Hedge and Correlation Strategy | Page 18 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Correlation + Momentum Strategy? 6 replies

MT4 MTF Correlation table and Correlation oscillator indicators 155 replies

InsomiaFX Correlation Double Hedge EA 66 replies

Looking for EA for Correlation Strategy 6 replies

Hedge strategy (not a hedge fund) 13 replies

Attachments: Hedge and Correlation Strategy
Exit Attachments

Hedge and Correlation Strategy

  • #341
  • Jul 23, 2009 7:41am Jul 23, 2009 7:41am
Quoting T.E.Lawrence
Example to my previous post:

Attachment

I've entered few minutes ago (shorted cable, bought euro) - but before this I've had looked at my charts and noticed that cable was at resistance (R1 daily pivot) and euro was at support (daily pivot). So they were both at some reversal points.

Good call, T.E., on the GBPUSD EURUSD.
Seems to be moving in the "right" directions.
  • #342
  • Jul 23, 2009 9:38am Jul 23, 2009 9:38am
Yea, good find. A little too early for me to find that one.
Here's the same chart but from the thinkorswim platform. It's a comparison chart showing percentage change. The nice think about this chart is that both pairs are anchored at 0% at the beginning of the timeframe. This is a D1, M5 chart.
Attached Image (click to enlarge)
Click to Enlarge Name: eu_gu_comp.jpg Size: 77 KB
  • #343
  • Jul 23, 2009 11:29am Jul 23, 2009 11:29am
Quoting markfx
Yea, good find. A little too early for me to find that one.
Here's the same chart but from the thinkorswim platform. It's a comparison chart showing percentage change. The nice think about this chart is that both pairs are anchored at 0% at the beginning of the timeframe. This is a D1, M5 chart.
Does thinkorswim have practice / demo account?
  • #344
  • Jul 23, 2009 11:32am Jul 23, 2009 11:32am
This pair of pairs looks like it has some fun activity. Anyone trade this spread? It's a M5 one day chart of the USD/CHF and the EUR/USD in case you can't read it well.
Attached Image (click to enlarge)
Click to Enlarge Name: uc_eu_comp.jpg Size: 79 KB
  • #345
  • Jul 23, 2009 1:01pm Jul 23, 2009 1:01pm
Well, I took that trade above and just closed it for some nice pips. If I was able to sit here for a while I might play it the other way and see what happens.
  • #346
  • Jul 23, 2009 1:07pm Jul 23, 2009 1:07pm
Quoting markfx
Well, I took that trade above and just closed it for some nice pips. If I was able to sit here for a while I might play it the other way and see what happens.
Sorry for stupid question, but how did you trade it? Sold euro and bought swissy?
  • #347
  • Jul 23, 2009 4:56pm Jul 23, 2009 4:56pm
Quoting T.E.Lawrence
Sorry for stupid question, but how did you trade it? Sold euro and bought swissy?
Not a stupid question. I should have been more specific. Yeah, I think that one was a short e/u and long u/c.

I just got back and it looks like I should have kept that trade on but then again that's just being greedy LOL May be about time to go short u/c and long e/u??? I'm showing quite a large spread between the two.

Did you do anything with the g/u and e/u today?
  • #348
  • Jul 23, 2009 10:57pm Jul 23, 2009 10:57pm
Right now I'm trading negatively correlated pairs and am making approximately 20% per week on average, trading 4 pairs of crosses when they are gapping open.[/quote]


dreamliner can you go into when you say gaping is that also including the support and resistance
  • #349
  • Jul 24, 2009 12:26am Jul 24, 2009 12:26am
Nice setup:

Attached Image (click to enlarge)
Click to Enlarge Name: chart.jpg Size: 83 KB


short GBP/USD - 10 000 UNITS
long EUR/USD - 10 000 UNITS
  • #350
  • Jul 24, 2009 3:09am Jul 24, 2009 3:09am
Quoting T.E.Lawrence
Nice setup:

Attachment

short GBP/USD - 10 000 UNITS
long EUR/USD - 10 000 UNITS
Ok, I've gotten out of this trade - +30 pips. After the curious and strange string of losing trades I had two weeks ago, I rarely wait now for pair to cross. I take 10 - 30 pips profits trading 5-15-30 time frames.

I really need to know why some trades are losing even after the gap is closed.

Anyway it's the most profitable strategy I've ever had (thanks to Dreamliner), but still I'm not totally confident trading this method.

P.S.

Post your charts folks - me and other people on other trades learned a lot just watching charts.
  • #351
  • Jul 24, 2009 3:14am Jul 24, 2009 3:14am
What are you doing if you see a gap on 5 min, no gap on 15 min, and a opposite gap (to that on 5min) on 30 min?
  • #352
  • Jul 24, 2009 6:03am Jul 24, 2009 6:03am
Example of charts overlaid in photoshop with my active trade:

Attached Image (click to enlarge)
Click to Enlarge Name: chart_oanda.jpg Size: 100 KB


And this how it looks on dailyfx:

Attached Image (click to enlarge)
Click to Enlarge Name: chart_dailyfx.jpg Size: 79 KB


But I'm not sure if I'm overlaying charts in Photoshop properly. I just take screen capture and then past in PS, and repeat this step for the second currency.
  • #353
  • Jul 24, 2009 7:41am Jul 24, 2009 7:41am
Hi Lawrence,
I don't think there is a "proper" way to overlay the charts. I also believe timeframe is irrelevant. We are trading price difference; a 100 pip price difference is a 100 pip price difference regardless of the chart you are looking at.

I believe one way to trade this effectively is to fix the point that you "zero" out the currencies. For me it makes sense to do this at 5pm EST, which happens to be 00:00 on my broker's server. This time of day usually has the least amount of movement; the big moves of the previous day are now done, and the asian session is just ramping up.

So, I "zero" out at 00:00, then watch the gap (from now on referred to as "Divergence") as it increases. I know from past experience that the divergence will increase to a certain point, then usually it goes back to zero and flips the other way. The strategy I'm trying is to wait for the divergence to reach a certain point, then enter, then close out as the divergence moves back to zero.

What I need to do is gather more data regarding the typical divergence amount and frequency. The only way to do this reliably is to stick to one method (zeroing at 00:00), and take notes.

Clearly, there's more work to be done.
  • #354
  • Jul 24, 2009 8:31am Jul 24, 2009 8:31am
Quoting newway
Right now I'm trading negatively correlated pairs and am making approximately 20% per week on average, trading 4 pairs of crosses when they are gapping open.
Nice job. What pairs have you had the most luck with?
  • #355
  • Jul 24, 2009 9:05am Jul 24, 2009 9:05am
Quoting Jm1941
Hi Lawrence,
I don't think there is a "proper" way to overlay the charts. I also believe timeframe is irrelevant. We are trading price difference; a 100 pip price difference is a 100 pip price difference regardless of the chart you are looking at.

I believe one way to trade this effectively is to fix the point that you "zero" out the currencies. For me it makes sense to do this at 5pm EST, which happens to be 00:00 on my broker's server. This time of day usually has the least amount of movement; the big moves of the previous day are now done,...

Good Description. I think that's exactly the method I've been experimenting with. I'vebeen trying a lot of different setups but it seems that just setting my chart to 1 day 5 minutes is a nice way to go. My chart is set to "percentage view" and it zeros out both lines at the same time as yours above. The 2 pairs (lines) travel together and then spread out and may cross, etc etc. I've just been waiting until they seem to be at about the widest point and sell the one on top and buy the bottom. I look back at a 5 day chart to try and determine how far they've been spreading. So far it's not very scientific so as you say...there's plenty of work to be done

happy trading.
  • #356
  • Jul 24, 2009 5:41pm Jul 24, 2009 5:41pm
Quoting markfx
Nice job. What pairs have you had the most luck with?
This week I have traded these four, all successfully, increased live account by 34%:

GBP/JPY with EUR/GBP
EUR/GBP with GBP/CHF
GBP/USD with EUR/GBP
CAD/JPY with USD/CAD
  • #357
  • Jul 24, 2009 6:29pm Jul 24, 2009 6:29pm
Dreamliner,

Very nice increase.
If it is not too much to ask, could you post your charts for these like you did before with the overlay and entries and exits?

Thanks

Bruce


Quoting Dreamliner
This week I have traded these four, all successfully, increased live account by 34%:

GBP/JPY with EUR/GBP
EUR/GBP with GBP/CHF
GBP/USD with EUR/GBP
CAD/JPY with USD/CAD
  • #358
  • Jul 24, 2009 6:31pm Jul 24, 2009 6:31pm
Quoting brucech
Dreamliner,

Very nice increase.
If it is not too much to ask, could you post your charts for these like you did before with the overlay and entries and exits?

Thanks

Bruce
Sorry Bruce, I did not keep track of them, but if you look at the DailyFX 30 min charts for these pairs you'll see the trading opportunities throughout last week.
  • #359
  • Jul 25, 2009 9:26am Jul 25, 2009 9:26am
Quoting T.E.Lawrence
I really need to know why some trades are losing even after the gap is closed.
I've noticed that too. I did not look into it yet, but I thought it might be related to the spot rate going against your actual account value. Sorry, I'm not saying that right.

If your account is funded in USD but you trade EUR/JPY or EUR/GBP, something that does not have a USD side. Now lets say your position goes up a little but EUR/USD goes against you, I believe it's possible to loose on the exchange rate when the position is closed.

Just a theory.

To combat that, if it's true, would be to trade correlation/divergence on pairs that have USD on one side or the other.

Who knows??
  • #360
  • Jul 25, 2009 9:28am Jul 25, 2009 9:28am
Quoting siafx
I've noticed that too. I did not look into it yet, but I thought it might be related to the spot rate going against your actual account value. Sorry, I'm not saying that right.

If your account is funded in USD but you trade EUR/JPY or EUR/GBP, something that does not have a USD side. Now lets say your position goes up a little but EUR/USD goes against you, I believe it's possible to loose on the exchange rate when the position is closed.

Just a theory.

To combat that, if it's true, would be to trade correlation/divergence on pairs that have...
This is not a market neutral trading method. So if both go up or both go down, even though they cross, you can be down pips.

This is one of the reasons why I prefer negatively correlated pairs.
3 traders viewing now