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Hedge trading spieler system derived from futures spread trading

  • #2,221
  • Nov 8, 2008 11:56pm Nov 8, 2008 11:56pm
I'm reading the Technical Analysis Fallacy thread (http://www.forexfactory.com/showthread.php?t=57639) and it seems to have a lot in common with spieler's strategy. Check it out, it's kind of obscure at first, but it can really help with finetuning your hedging entries.
  • #2,222
  • Nov 9, 2008 10:55am Nov 9, 2008 10:55am

Hi Pipsalot, I was also touched on the Technical Analysis Fallacy thread, certainly very exciting and educational!
Then I had, unfortunately, neglect because of my difficulties with English ... I would therefore ask you, if this is possible, to make a brief summary of the main points discussed in the thread.

I know it is not easy, but I think that might be useful to have your own interpretation of thread, of course, only if you want...

thanks

  • #2,223
  • Nov 9, 2008 11:17am Nov 9, 2008 11:17am
Quoting Stake

Hi Pipsalot, I was also touched on the Technical Analysis Fallacy thread, certainly very exciting and educational!
Then I had, unfortunately, neglect because of my difficulties with English ... I would therefore ask you, if this is possible, to make a brief summary of the main points discussed in the thread.

I know it is not easy, but I think that might be useful to have your own interpretation of thread, of course, only if you want...

thanks

Hi

I'm making my own summary of that thread and will be happy to send it to you when I'm done. I don't want to hijack this thread, I just want to point out that those who find spieler's strategy useful will be enriched by the information in that other thread.
  • #2,224
  • Nov 10, 2008 12:52am Nov 10, 2008 12:52am

Thanks Pipsalot, you're very available ... I agree with you that other information can enrich this system, and this does not distort the original!!!

It is simply enrich our knowledge ... in this case we are talking about a professional who gives us his knowledge of operator behind the scenes, and this represents a value added ...

  • #2,225
  • Nov 10, 2008 1:17am Nov 10, 2008 1:17am
STILL LONG
We are in the 151 zone again
153 will be hit soon now ..............
  • #2,226
  • Nov 10, 2008 2:04am Nov 10, 2008 2:04am
Hi Spieler!

How many lots do you have now? And where did you enter them?
  • #2,227
  • Nov 14, 2008 3:19am Nov 14, 2008 3:19am
finaly get out this morning

This position has been hard to keep but finaly i had a very small loss
I could have get a profit but i made a bad exit on 2 lots because i was a little bit overleveraged

Now i am either going to wait the volatility to lower or get in with more % moove.
The system is still good but period have been extreme on every market so normal that we get some problems.
2008 will stay a very nice year for this kind of spread trading
  • #2,228
  • Nov 14, 2008 7:19am Nov 14, 2008 7:19am
It's good to know that your loss wasn't a big one. I would have made a nice profit if I had stayed in (although my drawdown would have been very big), but I got too scared on that huge drop :-)

If you have time, do keep us up to date about your trades with the system to see how you're handling this volatility.
  • #2,229
  • Nov 14, 2008 8:27am Nov 14, 2008 8:27am

I apologize Mr. Spieler, I have some questions and I hope that you will answer me ...

The first question concerns the use of "the one leg thing", I would like to use this method to adjust the entrance and exits to try to cover the spread and gain some precious pips, well I like to know something more about this method and in particular to know what time frame are better, I thought a more low TF for example M1 or M5 to observe the trend of the two pairs EURUSD and USDCHF until we decide to hedge the position, perhaps at a distance of 3 / 6 pips as you suggested...

The second issue concerns the measurement of speed, I could not find the suggestions in the thread and I was wondering if you use a momentum oscillator to aid or some other instrument or simply keep under surveillance the chart...

Finally I wanted to remind Mr Spieler not feel responsible in any way the actions of others in this thread, everyone here has its own money on his own responsibility and our gratitude will never be too much to Mr. Spieler for sharing with us a system among the most fascinating and concrete never seen before!
thanks again ...

  • #2,230
  • Edited 12:55pm Nov 16, 2008 10:42am | Edited 12:55pm
Anyone interested in expecting two diverging currencies to reconverge simply because "they're supposed to" might do well to read Roger Lowenstein's book WHEN GENIUS FAILED on Long Term Capital Management's collapse.

In the end, LTCM's trades did reconverge as expected, but only after the company had lost billions of dollars and pretty much destabilised the entire financial system of the US.

I'm reminded of the saying attributed to John Maynard Keynes: "The market can stay irrational longer than you can stay solvent.”

If you think it can't happen to you, then Nassim Nicholas Taleb's book THE BLACK SWAN is required reading.

However, that doesn't mean I'm not interested in the divergence idea, just trying to highlight some improbable (but by no means impossible) outcomes for trading this way.

For fun, here's a graph based on my calculations of the daily divergence between EUR-USD and USD-CHF over the last ten years and another graph for the last month.

El Choco
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  • #2,231
  • Edited 12:54pm Nov 16, 2008 12:50pm | Edited 12:54pm
And here's a graph of cumulative divergence. Tell me if I'm way off track here.

If we enter at say -0.5% divergence and the following day it also diverges -0.5%, then that's a cumulative divergence of 1%. If on day three the divergence is +0.5%, we still haven't made a profit and cannot do so until the cumulative divergence goes beyond our entry level of -0.5%. Have I got this right?

If so, entering at at -0.3% divergence on 31st Jan 2000 and waiting for 0% or more to close the trade would have meant waiting until 29th Jan 2007.

If I'm totally skew with my thinking here, then do let me know. I'm just working on EOD figures here, so maybe there were opportunities to close out before the day's close. Hope so.

I love the idea of trading spreads, i'm just having a hard time to getting it to work.

El Choco
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  • #2,232
  • Nov 16, 2008 12:55pm Nov 16, 2008 12:55pm
Just buy equal lots of EURCHF, EURUSD and USDCHF on a 30min chart when correlation is <= -0.9.

Simple and very profitable.
  • #2,233
  • Nov 17, 2008 3:48am Nov 17, 2008 3:48am
What, how are you checking for correlation, what indicator are you
using to look for greater than -0.9

you are looking at correlation between the Eurusd and usdchf is greater than -.09 and than
you are buying all three eurochf, eurusd, usdchf of equal lots correct ?




Quoting jack1943
Just buy equal lots of EURCHF, EURUSD and USDCHF on a 30min chart when correlation is <= -0.9.

Simple and very profitable.
  • #2,234
  • Nov 17, 2008 11:03pm Nov 17, 2008 11:03pm
Quoting elchoco
And here's a graph of cumulative divergence. Tell me if I'm way off track here.

If we enter at say -0.5% divergence and the following day it also diverges -0.5%, then that's a cumulative divergence of 1%. If on day three the divergence is +0.5%, we still haven't made a profit and cannot do so until the cumulative divergence goes beyond our entry level of -0.5%. Have I got this right?

If so, entering at at -0.3% divergence on 31st Jan 2000 and waiting for 0% or more to close the trade would have meant waiting until 29th Jan 2007.

If I'm totally...
You'd have one lot at -0.5%, a second lot at -0.75%, and a third one at -1.0. Your average would be -0.75%, which means that your total position would be in profit if it went back to -0.5%.
  • #2,235
  • Nov 18, 2008 4:39am Nov 18, 2008 4:39am
Quoting toddanderson
What, how are you checking for correlation, what indicator are you
using to look for greater than -0.9

you are looking at correlation between the Eurusd and usdchf is greater than -.09 and than
you are buying all three eurochf, eurusd, usdchf of equal lots correct ?
Be aware he's trying to sold his EA (using also multiple account Cybernet69 = jack1943).

http://www.forexfactory.com/showpost...postcount=2210
  • #2,236
  • Nov 18, 2008 6:42am Nov 18, 2008 6:42am
Quoting elchoco
Anyone interested in expecting two diverging currencies to reconverge simply because "they're supposed to" might do well to read Roger Lowenstein's book WHEN GENIUS FAILED on Long Term Capital Management's collapse.

In the end, LTCM's trades did reconverge as expected, but only after the company had lost billions of dollars and pretty much destabilised the entire financial system of the US.

I'm reminded of the saying attributed to John Maynard Keynes: "The market can stay irrational longer than you can stay solvent.”

If you think...
The 1st chart u have is similar to what i had when i plotted the divergence against a 8-day MA. The data in the graph is up till Aug 31st 2008.

http://www.forexfactory.com/showpost...postcount=1522
  • #2,237
  • Nov 18, 2008 9:22am Nov 18, 2008 9:22am
Quoting NewbieFxFx
All,

We are having a very strong decorrelation and that's very interesting to trade.

At the moment I have 3 open positions (less than some of you because I took a very conservative approach not adding positions - longs - as I should).

Please do note that we can't have a decorrelation occuring without, at some point, a recorrelation. Unless the pairs decorrelate completly and the system won't work anymore.

So be patient, work the position (in and out inside the decorrelation) as Spieler learned us to do.

The recorrelation is coming....

All,

we have a recorrelation occuring right now from the october drop in EUR/CHF.

I just closed one of my 3 positions opened 1 month ago with profit, and I could close the other 2 with an overall profit. I didn't add long positions because I didn't have time.

As I said earlier, the secret for successing with this system is discipline, patience and no over-leveraging (give your position some breathing space!!)

Merci Spieler.
  • #2,238
  • Nov 19, 2008 4:59am Nov 19, 2008 4:59am
Bonjour Spielier,

I have a quick question on this strategy. Today, EUR/CHF is approx. +0,40%.

Looking at the bigger picture, do you think it is safe to enter a short position on EUR/USD and USD/CHF given the large drop (decorrelation) that occured in october ??

I still think we have a big recorrelation going on right now and I think we should be carrefull trying to go against the flow.

Thanks. Merci beaucoup pour ton aide,
  • #2,239
  • Nov 19, 2008 11:39am Nov 19, 2008 11:39am
ok, I think I've got the message, I'm happy to be pacient (patient? paciente?) but only when i understand what's going on, otherwise it feels like jumping in a lake without having checked first for dangerous spikes.

I accept there's some "working of the position invloved" (I really like end of day trading as i'm prepared to accept lower profitability to get my life back).

I'll take as an assumption that divergence can go to +/- 20% (which is what my figures give me) and adjust my entry position size accordingly.

Thanks for the creative ideas

Happy pipping

El Choco
  • #2,240
  • Nov 20, 2008 9:41am Nov 20, 2008 9:41am
Quoting NewbieFxFx
Bonjour Spielier,

I have a quick question on this strategy. Today, EUR/CHF is approx. +0,40%.

Looking at the bigger picture, do you think it is safe to enter a short position on EUR/USD and USD/CHF given the large drop (decorrelation) that occured in october ??

I still think we have a big recorrelation going on right now and I think we should be carrefull trying to go against the flow.

Thanks. Merci beaucoup pour ton aide,
Several times I have thought about this problem and I think it is almost impossible to take the perfect entry ... unfortunately, the center of gravity of eur / chf is not static, as in all other pairs (would be too easy!) but moves continuously ... I thought something like a dynamic indicator that helps us to see the center of gravity, perhaps the COG,

This could certainly help to have under control the movements of the market but still remains a dynamic indicator on a dynamic changing center of gravity, therefore unusable for the purposes of our trade ...
But maybe this thing could have some effect, (I don't know I'm probably saying just nonsense !!!):

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