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Hedge trading spieler system derived from futures spread trading

  • #861
  • Aug 1, 2008 11:54am Aug 1, 2008 11:54am
There has been much debate as to the comparison between spieler's hedge and outright trading EUR/CHF.

Outright EUR/CHF trading offers more gains and more losses depending on whether you are on the right or wrong side of the trade.

The hedge option offers less losses (when price is going against you), and less gains (when going your way) - as opposite leg is cancelling some of your losses/gains.

I personally prefer the hedge as it equates to a more comfortable trading experience - in other words, MUCH LESS STRESS...

As spieler had said before, a very important part of this straegy is watching EUR/CHF's momentum as if this pair is trending, causing continuous lot additions(+/-.50%,+/-75%+/-1% etc) losses could easily add up.

respec
  • #862
  • Aug 1, 2008 12:51pm Aug 1, 2008 12:51pm
May I ask the thread how many positions they are able to trade in and out of in a week? 3,4,5, more?

Thanks,

Lenoxer
  • #863
  • Aug 2, 2008 3:16am Aug 2, 2008 3:16am
Hi Spieler,

Basically, I find the system is quite easy to follow. After trading live, I see how the basics work. Apparently after going into more indepth understanding, basically there risk involvement. As what Sp!3l3r has mention, is a
good strategy for not glueing into the market at all times. But I have few things I need to clarify more towards worst case scenario understanding.

1. Basically, we do require more margin to sustain during big decorrelation. Under normal circumstances this value maybe -1% or 1%. So during this decorrelation period, what are the average pips that we are to estimate losing ( floating ) base on 4Lots.

2. Will the decorrelation decrease to -2% and below or increase +2% and above. Under what circumstances will this situation take place ?

3. During the entry period, We able to follow the swingman divergence for indicator. But at the same time, are we comparing the entry from 1hr and 4hr to indentify the trend for the entry decision. How or do you able to identify
the happening of big decorrelation period.

4. What if the decorrelation is really a big melt down or up which what happens like february. Are we still carrying the trades to rollover until we balance out or cut the lesser losing or until we gains minimal profits.

5. About the swingman divergence 3 or the EA, can I follow the divergences percentages accurately or I shall recalculate the closing price manually. At this point, I'm not sure about the yesterday closing and today closing as
I had hard time discovering the actual pricing base on GMT. I'm using IBFX.

Can anyone assist me on this.

I'm looking forward to test out this system together as I dont think I'm in a suitable position to handle margin during the big decorrelation. So to me still a big risk. Therefore, I should never attempted to try on live unless I'm confident enough and increase my sustainable margin. But I'm interested in how far can this system can produce.

Thanks in advance, Sp!3l3r. 3sp3c!@lly, in sharing this loveable technique.
Banker please return my pipins.
  • #864
  • Aug 2, 2008 7:38pm Aug 2, 2008 7:38pm
Lenoxer

depends on what you call a position.
For me a position can be several trades ( 0.25, 0.50 etc,,,)

Usually, but last 2 weeks have not been representating, we have between 3 and 6 positions but that is not important because a position built with 3/4 lots but with inside 2 in out for exemple can give hundreds of pips.
So it is more the volatility of the position that matters than the number of them.


dont like these following long questions at the end i dont remembrr the beginning

#1. Basically, we do require more margin to sustain during big decorrelation. Under normal circumstances this value maybe -1% or 1%. So during this decorrelation period, what are the average pips that we are to estimate losing ( floating ) base on 4Lots.#

imagine eur/usd looses 155pips ( basically1%) and usd/chf dont moove , eur/chf will be close to -1% so you will have 3 loosing positions and 1 even ( the last entered at 1% in your question even if i have already said to wait 0.50% more for the 4th one which should be 1.25% but let continue with your figures)
first position will lost 40pips with spread
2nd 80
3rd 118
that is a potential total of 238 pips loss.

BUt this does not represent a reallity because your question does not take into account my money management.

Exemple i said you are in long at +0.25% we close at +0.15 next day you have to wait 0.25% so at the end in real you almost never get 0.25/0.50/0.75 entries.
Then you mean a 1% movment without any pull back to let us scale in /out.



#2. Will the decorrelation decrease to -2% and below or increase +2% and above. Under what circumstances will this situation take place ?#

You just have to do the maths and check if that situation have arlready happened and do leverage in correlation.

#3. During the entry period, We able to follow the swingman divergence for indicator. But at the same time, are we comparing the entry from 1hr and 4hr to indentify the trend for the entry decision. How or do you able to identify
the happening of big decorrelation period. #

I follow 1h compared to 1h or 4 compared to 4. One day i posted a graph with 1/4 was an error and i dont know if the ea is based on 1/1 4/4 or 1/4.
Anyway as we speak in term of % that does not matter at all.

#4. What if the decorrelation is really a big melt down or up which what happens like february. Are we still carrying the trades to rollover until we balance out or cut the lesser losing or until we gains minimal profits.#

Easy to answer: Do the job

Take february trend in 5 minutes candelsticks and trade the system taking into account the pull backs for in/out and the end of day for my MM and give us the result. I am sure it will be interesting for everybody.

#5. About the swingman divergence 3 or the EA, can I follow the divergences percentages accurately or I shall recalculate the closing price manually. At this point, I'm not sure about the yesterday closing and today closing as
I had hard time discovering the actual pricing base on GMT. I'm using IBFX. #

I know nothing about this EA
  • #865
  • Edited 10:21pm Aug 2, 2008 10:19pm | Edited 10:21pm
Every trading system has some basic assumptions. For example, trend follower system assume that their indicator shows the trend. Even facing some short term reverse, they assume trend is still there, unless hit SL, or trigger any reverse trading logic.

This "hedge" system also has some assumptions. After reading this whole article twice, using couple days, here is my understanding of some assumption of this system:

1. EURUSD and USDCHF are perfect negative correlated.
2. Even at certain time, EURCHF shows unfavorable trend, it will still have certain level reverse movement, which will help trader reduce the lost or get break even.
3. The investment model: 1 EURUSD vs 1.5 USDCHF, building a virtual EUR/CHF exchange rate at 1.0, which also reduced the possible up-down level in the future.

Based on those assumptions, the "HEDGE" investment method, use +- 0.20% movement of EURCHF as a entry point. And continue adding entries as same direction after every +-0.20% or +-0.5% position, which is similar to Fish Net approach.

So in summary, this is a reverse trend trading system, which trades EURCHF, using similar fish net money management approach.

But one surprise strong move of EURCHF will kill all open orders. It is a common risk of Fish Net. Unfortunately, using EURUSD and USDCHF makes it difficulty to use METATRADE strategy tester to do a back testing.

The occasionally success reported from forum in the last two months will only demonstrate the similar possible success of every FISH NET strategy. And we don't have a statistics result to tell the truth.

At the end, this strategy still face huge risk, if we continue adding open order on the same direction. And SL setting for whole investment portfolio will still be necessary.

< English is not my first language. Sorry for any wording issues here >
  • #866
  • Aug 3, 2008 12:12am Aug 3, 2008 12:12am
there are several days in years when the pair is decorelated...but most of them is because of the news...Check the news first before entering the position..the news is all from this website that we open everyday..
  • #867
  • Aug 3, 2008 2:15am Aug 3, 2008 2:15am
Quoting teamaker
Every trading system has some basic assumptions. For example, trend follower system assume that their indicator shows the trend. Even facing some short term reverse, they assume trend is still there, unless hit SL, or trigger any reverse trading logic.

This "hedge" system also has some assumptions. After reading this whole article twice, using couple days, here is my understanding of some assumption of this system:

1. EURUSD and USDCHF are perfect negative correlated.
2. Even at certain time, EURCHF shows unfavorable trend, it will still have certain level reverse movement, which will help trader reduce the lost or get break even.
3. The investment model: 1 EURUSD vs 1.5 USDCHF, building a virtual EUR/CHF exchange rate at 1.0, which also reduced the possible up-down level in the future.

Based on those assumptions, the "HEDGE" investment method, use +- 0.20% movement of EURCHF as a entry point. And continue adding entries as same direction after every +-0.20% or +-0.5% position, which is similar to Fish Net approach.

So in summary, this is a reverse trend trading system, which trades EURCHF, using similar fish net money management approach.

But one surprise strong move of EURCHF will kill all open orders. It is a common risk of Fish Net. Unfortunately, using EURUSD and USDCHF makes it difficulty to use METATRADE strategy tester to do a back testing.

The occasionally success reported from forum in the last two months will only demonstrate the similar possible success of every FISH NET strategy. And we don't have a statistics result to tell the truth.

At the end, this strategy still face huge risk, if we continue adding open order on the same direction. And SL setting for whole investment portfolio will still be necessary.

< English is not my first language. Sorry for any wording issues here >
teamaker-

spieler's system is NOT like a Fish Net or Grid Trading type system. Read the whole thead before talking about hugh risk.

Yes, there is a risk the same as any other system but that risk can be managed with using a good MM plan.
  • #868
  • Aug 3, 2008 4:46am Aug 3, 2008 4:46am
Hi Teamaker,

I do understand what you try to highlight. But with proper money management, taking trade that derive certain small percentages would definately do not harm. I believe there's no trading system that can deliver 100% of return investment, as a matter of fact, this system is easier to follow as compare other which involving looking in simultaneous analysis before proper entry. By using such system, it's really less hassle for entry.

The moment we have place an order or entry, there's nothing much we can do as there's always risk. Risk losing or winning. If you can achieve 99% winning streak, then I would like to congratulate you on your success. However, I doubt that you would possible to share your success with others.

Anyway, thank you for your concern.
Banker please return my pipins.
  • #869
  • Aug 3, 2008 5:16am Aug 3, 2008 5:16am
Quoting spieler
Lenoxer

depends on what you call a position.
For me a position can be several trades ( 0.25, 0.50 etc,,,)

Usually, but last 2 weeks have not been representating, we have between 3 and 6 positions but that is not important because a position built with 3/4 lots but with inside 2 in out for exemple can give hundreds of pips.
So it is more the volatility of the position that matters than the number of them.


dont like these following long questions at the end i dont remembrr the beginning

#1. Basically, we do require more margin to sustain during big decorrelation. Under normal circumstances this value maybe -1% or 1%. So during this decorrelation period, what are the average pips that we are to estimate losing ( floating ) base on 4Lots.#

imagine eur/usd looses 155pips ( basically1%) and usd/chf dont moove , eur/chf will be close to -1% so you will have 3 loosing positions and 1 even ( the last entered at 1% in your question even if i have already said to wait 0.50% more for the 4th one which should be 1.25% but let continue with your figures)
first position will lost 40pips with spread
2nd 80
3rd 118
that is a potential total of 238 pips loss.

BUt this does not represent a reallity because your question does not take into account my money management.

Exemple i said you are in long at +0.25% we close at +0.15 next day you have to wait 0.25% so at the end in real you almost never get 0.25/0.50/0.75 entries.
Then you mean a 1% movment without any pull back to let us scale in /out.



#2. Will the decorrelation decrease to -2% and below or increase +2% and above. Under what circumstances will this situation take place ?#

You just have to do the maths and check if that situation have arlready happened and do leverage in correlation.

#3. During the entry period, We able to follow the swingman divergence for indicator. But at the same time, are we comparing the entry from 1hr and 4hr to indentify the trend for the entry decision. How or do you able to identify
the happening of big decorrelation period. #

I follow 1h compared to 1h or 4 compared to 4. One day i posted a graph with 1/4 was an error and i dont know if the ea is based on 1/1 4/4 or 1/4.
Anyway as we speak in term of % that does not matter at all.

#4. What if the decorrelation is really a big melt down or up which what happens like february. Are we still carrying the trades to rollover until we balance out or cut the lesser losing or until we gains minimal profits.#

Easy to answer: Do the job

Take february trend in 5 minutes candelsticks and trade the system taking into account the pull backs for in/out and the end of day for my MM and give us the result. I am sure it will be interesting for everybody.

#5. About the swingman divergence 3 or the EA, can I follow the divergences percentages accurately or I shall recalculate the closing price manually. At this point, I'm not sure about the yesterday closing and today closing as
I had hard time discovering the actual pricing base on GMT. I'm using IBFX. #

I know nothing about this EA
Hi Spieler,

Thanks for your clarification. I believed I can digest 70% what you explaining. Perhaps I put more effort into practise. Thanks for the explaination.
Banker please return my pipins.
  • #870
  • Aug 3, 2008 5:27am Aug 3, 2008 5:27am
Hi S3ni0rs,

After what Spieler has explain, are we entering trade following swingman divergence. From my understanding, correct me if I'm wrong,

1. Day 0, swingman divergence showing -5%.
2. Day 1, 1st entry at 25% which mean our entry at swingman will be -0.5% - 0.25% (-0.30% )
3. Day 2, 2nd entry at 50% which mean our entry at swingman will be -0.30% - 0.50% ( -0.80%)
4. Day 3, 3rd entry at 75% which mean our entry at swingman will be -0.80% - 0.75% ( -1.55% )

So which mean that's after the 3rd lot, we are already heading towards a big decorrelation. which is -1.55 %. That's huge. Overally, we use swingman indicator for entry reference and not following swingman indicator precisely.

Banker please return my pipins.
  • #871
  • Aug 3, 2008 9:43pm Aug 3, 2008 9:43pm
Strategy of today:
Am still short half a lot at 163.10.
am supposed to wait 1.6269 to get out with profit.
If market is too slow perhaps i will get out before with less profit.
waiting 163.74 to put a new short ( based on friday closed end not sunday because conservative approach )

and i know nothing about the fish stuff
  • #872
  • Aug 3, 2008 11:49pm Aug 3, 2008 11:49pm
Spieler-

Do you use the same fixed lot size for all entries made to build a position or do you scale in using smaller lot sizes first. Example, 1 lot for first entries at +/-0.25, 0.50 or say anything less than +/-1.00% then moving to slightly larger lots for entries above +/-1.00%?
  • #873
  • Aug 4, 2008 12:56am Aug 4, 2008 12:56am
spieler-

Sorry, just to clarify my earlier question, I am not meaning a Martingale type scaling up. I mean do use use say half normal lot size for first entries and then move to normal lot size?

Doing this would seem logical as in a trending type situation the profit externalised on pullbacks would be bigger than the loss being drawndown by the first half sized position entries made to open the position.
  • #874
  • Aug 4, 2008 2:16am Aug 4, 2008 2:16am
Quoting spieler
Strategy of today:
Am still short half a lot at 163.10.
am supposed to wait 1.6269 to get out with profit.
If market is too slow perhaps i will get out before with less profit.
waiting 163.74 to put a new short ( based on friday closed end not sunday because conservative approach )

and i know nothing about the fish stuff

I am currently with no positions because I took profit on all lots on Friday. So now I'm waiting for 163.74 to start a new short trade, or for 1.6284 (based on Sunday close) to start a new long trade. Is that correct? Or would you wait longer for a long trade?
  • #875
  • Aug 4, 2008 2:50am Aug 4, 2008 2:50am
Hi,

I am still confused about adding new lots if the trade last more than one day. Lets say: I will enter short position on EUR and CHF when EUR/CHF is 1.5000 (+0.25%), end of day is +0.38%. Where should be next level (+0.50%)? Thanks for your help
  • #876
  • Aug 4, 2008 4:02am Aug 4, 2008 4:02am
Quoting xkuba
Hi,

I am still confused about adding new lots if the trade last more than one day. Lets say: I will enter short position on EUR and CHF when EUR/CHF is 1.5000 (+0.25%), end of day is +0.38%. Where should be next level (+0.50%)? Thanks for your help
xkuba-

Every day starts again at 0% and you must wait for a move of +0.25% on that day for your next entry. So if your entry day ended at +0.38% and you get a move the next day of +0.25% your second entry will end up at +0.63%. Hope that helps
  • #877
  • Aug 4, 2008 4:08am Aug 4, 2008 4:08am
Quoting Richard
xkuba-

Every day starts again at 0% and you must wait for a move of +0.25% on that day for your next entry. So if your entry day ended at +0.38% and you get a move the next day of +0.25% your second entry will end up at +0.63%. Hope that helps

If I understand correctly, when you only have one lot, you should place your second lot at +0.25% from the first entry point instead of waiting for a +0.25% move in one day. That is what we did on the set of trades started on July 29.
  • #878
  • Edited 4:56am Aug 4, 2008 4:28am | Edited 4:56am
Quoting pipsalot
If I understand correctly, when you only have one lot, you should place your second lot at +0.25% from the first entry point instead of waiting for a +0.25% move in one day. That is what we did on the set of trades started on July 29.
It's seems we might have a little problem here. I thought that too, in this case (+0.38% close) is enough to wait only another +0.12% to add another lot, but during reading the thread I've encountered contradictory (at least for my understanding) information.
A good trade is when I Break Even. A great trade is when I Take Profit.
  • #879
  • Aug 4, 2008 5:02am Aug 4, 2008 5:02am
Quoting pipsalot
If I understand correctly, when you only have one lot, you should place your second lot at +0.25% from the first entry point instead of waiting for a +0.25% move in one day. That is what we did on the set of trades started on July 29.
When you did that on the last set of trades spieler did say it was OK to enter at 0.50 because you only had one lot in BUT under the strict rules of the system you must wait for an interday move of 0.25 before you make second entry. The only exception to this is when there is no day with a move of 0.25 but after many days of smaller moves the price is 0.50 away from your first entry. At this point you immediately enter second lot. This is how I understand it but spieler will correct me if I am wrong.
  • #880
  • Aug 4, 2008 5:16am Aug 4, 2008 5:16am
1. I am looking at the 1 hour chart of EUR/CHF with Spielershedge EA set on 2 tradestations the first one with server time of GMT and the second tradestation with server time of GMT + 2. The GMT server chart shows reading of 0.00 % and the GMT + 2 chart shows reading of -0.05%. So it makes a difference for entry. So the question is which server time are we supposed to use?

2.Regarding spielershedge EA again, if we hold position from previous day, do we change the shift days reference in the EA to 2 instead of 1 to take into account the 2 days?

Is there someone that can answer these questions? Thanks.
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