Hedge trading spieler system derived from futures spread trading

1) I never trade between 24th december and 03 th january NEVER whatever the marker specially between 24 and 31th december.
This is time for adjustement of countries balance and window dressing and no rules seems to exist anymore.

So your first 3 trades still remaining today will have never take place.

But let us imagine this happen starting after the 04th of january here are the calculations and we pass the period with acceptable but big DD.

To make things understandable i did same as you with trade on eur/chf but a ratio 1/1.5 mio on the paires eur/usd and usd/chf for the swap.

Note that i will not take into account speed of trend neither end of day as i explained in this thread to keep a conservative approach . So we are in the worst case scenario that i will not managed the way i do for the purpose of this interessant study.



28th 12 07 Long 166.21 -0.25 lot 1
28 12 07 long 165.79 -0.25 lot 2
31 12 07 long 165.37 -0.25 lot 3
02nd 01 08 long 164.54 -0.50 lot 4
04 01 08 long 163.71 -0.50%lot 5

Lot 5 out at 16412 ( entry price +0.25%) remain 4 lots profit 41pips


15th 01 08 long 162.07 -1% lot 5 again
21th 01 08 long 160.45 -1% lot 6

Having 6 lots and becoming dangerous the exit rule changes . The 2 last lots ( 6 and 5) will be exit at their average price +0.25% ( 160.45+162.07)/2*100.25%= 161.66
exit at 161.66 profit 80pips remain 4 lots
02 nd 03 08 long 157.24 -2% ( new rule after having 6 lots at one moment) lot 5 again
out lot 5 at +1% which is 15881, we only hit 15879 and went down. In real i will have cut at around 15870 after target missed.
profit 146 pips remain 4lots
17th 03 08 long 15409 -2% lot 05 again

We hit this day 153.26 which is the lowest point of the 28th12/07 till today.

At this point we have 5 lots long with

lot 1 = loss of 1295 pips
lot 2 = los of 1253 pips
lot 3= loss of 1211 pip s
lot 4= loss of 1128 pips
lot 5 = loss of 83 pips
same day we close the lot 5 at 155.63 ( +1%) with +154 pips.

So the max dd is 1295+1253+1211+1128+83=4970pips -41-80-146 =
4703 pips = close to 47030 usd 47% of the account

swap interest with a 1/1.5 ratios and my leverage of *2.5 to start building a position with 100k you will have 1 lot = 166k eur/usd vs 250k usd/chf
this represents 15 usd interest per day per lot
so we have as of 17th 03 08 458 pips of interests so that the max dd becomes 4245 pips ( 42%)

That is big but bearable

As of today the position is winning taking into account 5 more months of interests and that the price is at 163

Conclusion ; If this kind of amazing trend takes place the DD can be huge and not supportable if you are over leveraged.
Dont forget that at the end of the year we are supposed to have a profit so the -42% is not really 42% of the starting capital .

You can of course decide to put a stop loss if you loose for exemple 20% of your K on a serie of trades against a trend.

THis was the worst case scenario, In real this kind of trend should be managed differently waiting more to go in ( i can see some long red candles triggering an entry, i will have waited of course more than 0.25 or 0.50)
And you need to be conservative with the end of day stuff i explained.

This trend i was in but started after the 04th and i managed it well with a very bearable DD.

If this trend occurs on the short side, the interests are against you so i will cut my positions after 2 weeks ( 10 trading days) whatever the result and start again building a position.

Perhaps we are going to exit our short today .
we hit 162.80 target 16269 we will see the short was at 163.10

I tried to scalp some pips on cable and eur/usd nothing to do very very slow market with such a low borring volume

Hi Spieler,

Thanks for the explanation of the trend that Richard pointed out. How often do you encounter such huge trends? And would it not be a good idea to close a set of trades if the drawdown reaches, say, 2-3% of your account, and start building a new position? Doing that would allow you to get out of big trends and make some profits from new positions.

2/3% is nothing you cannot build a hedge position allowing such a small loss.
You have to built one with decorrelation and that is what we are looking for

spieler-

Thanks for your reply and explaination of how this trend should of been traded. I would like to make some comments and please ask some questions if I may.

1) I never trade between 24th december and 03 th january NEVER whatever the marker specially between 24 and 31th december.
This is time for adjustement of countries balance and window dressing and no rules seems to exist anymore.
I agree, this is a very sensible rule

So your first 3 trades still remaining today will have never take place.

But let us imagine this happen starting after the 04th of january here are the calculations and we pass the period with acceptable but big DD.

To make things understandable i did same as you with trade on eur/chf but a ratio 1/1.5 mio on the paires eur/usd and usd/chf for the swap.

Note that i will not take into account speed of trend neither end of day as i explained in this thread to keep a conservative approach . So we are in the worst case scenario that i will not managed the way i do for the purpose of this interessant study.



28th 12 07 Long 166.21 -0.25 lot 1
28 12 07 long 165.79 -0.25 lot 2
31 12 07 long 165.37 -0.25 lot 3
02nd 01 08 long 164.54 -0.50 lot 4
04 01 08 long 163.71 -0.50%lot 5

Lot 5 out at 16412 ( entry price +0.25%) remain 4 lots profit 41pips


15th 01 08 long 162.07 -1% lot 5 again
My understanding was that your rules are to wait 0.50 more not 1.0 more (calculated from last entry price) before entering again a position that was exited on a 0.25 pullback?
21th 01 08 long 160.45 -1% lot 6

Having 6 lots and becoming dangerous the exit rule changes . The 2 last lots ( 6 and 5) will be exit at their average price +0.25% ( 160.45+162.07)/2*100.25%= 161.66
exit at 161.66 profit 80pips remain 4 lots
Thank you for this new rule. What if after entering lot 6 the there was no pullback allowing for an exit at average price would you then just enter lot 7 after another -1%?
02 nd 03 08 long 157.24 -2% ( new rule after having 6 lots at one moment) lot 5 again
out lot 5 at +1% which is 15881, we only hit 15879 and went down. In real i will have cut at around 15870 after target missed.
profit 146 pips remain 4lots
17th 03 08 long 15409 -2% lot 05 again

We hit this day 153.26 which is the lowest point of the 28th12/07 till today.

At this point we have 5 lots long with

lot 1 = loss of 1295 pips
lot 2 = los of 1253 pips
lot 3= loss of 1211 pip s
lot 4= loss of 1128 pips
lot 5 = loss of 83 pips
same day we close the lot 5 at 155.63 ( +1%) with +154 pips.

So the max dd is 1295+1253+1211+1128+83=4970pips -41-80-146 =
4703 pips = close to 47030 usd 47% of the account

swap interest with a 1/1.5 ratios and my leverage of *2.5 to start building a position with 100k you will have 1 lot = 166k eur/usd vs 250k usd/chf
this represents 15 usd interest per day per lot
so we have as of 17th 03 08 458 pips of interests so that the max dd becomes 4245 pips ( 42%)

That is big but bearable

As of today the position is winning taking into account 5 more months of interests and that the price is at 163
True, but the problem for me would be that the profit gained for over 7 months of trading would be tiny and the experience would defiantly not of been stress free!

Conclusion ; If this kind of amazing trend takes place the DD can be huge and not supportable if you are over leveraged.
Dont forget that at the end of the year we are supposed to have a profit so the -42% is not really 42% of the starting capital .
So would you say that to trade 1 lot with your system you need to be capitalized at 100k?

You can of course decide to put a stop loss if you loose for exemple 20% of your K on a serie of trades against a trend.

THis was the worst case scenario, In real this kind of trend should be managed differently waiting more to go in ( i can see some long red candles triggering an entry, i will have waited of course more than 0.25 or 0.50)
And you need to be conservative with the end of day stuff i explained.

This trend i was in but started after the 04th and i managed it well with a very bearable DD.

If this trend occurs on the short side, the interests are against you so i will cut my positions after 2 weeks ( 10 trading days) whatever the result and start again building a position.
Would you close every open entry made to build that position even if the first 1 or 2 entries were making a big loss due to strong uptrend?

Hallo there,
I was reading about this sistem, and finaly I reached the last post pheu

1. I spotted a post about accounts that do not allow multipile positions, and rather one position on eur/usd and one on usd/chf. Someone adviced that remembering the % and closing a lot with corelation/decorelation will work, but I doubt that, because the price of the firs(tought -25%) and the second lot(-50%) will be averaged and getting 1 lot at -25% again will result in a big mess So any ideas on that?

2. Just to get if I understand. I have a little proggraming knoledge, but just enough to make my own clumzy program that have two imput fields. the firs imput field is the price of eur/chf when I buy 1 lot eur/usd and 1.469(today's ratio for keeping usd maksimum neutral) lot usd/chf, for example. Now the first price is my 0% level and it will be a constant until the whole chain of trade ends. In time I put the current price of eur/chf in the second text field and watch the % change manually.
so second leg on my -25%, then 3 leg on -50%. If reversal appear here and go to +25% I will have 3 winning positions,
right?

3. May be I'm wrong but I was thinking if we trade the corelation/decorelation, what You think of the graph that I will attach?



anyway I continue to explore this amazing world of currency flow and things surely will bicome clear in time.

thank You all,
great thred,
thanks

uau, thats look beautiful!



I watch CAD too, hope it is not a problem. i decidet to play it because compared to the months open it reached +100%, while eur/chf was playing around 15% ~ - 15%. Now eur/cad is ~80% based on months open and the two positions are still + and rocking, thats odd!?

... I mean I would see one position a big + and the another small -, but here the two are at +

Hi all.

Spieler, what is the current game plan?

Are you still short - as I have it, we should be long now, right?

How do these important numbers affect our trades (EUR/USD at 1.5400) and (USD/CHF at 1.0600) as I type.

I decided to add an other lot short now at 16340 was +0.26% ( was supposed to wait +0.25% from my entry point) but market slow and i need sonme action and we are very high.
And i had only 1/2 lot remaining so i have now 1.5

as for 1.54 and 1.06 i dont care of that does not count

Dear Spieler,

Thanks very much for your reply to Richard's post detailing the extreme trend. So, in summary, can you tell us what are the rules for taking a loss?
Also, do you ever use technical analysis on the spread itself, like stochastics or RSI or divergences or tendlines, etc., to fine tune your entries?

Thanks,

Lenoxer

That's a very good thread you started here mr. Spieler. I have been reading it almost non stop for a few days now. The concept of hedge trading as you call it is very new to me, so after some studying I have a question to you.
I tried to create a bad case scenario from somewhere in the middle of the chart, just to understand how to get safely out if I am in trouble. So here it is - the trade goes against me. The date is April 9/08. Previous day's close is @1.5934 - there I have 0 level. Next levels by my calc would have been:
-.25% = 1.5895
-.50% = 1.5855
-.75% = 1.5815
-1.0% = 1.5775
next is -.50% from -1.0% = 1.5697

There would have been 4 trades involved (1 on each level). The trade #2 would have been closed when it went back where it started from. So from level -1.0% up I would have had only 3 trades to close at their respectful GE levels.

Finally after 2.5 days of monitoring, on April 1/08 I would have closed the last trade with no profit but no loss either.

Am I correct, mr. Spieler? Just want to be assured that I understand how it should be done. In my humble opinion it is a very good way to get out of trouble. On the other hand this method of trading might be more sutable for ranging markets, that's why I want to know what to do when bigger trends occur.

Thank you for sharing your method.

Respects,
Lietuve

15th 01 08 long 162.07 -1% lot 5 again
My understanding was that your rules are to wait 0.50 more not 1.0 more (calculated from last entry price) before entering again a position that was exited on a 0.25 pullback?


As soon as i had 5 lots meaning i am against a trend mm becomes paramount, so waiting 1% even if i scale out.

21th 01 08 long 160.45 -1% lot 6

Having 6 lots and becoming dangerous the exit rule changes . The 2 last lots ( 6 and 5) will be exit at their average price +0.25% ( 160.45+162.07)/2*100.25%= 161.66
exit at 161.66 profit 80pips remain 4 lots
Thank you for this new rule. What if after entering lot 6 the there was no pullback allowing for an exit at average price would you then just enter lot 7 after another -1%?

NO -2% not 1%

02 nd 03 08 long 157.24 -2% ( new rule after having 6 lots at one moment) lot 5 again
out lot 5 at +1% which is 15881, we only hit 15879 and went down. In real i will have cut at around 15870 after target missed.
profit 146 pips remain 4lots
17th 03 08 long 15409 -2% lot 05 again

We hit this day 153.26 which is the lowest point of the 28th12/07 till today.

At this point we have 5 lots long with

lot 1 = loss of 1295 pips
lot 2 = los of 1253 pips
lot 3= loss of 1211 pip s
lot 4= loss of 1128 pips
lot 5 = loss of 83 pips
same day we close the lot 5 at 155.63 ( +1%) with +154 pips.

So the max dd is 1295+1253+1211+1128+83=4970pips -41-80-146 =
4703 pips = close to 47030 usd 47% of the account

swap interest with a 1/1.5 ratios and my leverage of *2.5 to start building a position with 100k you will have 1 lot = 166k eur/usd vs 250k usd/chf
this represents 15 usd interest per day per lot
so we have as of 17th 03 08 458 pips of interests so that the max dd becomes 4245 pips ( 42%)

That is big but bearable

As of today the position is winning taking into account 5 more months of interests and that the price is at 163
True, but the problem for me would be that the profit gained for over 7 months of trading would be tiny and the experience would defiantly not of been stress free!

I agree on that but a profit is a profit ( 90% at least of traders are loosing a lot of money) and this situation does not occur that often.


Conclusion ; If this kind of amazing trend takes place the DD can be huge and not supportable if you are over leveraged.
Dont forget that at the end of the year we are supposed to have a profit so the -42% is not really 42% of the starting capital .
So would you say that to trade 1 lot with your system you need to be capitalized at 100k?

No depending what you call 1 lot .with a 100k wallet you can start with 1.6lot eur/usd and 2.5lot usd/chf ( 1lot = 100k unit in this exemple)


You can of course decide to put a stop loss if you loose for exemple 20% of your K on a serie of trades against a trend.

THis was the worst case scenario, In real this kind of trend should be managed differently waiting more to go in ( i can see some long red candles triggering an entry, i will have waited of course more than 0.25 or 0.50)
And you need to be conservative with the end of day stuff i explained.

This trend i was in but started after the 04th and i managed it well with a very bearable DD.

If this trend occurs on the short side, the interests are against you so i will cut my positions after 2 weeks ( 10 trading days) whatever the result and start again building a position.
Would you close every open entry made to build that position even if the first 1 or 2 entries were making a big loss due to strong uptrend?

Yes

Just to get if I understand. I have a little proggraming knoledge, but just enough to make my own clumzy program that have two imput fields. the firs imput field is the price of eur/chf when I buy 1 lot eur/usd and 1.469(today's ratio for keeping usd maksimum neutral) lot usd/chf, for example. Now the first price is my 0% level and it will be a constant until the whole chain of trade ends. In time I put the current price of eur/chf in the second text field and watch the % change manually.
so second leg on my -25%, then 3 leg on -50%. If reversal appear here and go to +25% I will have 3 winning positions,
right?


Why 1.469???
rules explained are not fixed 0.25% you have to be more conservative by taking into account the close of each day.

#Thanks very much for your reply to Richard's post detailing the extreme trend. So, in summary, can you tell us what are the rules for taking a loss?
Also, do you ever use technical analysis on the spread itself, like stochastics or RSI or divergences or tendlines, etc., to fine tune your entries?#


I dont use any indicators for that system.

taking a loss occurs between zero and 2 times per year.
usually i never take a loss on a position built ( meaning i can close 1lot with a loss but th ewhole position will be a winner)
You can decide a DD where you take your loss of course

Lietuve

Your exemple is a good one of decorrelation/recorrelation with a nice winning trade despite a trend against us.
close 08 th 04 at 15943
long 1 lot at 15892 09th lot 1
long 1 lot at 15852 09th lot 2
long 1 lot at 1581210th lot 3
long 1 lot at 1573210th lot 4

out lot 4 15810 on 10th +78pips
out lot 3 at 15851 on 10th +39 pips
out lot 2 on 11th at 15891 +39 pips

One could cut first lot at even having had 4 lots and 3 winners even is good.
Otherwise you had to keep it some more days to get out with a profit.

Usually when this occurs i wait the price to go beyond first lot but if retracing i stop even ( was the case in your exemple)

So a nice 156 pips in just 3 days not so bad

Real entry point for second lot has finaly been reached after i entered too soon ( higher 163.51, entry was 163.50)
Need to buy some patience on ebay gonna check the price

So far position is winning
remaining 1/2lot at 163.10 amd full lot at 163.40

This position has already give a winner for 39 pips + 20 pips on half but begin to last a little bit too much for me ....
That s august

Thanks, mr. Spieler, now I got the concept, it took 2 days, but sleeplessness makes me slow.

From yesterday I am in my first trade: short usd/chf @ 1.0602
short eur/usd @ 1.5406
If the trade comes back to old +.25% - I am out.

Lietuve

Well I have exactly the same entry, we will see how it goes...

It might be a busier today than these past days... (lots of important news)

Spieler, do you stay the whole day in front of your computer?

(As you don't use any stoplosses - and i do understand the less stressful trading style that this hedge offers you)

Thanks
P.

I suppose you mean when eur/chf goes from old +.25% to old .00%?

I used to spend 20hours per day in front of my war machine and 1 day i realised that i could do others nice things like playing golf or whatever.

Sonow i spend less time trading and more time enjoying life and hedging is perfect for that because if you miss an exit window an other one will come later,

That written i spend some time in front of the PC as i have other systems and am a professional money manager.