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Hedge and Correlation Strategy

  • #41
  • Mar 31, 2009 3:31am Mar 31, 2009 3:31am
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.
Not without changing the code.
It would be easy for anyone who programs.
I can't do it.
  • #42
  • Mar 31, 2009 7:04am Mar 31, 2009 7:04am
Tons of people have tried the Long EUR/USD Long USD/CHF trade, but the problem is you might as well just trade EUR/CHF long. You can see you are long EUR/CHF in that trade. But in mine, you have a long JPY and a short JPY when you trade this way. That is the difference I see.

Quoting findcount
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...........
  • #43
  • Mar 31, 2009 7:18am Mar 31, 2009 7:18am
800 pips was a little exaggerated, but if the prices i highlighted in this new pic are correct, were the black line stands you would be under around 250 pips..

http://preview.shareapic.net/preview5/015852599.jpg

But the strategy is interesting.


Quoting Dreamliner
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.
  • #44
  • Mar 31, 2009 7:22am Mar 31, 2009 7:22am
That is the exact trade I rode out, and closed it with a profit of 5% on my account. I thought 800 seemed a bit excessive .

I don't think this style of trading is for everybody, but the reason why I trade it is because every gap is eventually closed by a cross. So far I'm up nearly 20% on my account since beginning last Wednesday.

Quoting Postrock
800 pips was a little exaggerated, but if the prices i highlighted in this new pic are correct, were the black line stands you would be under around 250 pips..

http://preview.shareapic.net/preview5/015852599.jpg

But the strategy is interesting.
  • #45
  • Mar 31, 2009 7:29am Mar 31, 2009 7:29am
I cant do it right now, but it would be cool to have an indicator wich measures all the crosses between those 2 pairs, so to determine an average gap range..

That would be a pretty good start for testing..
  • #46
  • Mar 31, 2009 8:21am Mar 31, 2009 8:21am
I was in last night useing eu/us and gu/us as my pairs . I was sleepy and was tired of waiting but closed my trade with 15 pips to the positive . Ill take it bcouse if I were in a standard account it translates to $ 150 .00 . It seems this system would to well with email alerts and alarms when they cross . Good lucks guys waiting for anouther oportunity
  • #47
  • Mar 31, 2009 8:25am Mar 31, 2009 8:25am
Quoting Dreamliner
Tons of people have tried the Long EUR/USD Long USD/CHF trade, but the problem is you might as well just trade EUR/CHF long. You can see you are long EUR/CHF in that trade. But in mine, you have a long JPY and a short JPY when you trade this way. That is the difference I see.
You are Long and Short USD when trading the EU-UCHF Hedge. EG, LONG both pairs = Long Euro/Short USD + Long USD/Short CHF

I think there may be a much safer way to trade the correlation without Hedging In the manner you are.
Living the adventure in my head.
  • #48
  • Mar 31, 2009 8:34am Mar 31, 2009 8:34am
I do not want to scare you but you are actually trading EURGBP. Look how it is calculated:

EURUSD = 1.3303
GBPUSD = 1.4314
EURGBP = 0.9293

EURUSD/GBPUSD = EURGBP. Put there numbers and see for yourself. Now, look at EURGBP chart and see how wild it can get at times...

This is exactly the same like EURUSD, USDCHF => EURCHF.

Good luck!
  • #49
  • Mar 31, 2009 8:36am Mar 31, 2009 8:36am
Quoting hotstorm
I do not want to scare you but you are actually trading EURGBP. Look how it is calculated:

EURUSD = 1.3303
GBPUSD = 1.4314
EURGBP = 0.9293

EURUSD/GBPUSD = EURGBP. Put there numbers and see for yourself. Now, look at EURGBP chart and see how wild it can get at times...

This is exactly the same like EURUSD, USDCHF => EURCHF.

Good luck!
Said it better than me
Living the adventure in my head.
  • #50
  • Mar 31, 2009 8:39am Mar 31, 2009 8:39am
You can easily build an EA for the GBPJPY/EURJPY hedge...

if CCI(GBPJPY,12) > CCI(EURJPY,20)
- SHORT GBPJPY
- LONG EURJPY

if CCI(GBPJPY,12) < CCI(EURJPY,20)
- LONG GBPJPY
- SHORT EURJPY

close on profit > x

if you want then i can build an EA to-do this in about 1 hour.
  • #51
  • Edited 9:24am Mar 31, 2009 9:09am | Edited 9:24am
Please find attached EA that will trade GBPJPY with EURJPY using correlation >= 0.8 and CCI entries.
Attached File(s)
File Type: ex4 FX Hedge Trader.ex4   10 KB | 3,598 downloads
  • #52
  • Mar 31, 2009 9:10am Mar 31, 2009 9:10am
Quoting tokyomaster
You can easily build an EA for the GBPJPY/EURJPY hedge...

if CCI(GBPJPY,12) > CCI(EURJPY,20)
- SHORT GBPJPY
- LONG EURJPY

if CCI(GBPJPY,12) < CCI(EURJPY,20)
- LONG GBPJPY
- SHORT EURJPY

close on profit > x

if you want then i can build an EA to-do this in about 1 hour.
If you do would you please include these pairs please . Thanks tokyo
  • #53
  • Mar 31, 2009 9:20am Mar 31, 2009 9:20am
Quoting tokyomaster
Please find attached EA that will trade GBPJPY with EURJPY using correlation >= 0.8 and CCI entries.
I tried that EA and it won't open the EUR/JPY side of the trade. It only opens the GBP/JPY.
  • #54
  • Mar 31, 2009 9:25am Mar 31, 2009 9:25am
Please download newer version and try again.
  • #55
  • Mar 31, 2009 9:26am Mar 31, 2009 9:26am
Quoting billbss
I tried that EA and it won't open the EUR/JPY side of the trade. It only opens the GBP/JPY.
in MT4 you can not backtest this EA. Only fovard test
  • #56
  • Mar 31, 2009 9:30am Mar 31, 2009 9:30am
Yes, only forward test on DEMO account. MT4 does not handle multi currency trading EA's.
  • #57
  • Mar 31, 2009 10:05am Mar 31, 2009 10:05am
Agreed! (Wish I were a programmer ).

Quoting Postrock
I cant do it right now, but it would be cool to have an indicator wich measures all the crosses between those 2 pairs, so to determine an average gap range..

That would be a pretty good start for testing..
  • #58
  • Mar 31, 2009 10:06am Mar 31, 2009 10:06am
This is what the trades look like.
Attached Image (click to enlarge)
Click to Enlarge Name: hedge.gif Size: 55 KB
  • #59
  • Mar 31, 2009 10:10am Mar 31, 2009 10:10am
Quoting Leonlorenzo
You are Long and Short USD when trading the EU-UCHF Hedge. EG, LONG both pairs = Long Euro/Short USD + Long USD/Short CHF

I think there may be a much safer way to trade the correlation without Hedging In the manner you are.
Thank you for your input. Please tell us about the safer way to trade the correlation. That is why I opened this thread. You are not hijacking the thread, so just explain the safer way. Thank you.
  • #60
  • Mar 31, 2009 10:13am Mar 31, 2009 10:13am
If we go long EUR/USD and short GBP/USD which direction are we trading EUR/GBP?

If we go short EUR/USD and long GBP/USD which direction are we trading EUR/GBP?

Thank you for helping me understand.

Quoting hotstorm
I do not want to scare you but you are actually trading EURGBP. Look how it is calculated:

EURUSD = 1.3303
GBPUSD = 1.4314
EURGBP = 0.9293

EURUSD/GBPUSD = EURGBP. Put there numbers and see for yourself. Now, look at EURGBP chart and see how wild it can get at times...

This is exactly the same like EURUSD, USDCHF => EURCHF.

Good luck!
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