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Hedge and Correlation Strategy

  • #1,201
  • Sep 10, 2009 6:49pm Sep 10, 2009 6:49pm
Quoting Gothamcity
i am back down to -150 pips on these two pairs.
I was at -70 pips sometime today.

So if I went in at the right moment, I would be up many pips right now.
I went in using 30 min TF. Now I am looking at only the daily chart
for the gap to close. This might take the whole week and maybe more.

Oh well, it could be worse...
Looking at the correlation table, the relation between the pairs is shifting somehow. I would still stay in the trade as I believe prices will gather again.

http://i28.tinypic.com/2ywbtc7.gif
  • #1,202
  • Sep 10, 2009 8:29pm Sep 10, 2009 8:29pm
Quoting jtmoore007
Guys. Why the need to hedge. That is the whole idea behind going long and short at same time with diff pair ie. Long eu short gu. No need to hedge. This is "almost" like hedging. If the trade goes against u just add to it to avg your price. As long as u don't let yourself get into margin trouble u should b ok.

Don't trade many pairs and don't trade many lots. This is a slow and steady approch. Not going to get rich today but might gain a few bucks here and there.

Sometimes you open different sets and one set calls for a short of pair X and the other set of pairs call for a long of pair X, hence a hedge is created. some brokers per NFA say no no.
  • #1,203
  • Sep 10, 2009 8:29pm Sep 10, 2009 8:29pm
Quoting bravester
what tf do you see a divergence on for that pair?
30M
  • #1,204
  • Sep 10, 2009 9:24pm Sep 10, 2009 9:24pm
Quoting chamane
Looking at the correlation table, the relation between the pairs is shifting somehow. I would still stay in the trade as I believe prices will gather again.

http://i28.tinypic.com/2ywbtc7.gif
I am down 180 pips everyone... I hope the shift occurs before
it burns the account....

heh he.. I shall stay in the trade,
either the this trade is gonna take my account,
or I am gonna beat the trade by being patient...

let's see who wins...
  • #1,205
  • Edited 1:10am Sep 11, 2009 12:31am | Edited 1:10am
Quoting Gothamcity
I am down 180 pips everyone... I hope the shift occurs before
it burns the account....

GBPCHF is a crazy pair and you don't know when it will turn. So there is hope.
Try EURGBP with GBPCHF. Correlation is better I think.
My observation is that when you use two pairs in hedging, the resultant pair movement is critical.

EURGBP GBPCHF > EURCHF
GBPUSD GBPCHF > USDCHF

Some possibilities are:
EURJPY CHFJPY
EURJPYGBPJPY

This just an idea and I have not gone in depth into this.
I too have an old indicator used for this trading which gives trade direction but try at your own risk.
Attached File(s)
File Type: ex4 NeutralHedge Overlay_v4.ex4   11 KB | 617 downloads
"Put all your efforts in becoming effortless"
  • #1,206
  • Sep 11, 2009 2:04am Sep 11, 2009 2:04am
Update on my GBP/CHF / GBP/USD trade:

current profit: -245 pips, and it's getting worse every day - any thoughts? Should I really wait until I see some profit, regardless of whether the gap is closed or not, as I was advised?

I still don't get how on earth Dreamliner has never had any losing trade. I'm really confused why some trades result in profit and others don't.
  • #1,207
  • Sep 11, 2009 3:15am Sep 11, 2009 3:15am
Quoting Gothamcity
I am down 180 pips everyone... I hope the shift occurs before
it burns the account....

heh he.. I shall stay in the trade,
either the this trade is gonna take my account,
or I am gonna beat the trade by being patient...

let's see who wins...
What is your value per pip and what is your account size?
Probability Professor
  • #1,208
  • Sep 11, 2009 3:33am Sep 11, 2009 3:33am
Quoting T.E.Lawrence
Update on my GBP/CHF / GBP/USD trade:

current profit: -245 pips, and it's getting worse every day - any thoughts? Should I really wait until I see some profit, regardless of whether the gap is closed or not, as I was advised?

I still don't get how on earth Dreamliner has never had any losing trade. I'm really confused why some trades result in profit and others don't.


I would love to have all my trade in the positive, but in the real world that just does not happen.
I follow a trade like you T.E. but if it hits a -10% of my account or drags on to long (two weeks) then i close it. = money management!
it seems like i have only one problem and that is that i only learned about this a short while ago. I have traded 5 times and all 5 times were positive.

I have been following the thread for a few days now. I read all 80 or something pages in about 3 hours and guys the strategy sounds quite exelnt!
  • #1,209
  • Sep 11, 2009 4:55am Sep 11, 2009 4:55am
I think we need to recognise a big gap can get bigger so its probably a more risky trade, this pairs have been drifting apart all week.

Due to the volatility of this pair right now maybe you should have taken some profit when it was on the table as you mentioned yesterday when it came back and then move onto another trade, every trade will have its correct exit time before it can bite back

I made money out of these two pairs this week but did so by picking my levels and didn't wait for the pairs to cross as they are too far apart, took some small but reasonable profit. The longer your in a trade the greater chance you have of it turning back and biting you.

Don't pin your hopes on one trade - try have others in profit which could negate a big loss, losses are part of doing business...

regards

Red

Quoting T.E.Lawrence
Update on my GBP/CHF / GBP/USD trade:

current profit: -245 pips, and it's getting worse every day - any thoughts? Should I really wait until I see some profit, regardless of whether the gap is closed or not, as I was advised?

I still don't get how on earth Dreamliner has never had any losing trade. I'm really confused why some trades result in profit and others don't.
  • #1,210
  • Sep 11, 2009 6:43am Sep 11, 2009 6:43am
Position in GU - GJ, anyone else...
Attached Image (click to enlarge)
Click to Enlarge Name: gu-gj.jpg Size: 130 KB
  • #1,211
  • Sep 11, 2009 7:09am Sep 11, 2009 7:09am
What are you doing in this case ? are you adding to the positions
if so are you adding in the same direction as your first pair order or
adding in a differant direction


Quoting T.E.Lawrence
Update on my GBP/CHF / GBP/USD trade:

current profit: -245 pips, and it's getting worse every day - any thoughts? Should I really wait until I see some profit, regardless of whether the gap is closed or not, as I was advised?

I still don't get how on earth Dreamliner has never had any losing trade. I'm really confused why some trades result in profit and others don't.
  • #1,212
  • Sep 11, 2009 7:11am Sep 11, 2009 7:11am
Quoting redart007
Position in GU - GJ, anyone else...
I'm actually in this trade, yes.
Probability Professor
  • #1,213
  • Sep 11, 2009 7:24am Sep 11, 2009 7:24am
Quoting redart007
Position in GU - GJ, anyone else...
USDJPY is in a major downtrend, so you are stuck.
Better to look at the movement of the resultant pair.
Better to trade GU with EU is my opinion.
"Put all your efforts in becoming effortless"
  • #1,214
  • Sep 11, 2009 7:35am Sep 11, 2009 7:35am
Quoting toddanderson
What are you doing in this case ? are you adding to the positions
if so are you adding in the same direction as your first pair order or
adding in a differant direction
I leave this trade open till monday - then I decide. I added one more time today (I've already added 4 times to that trade). We'll see. I hope we will learn something from this situation.
  • #1,215
  • Sep 11, 2009 7:52am Sep 11, 2009 7:52am
Quoting T.E.Lawrence
I leave this trade open till monday - then I decide. I added one more time today (I've already added 4 times to that trade). We'll see. I hope we will learn something from this situation.

hey t.e. i think as long as you dont over leverage you should be fine. also if it hits 10% of acct balance then its time to get out and just look for other pairs to trade. im sure glade i got out of my trade g/u and e/y as i would of had a margin call. its better to lose at least 10% of acct balance than to wait for it to turn positive on you.
  • #1,216
  • Sep 11, 2009 7:54am Sep 11, 2009 7:54am
Same situation for me with GBPUSD/EURJPY. I'm down -160 pips right now, but I am staying in the trade just to see. I have made a few stats on the correlation of that combo. What it tells me is that maybe I should have waited before entering because the latest data shows a decrease in the correlation. Also, for each 100 points wich is roughly a 5 month period for daily data, the results can vary quite a bit, being even negative in some case. So I wait and see.

I would be more confident with a pair like EURUSD/USDCHF because the relation has been stable like a clock for quite a long time. Since they are negatively correlated, I am watching the reverse with Staticoverlay.

http://i29.tinypic.com/solnk0.gif
  • #1,217
  • Sep 11, 2009 7:59am Sep 11, 2009 7:59am
I close all of my 3 open positions. with small loss.. Have to figure out
how to play that strategy in more efficient way
Viewer Discretion Advised: Shall we shag now or should we shag later? :-)
  • #1,218
  • Sep 11, 2009 8:16am Sep 11, 2009 8:16am
Quoting SkyzerFX
I close all of my 3 open positions. with small loss.. Have to figure out
how to play that strategy in more efficient way
we're all trying to do the same
  • #1,219
  • Sep 11, 2009 8:18am Sep 11, 2009 8:18am
Quoting treadline
hey t.e. i think as long as you dont over leverage you should be fine. also if it hits 10% of acct balance then its time to get out and just look for other pairs to trade. im sure glade i got out of my trade g/u and e/y as i would of had a margin call. its better to lose at least 10% of acct balance than to wait for it to turn positive on you.
Yeah, I keep this in mind - but because I got some nice profit recently (which just cover my current loss on this trade ), I'm allowing myself to stay in this trade, to see how it will develop.
  • #1,220
  • Sep 11, 2009 8:19am Sep 11, 2009 8:19am
I am in the trade with 10 cent pips...

back down to -150 pips, I think I may have to keep this trade for a week or so in order for the pairs to converge...

any thoughts...
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