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Hedge and Correlation Strategy

  • #501
  • Aug 4, 2009 11:00pm Aug 4, 2009 11:00pm
Quoting scooby-doo
Put the indicators into your MT4 indicator folder and the template into your MT4 template folder.

Remember, you need to ajust the lot size for EURUSD and USDCHF. The easiest way todo this is just divide EURUSD by USDCHF bid prices.

PS. I dont have the source code for the indicators.
Thanks a lot Scooby
  • #502
  • Aug 4, 2009 11:06pm Aug 4, 2009 11:06pm
Quoting scooby-doo
I am not saying you are correct in trying to trade this method BUT if you want to then the safest way is the following...

Wait for all the bars to change to the same colour...

If the EURUSD is ontop of USDCHF and all the bars are red then SELL EURUSD and BUY USDCHF.

If the USDCHF is ontop of EURUSD and all the bars are green then BUY EURUSD and SELL USDCHF.

You should get out of the trade when all the bars change to the opposite colour or when your TP is hit.
I'm using the template you've posted, but I only have 2 Pj-overRSI indicator at the bottom - 20 and 50. Your screen looks different.
  • #503
  • Aug 5, 2009 4:35am Aug 5, 2009 4:35am
I've posted a couple of opinions in this thread just trying to show that spread trading on pairs that have one currency in common cannot work long term because you basically trade a cross pair, like EURGBP or EURCHF.

I was doing the same thing some time ago and it would work for some periods of time, but in the end I was losing more than gaining because of cross pair trending heavily for quite a long period of time, which led to remarkable losses.

I am still in search for some combination to trade this system. So, I would like to suggest to try spread trading of GBPJPY vs. AUDUSD or CHFJPY vs. AUDUSD. You can spot right away that they have no common currency, however they correlate pretty well for some reason.

Look at the attached picture that suggests to go short GBPJPY (red/blue candles) and long AUDUSD (green/yellow candles).

I have not tried doing that yet, so I have no experiences how these combinations work but if you are interested you might try to test them. I suggest not to trade lower than M15 timeframe.

Everyone should demo trade the strategy at least 3 months before going live. According to my experiences every strategy I tried got to troubles within 3 months of trading, so if this one lasts then I would go live with some small account.

I attach overlay indicator and template that I use.

Good luck!
Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy_audusd.jpg Size: 166 KB
Attached File(s)
File Type: mq4 OverLayChart.mq4   9 KB | 638 downloads
File Type: tpl overlay.tpl   6 KB | 612 downloads
  • #504
  • Edited 5:39am Aug 5, 2009 5:04am | Edited 5:39am
Looks like the first trade worked pretty well. But one trade is nothing, although it is encouraging...

Regarding the lot sizes it looks like AUDUSD lot size should be about twice as much as GBPJPY, because GBPJPY fluctuates about twice more than AUDUSD... just some initial observation...
Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy_audusd_trade.jpg Size: 134 KB
  • #505
  • Aug 5, 2009 6:01am Aug 5, 2009 6:01am
Quoting hotstorm
I've posted a couple of opinions in this thread just trying to show that spread trading on pairs that have one currency in common cannot work long term because you basically trade a cross pair, like EURGBP or EURCHF.

Good luck!
This is excellent insight. Pls keep us updated how such a combination works out. Will also try out those suggested pairs and share the results.
  • #506
  • Aug 5, 2009 7:09am Aug 5, 2009 7:09am
I just closed first trade at profit as the charts crossed. There is no gap right now so I won't open a new trade.

Again, I have no experiences trading this combination so do your own judgment, experiment, observe, test... Maybe I was just lucky this time...
Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy_audusd_trade_01.jpg Size: 13 KB
  • #507
  • Aug 5, 2009 1:00pm Aug 5, 2009 1:00pm
Although i posted some indicators and template for you guys to use with this strategy, i really wish you would step back and think about what you are doing here.

Overlaying correlated pairs (negative or positive) is actually a false. They appear to be overlaped, yes, but this is not something you should take as gossiple to enter a trade.

I trade full time with a bank, and yes, you can argue that we somtimes get it wrong, like the weather people do, but do you really think it is this simple ??

Whatever strategy or system you use, you cant get away from the fact that economic news statements will hit you very hard if you are on the wrong side of that trade.

Also, banks will consolidate their positions without any warning, purely because they want to close out their negative or positive entries to reconcile their market position. There is nothing you can do about this, whatever type of trader you are.

From my personal and professional experience, the best system i have seen on this forum and others is VSA. Combine that with support/resistence and you will all be looking in the right place!!

Where i work we have a team of 26 traders, who overall make a great deal of money for the bank and for themselves in bonuses. Likewise, we also have a large team of IT staff who virtually every day come up with new indicators and chart analysis parameters which are fed into a semi-automated system.

Please, dont get me wrong, ofcourse a so called perfect system may one day be invented. But, if it was, then here is not the place to publish it now, is it ??????????????

Goodluck.
  • #508
  • Aug 5, 2009 4:58pm Aug 5, 2009 4:58pm
This is precisely why I wrote, in red, on the homepage that I no longer trade this system live.

Quoting scooby-doo
Although i posted some indicators and template for you guys to use with this strategy, i really wish you would step back and think about what you are doing here.

Overlaying correlated pairs (negative or positive) is actually a false. They appear to be overlaped, yes, but this is not something you should take as gossiple to enter a trade.

I trade full time with a bank, and yes, you can argue that we somtimes get it wrong, like the weather people do, but do you really think it is this simple ??

Whatever strategy or system you use, you cant get...
  • #509
  • Aug 5, 2009 6:16pm Aug 5, 2009 6:16pm
Hi there scooby. Thank you for your insight. By VSA I presume you mean volume spread analysis. Is there a deeper meaning to this term because as far as I am aware it is very difficult to guage volume on OTC markets. I know EBS run by icap does a good percentage of the spot daily fx but surely even that isn't good enough?

Quoting scooby-doo
Although i posted some indicators and template for you guys to use with this strategy, i really wish you would step back and think about what you are doing here.

Overlaying correlated pairs (negative or positive) is actually a false. They appear to be overlaped, yes, but this is not something you should take as gossiple to enter a trade.

I trade full time with a bank, and yes, you can argue that we somtimes get it wrong, like the weather people do, but do you really think it is this simple ??

Whatever strategy or system you use, you cant get...
  • #510
  • Aug 5, 2009 9:48pm Aug 5, 2009 9:48pm
I would like to ask those who are using this template

http://www.forexfactory.com/attachme...2&d=1249473850

- do you know that overlayed aud/usd is in different scale like gbp/jpy ? for example here it is 20 pips in compare to 10 pips aud usd, so if there is aud usd "above" gbp jpy, it shouldnt be so i would like to ask how to be sure which is sell and which is buy ?

thanks
Browsing forexfactory since 2006
  • #511
  • Edited Aug 6, 2009 1:29am Aug 5, 2009 11:31pm | Edited Aug 6, 2009 1:29am
Quoting rtx
I would like to ask those who are using this template

http://www.forexfactory.com/attachme...2&d=1249473850

- do you know that overlayed aud/usd is in different scale like gbp/jpy ? for example here it is 20 pips in compare to 10 pips aud usd, so if there is aud usd "above" gbp jpy, it shouldnt be so i would like to ask how to be sure which is sell and which is buy ?

thanks
Yeah, see the next post, I mentioned that GBPJPY moves about twice as much as AUDUSD.

My first trade was then modified to take 0.5 lot GBPJPY and 1 lot AUDUSD.

I know overlaying repaints as the time goes... I realize that this is too simple and too good to be true...

Everybody should do their own research, develop their own approach and judgment. Demo trade for a long time.

... I am doing this for fun, it does not cost me a dime as I trade on demo account.
  • #512
  • Aug 6, 2009 12:41am Aug 6, 2009 12:41am
Quoting olymbios
Hi there scooby. Thank you for your insight. By VSA I presume you mean volume spread analysis. Is there a deeper meaning to this term because as far as I am aware it is very difficult to guage volume on OTC markets. I know EBS run by icap does a good percentage of the spot daily fx but surely even that isn't good enough?
Volume spread analysis combined with support and resistence is the way you should go when trading as a retail individual, you will find that your profit ratio will/should be around 5:2.

I have to go now as the rumour is we are about to sell allot of EURUSD.
  • #513
  • Aug 6, 2009 12:56am Aug 6, 2009 12:56am
Quoting rtx
I would like to ask those who are using this template

http://www.forexfactory.com/attachme...2&d=1249473850

- do you know that overlayed aud/usd is in different scale like gbp/jpy ? for example here it is 20 pips in compare to 10 pips aud usd, so if there is aud usd "above" gbp jpy, it shouldnt be so i would like to ask how to be sure which is sell and which is buy ?

thanks
there are sufficient comments that overalying is too simple and crude and is highly dangerous if you do not know what u are doing; there are also pointers to more mathematically sound methods which are practiced by professionals and published with books and papers by academics and practitioners, some references have been given by mbrs here.
  • #514
  • Aug 6, 2009 1:01am Aug 6, 2009 1:01am
Quoting scooby-doo
Volume spread analysis combined with support and resistence is the way you should go when trading as a retail individual, you will find that your profit ratio will/should be around 5:2.

I have to go now as the rumour is we are about to sell allot of EURUSD.
Thanks for giving us some direction (via VSA) and hope ....
  • #515
  • Edited 5:40am Aug 6, 2009 1:10am | Edited 5:40am
GBPJPY vs. AUDUSD trade #2 closed for $155.55
CHFJPY vs. AUDUSD trade #3 closed for $150.69
GBPJPY vs. AUDUSD trade #4 closed
GBPJPY vs. AUDUSD trade #5 closed
Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy_audusd_trade_05.jpg Size: 61 KB
  • #516
  • Aug 6, 2009 6:32am Aug 6, 2009 6:32am
Quoting hotstorm
GBPJPY vs. AUDUSD trade #2 closed for $155.55
CHFJPY vs. AUDUSD trade #3 closed for $150.69
GBPJPY vs. AUDUSD trade #4 closed
GBPJPY vs. AUDUSD trade #5 closed
my results
Attached Image (click to enlarge)
Click to Enlarge Name: pairsgbpjpy_audusd.JPG Size: 44 KB
  • #517
  • Aug 6, 2009 9:04am Aug 6, 2009 9:04am
http://www.tinypic.info/files/t832z6nr9uorw6bl2d3l.jpg

today as i was reading this thread i opened a trade just after uk news...
at first it went into 30 pips profit, so i let it go to see how far it can go in any side,
i have learned few lessons which is common in forex not specifically for this system,,
1- stop loss is a must,,,,, you determine it
2- money management
3- i tried to averaging the trade and failed, when spraed was 50 pips( -500 usd) i added more lots and it some how came to -100usd but never to break even for better exit,
and then it moved over -1000 usd loss.
however today was special day bcz of rate statement from uk but problem started when us session came into play.

just now sold 1 lot of gold and bought 1 lot of gb/usd,,,will update later,
  • #518
  • Aug 6, 2009 4:17pm Aug 6, 2009 4:17pm
Quoting shahram261

today as i was reading this thread i opened a trade just after uk news...
at first it went into 30 pips profit, so i let it go to see how far it can go in any side,
i have learned few lessons which is common in forex not specifically for this system,,
1- stop loss is a must,,,,, you determine it
2- money management
3- i tried to averaging the trade and failed, when spraed was 50 pips( -500 usd) i added more lots and it some how came to -100usd but never to break even for better exit,
and then it moved...
ok, so we learnt here that we shld not avg down; if it is wrong get out of the trades; my attempts at this pairs combination
Attached Image (click to enlarge)
Click to Enlarge Name: pairsgbpusd_eurusd_7aug09.JPG Size: 118 KB
  • #519
  • Aug 7, 2009 7:51am Aug 7, 2009 7:51am
Quoting jeffreytp
You're right, this "system" doesn't work : (

Attachment
hi
i think you are implementing this system wrongly,,
the pair you have mentioned in your statement have negative correlation of lets say 80%
in this case you have to buy both or sell both and if you buy one and sell the other one you are moving in one direction,, thats why your statement most are +ve,,,otherwise one should be +ve other one _ve

regards
  • #520
  • Aug 7, 2009 7:55am Aug 7, 2009 7:55am
Quoting T.E.Lawrence
My today's trade:

Attachment

swissy - short & euro -long (both 10 000 units).

hi
your post no.445 is wrong signal if you long euro/usd and short usd/chf

however you said short swissy which might be long usd/chf you mean.

for correct method you should long euro/usd and long usd/chf for hedging.
maybe i am missing something
regards
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