts the info from MT4 using DDE.

I do not know much about programming excel, but this could be a start?

I supposed this question is answered somewhere, but this thread grew too big =D. So, i'm used to Long/Short strategies like this one in the stock exchange... usually do a couple per month. But on Forex e was afraid that egtting short at EU and long at GU would mean getting short at EurGbp. So this is not true, right? When i do what is suggested here i'm actually betting on the volatility of these pairs, which is by no means the same thing of shortening the Eur/Gbp. Am i right?


thank you in advance