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Hedge and Correlation Strategy

  • #21
  • Mar 30, 2009 7:13pm Mar 30, 2009 7:13pm
Quoting billbss
It shows line graphs of the closing price.
It will give the close prices when you run your mouse over them.
Where do you put "show no color"? I only see places for numbers on the various currency.
  • #22
  • Mar 30, 2009 7:18pm Mar 30, 2009 7:18pm
Quoting Dreamliner
Where do you put "show no color"? I only see places for numbers on the various currency.
On the "colors" tab.
The GBP/USD is red.
The EUR/USD is brown.

Click on the colors for the other pairs and select "None".
  • #23
  • Mar 30, 2009 7:19pm Mar 30, 2009 7:19pm
Quoting Dreamliner
Where do you put "show no color"? I only see places for numbers on the various currency.
The numbers you see for the various pairs, will either be a 1 or 0.
1 means the pair is shown normally.
0 means it is inverted.
You want both GBP/USD and EUR/USD with a "1".
  • #24
  • Mar 30, 2009 7:23pm Mar 30, 2009 7:23pm
When or do you have a point to "cut your losses"?
  • #25
  • Mar 30, 2009 7:29pm Mar 30, 2009 7:29pm
Quoting Dreamliner
Where do you put "show no color"? I only see places for numbers on the various currency.
This is what it looks like.
Leave the top two colors and "None" the rest of them.
Attached Image (click to enlarge)
Click to Enlarge Name: allusa.JPG Size: 235 KB
  • #26
  • Mar 30, 2009 7:45pm Mar 30, 2009 7:45pm
Just an Idea, Shouldnt average daily range and the worth of a pip be taken in to consideration for possition size when trading like this? Would be quite silly to trade (eg.) 1lot on each pair.

Leon
Living the adventure in my head.
  • #27
  • Mar 30, 2009 7:47pm Mar 30, 2009 7:47pm
Quoting Pip Chaser
When or do you have a point to "cut your losses"?
No, I do not take losses, I count them as drawdown, knowing the pairs will cross, and take the cross when it comes.
  • #28
  • Mar 30, 2009 7:49pm Mar 30, 2009 7:49pm
Quoting Leonlorenzo
Just an Idea, Shouldnt average daily range and the worth of a pip be taken in to consideration for possition size when trading like this? Would be quite silly to trade (eg.) 1lot on each pair.

Leon
I initially did consider pip worth when thinking about this, but then I did some backtesting visually, and live trading for a week, and decided against it. Mainly because on the 5 minute or 30 minute chart we aren't exhausting the daily range and we aren't getting huge moves to affect the pip prices.

I suppose if you traded a daily timeframe or longer this would be needed.
  • #29
  • Mar 30, 2009 7:53pm Mar 30, 2009 7:53pm
Quoting billbss
This is what it looks like.
Leave the top two colors and "None" the rest of them.
Bill, any idea why I can only get these to display properly on the daily chart? If I move down to hourly or any other timeframe than daily it is as if the indicator is removed. Any thoughts on why?
  • #30
  • Mar 30, 2009 7:57pm Mar 30, 2009 7:57pm
Quoting Dreamliner
Bill, any idea why I can only get these to display properly on the daily chart? If I move down to hourly or any other timeframe than daily it is as if the indicator is removed. Any thoughts on why?
They display on everything except 1M and Monthly.
Maybe they are off the screen on lower TFs. Try zooming out.
  • #31
  • Mar 30, 2009 7:58pm Mar 30, 2009 7:58pm
Check this pic...what would happen if you followed this method were i pointed the arrows? It would make sense, as they diverged just alittle in the near past...

But if you sold/bought there you would have gone under like..i dont know..800 pips? MAYBE in the end you would have made a small gain..but at the cost of some serious panic..

http://preview.shareapic.net/preview5/015843938.jpg
  • #32
  • Mar 30, 2009 7:59pm Mar 30, 2009 7:59pm
This method fails at some point with margin call because of de-correlation, divergence, spread, swap interest, ranging markets etc.
  • #33
  • Mar 30, 2009 8:12pm Mar 30, 2009 8:12pm
Implemented in my tradeing ,mini acct of course will update on progress and losses .............Thanks !
  • #34
  • Mar 30, 2009 8:30pm Mar 30, 2009 8:30pm
Hi Postrock,

I think it is impossible to tell what the drawdown would be just from looking at the picture. We would need the data to check it out.

Quoting Postrock
Check this pic...what would happen if you followed this method were i pointed the arrows? It would make sense, as they diverged just alittle in the near past...

But if you sold/bought there you would have gone under like..i dont know..800 pips? MAYBE in the end you would have made a small gain..but at the cost of some serious panic..

http://preview.shareapic.net/preview5/015843938.jpg
  • #35
  • Mar 30, 2009 8:31pm Mar 30, 2009 8:31pm
Quoting tokyomaster
This method fails at some point with margin call because of de-correlation, divergence, spread, swap interest, ranging markets etc.
The question is, can you take out more than you will loose on the 'death trade'. Say you double the account and then withdraw profits.

IMO, Margin call is essentially a stoploss, and you may as well atleast make sure margin call happens when correlation is out of whack by some over-average amount.
Living the adventure in my head.
  • #36
  • Mar 30, 2009 8:31pm Mar 30, 2009 8:31pm
Quoting tokyomaster
This method fails at some point with margin call because of de-correlation, divergence, spread, swap interest, ranging markets etc.
Please give us your history with this method in order to make this claim. Have you tried it, and it failed due to margin call? Or have others told you that it would fail?
  • #37
  • Mar 30, 2009 10:00pm Mar 30, 2009 10:00pm
Quoting billbss
Here's a good indicator for this.
It puts several pairs on the same screen.
Put "no color" on the pairs you don't want.
Bill, any way to get rid of the unnecessary text in this indicator? All we need is the EUR/USD and GBP/USD at the far right, not the rest of the currency text. I got rid of all the other lines of the other currencies but can't seem to get rid of their text.
  • #38
  • Mar 30, 2009 10:09pm Mar 30, 2009 10:09pm
Quoting Dreamliner
Bill, any way to get rid of the unnecessary text in this indicator? All we need is the EUR/USD and GBP/USD at the far right, not the rest of the currency text. I got rid of all the other lines of the other currencies but can't seem to get rid of their text.
Have you seen this one posted by smjones?

http://www.forexfactory.com/showpost...18&postcount=5

Leon
Living the adventure in my head.
  • #39
  • Mar 31, 2009 1:48am Mar 31, 2009 1:48am
weren't there a thread started by Spieler about a similar strategy involving eur/usd and usd/chf (both buy or sell of course) and things went awry ?

and that's involving the 2 pairs that have the tightest correlation (negative correlation in this case) so using eur/usd and gbp/usd should be much riskier ?

i'm certainly hoping Dreamliner or whoever can come up with a way to make this strategy work, maybe even with other pairs as long as it can work............no more headaches and heartbreaks then...........
  • #40
  • Edited 2:20am Mar 31, 2009 1:53am | Edited 2:20am
Quoting findcount
weren't there a thread started by Spieler about a similar strategy
Here's a link to the thread for comparison:

http://www.forexfactory.com/showthread.php?t=95721

Also correlation tables:

http://www.mataf.net/en/tools/correlation-table
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