Dear Spieler and Thread,
Though the MM remains the very most important part of this model, as Spieler says again and again, nevertheless, the second most important feature seems to be one's point of entry and, hence, where one begins the MM progression. There is more of a trend component to this "hedge" than you realize until you trade it live. Therefore, what Spieler calls watching the "pace" of EURCHF becomes paramount. Use S/R levels (that's what I do) to begin the trade, use MAs, but some sort of judgement is needed. The market is paying you for your judgement, not for the mechanized part of the model. We're doing some research on surviving trend runs against you with this strategy and will post what we find. Not yet being terribly exact, you might need to be able to survive possible 500 point runs against your position. I'm thinking that a modified Martingale (see FXTradePro on FF) would help here. A question for Spieler: if you look on MATAF.net at the correlation table, you'll see that the daily correlation for EURUSD/USDCHF is
-91 whereas the dailly correlation for CHFJPY/EURJPY is 95.9. You said that you don't like using the JPY hedge, that it is too volatile, but if USD is hedged out in your trade and JPY is hedged out in the other trade, why should one trade be more volatile than the other? (On an hourly basis, the EURUSD/USDCHF correlation is only -67.9 whereas the CHFJPY/EURJPY is 97.2). In short, why couldn't you adjust lot sizes to hedge out the JPY and hedge out the vols and trade that more correlated hedge?
Thanks so much, Spieler. Your efforts are greatly appreciated.
Lenoxer
Though the MM remains the very most important part of this model, as Spieler says again and again, nevertheless, the second most important feature seems to be one's point of entry and, hence, where one begins the MM progression. There is more of a trend component to this "hedge" than you realize until you trade it live. Therefore, what Spieler calls watching the "pace" of EURCHF becomes paramount. Use S/R levels (that's what I do) to begin the trade, use MAs, but some sort of judgement is needed. The market is paying you for your judgement, not for the mechanized part of the model. We're doing some research on surviving trend runs against you with this strategy and will post what we find. Not yet being terribly exact, you might need to be able to survive possible 500 point runs against your position. I'm thinking that a modified Martingale (see FXTradePro on FF) would help here. A question for Spieler: if you look on MATAF.net at the correlation table, you'll see that the daily correlation for EURUSD/USDCHF is
-91 whereas the dailly correlation for CHFJPY/EURJPY is 95.9. You said that you don't like using the JPY hedge, that it is too volatile, but if USD is hedged out in your trade and JPY is hedged out in the other trade, why should one trade be more volatile than the other? (On an hourly basis, the EURUSD/USDCHF correlation is only -67.9 whereas the CHFJPY/EURJPY is 97.2). In short, why couldn't you adjust lot sizes to hedge out the JPY and hedge out the vols and trade that more correlated hedge?
Thanks so much, Spieler. Your efforts are greatly appreciated.
Lenoxer