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Hedge and Correlation Strategy

  • #1,261
  • Sep 14, 2009 7:06am Sep 14, 2009 7:06am
Hi
is a private Italian traders are looking for an EA with the following characteristics:
- Open at 10-14 pairs of your choice.
- NO TP and Stoploss.
- Chiusuraa only to achieve a total profit to be determined.
- Ability to choose whether to sell all or any buy or sell some to buy ome.
Thanks a lot to whoever can help me.
  • #1,262
  • Edited 7:41am Sep 14, 2009 7:15am | Edited 7:41am
Problem with this method is clear

If you going to use safe pairs like AUDUSD/NZDUSD

you going to wait possibly months for Entry

Also you guys, have to check longer term charts before entry

check for example EURUSD/USDCHF

1) I'm not that crazy about to short Euro and buy Dollar right now looking
at the chart

2) Look over Weekly TF for the very same pair, you'll see that

spread is not even half way to where is was in the end of 2008

and if you going to look your Hourly TF you would just jump right in and lose.

Safest pairs sound good, but I cannot wait months and do nothing..
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  • #1,263
  • Sep 14, 2009 8:30am Sep 14, 2009 8:30am
ok guys im looking at usdchf to audusd on the daily and it seems that the gap is very big. now i think i will only look at the daily from now on to see the bigger picture. im currently long usdchf and short audusd. it seems that the it wants to close the gap. all i need is just 5% today and i will be happy. wish me luck. who is with on this one?
  • #1,264
  • Sep 14, 2009 8:55am Sep 14, 2009 8:55am
Last week, I took three trades AUDUSD/NZDUSD, EURJPY/GBPUSD and EURUSD/USDCHF because I thought I was entering with a spread large enough. By the end of Friday, I was something like -325 pips. Since I am only demoing, I let the pairs run. This morning, I got many pips back with a -81 pips overall. The pictures shows my entry for EURJPY/GBPUSD and actual situation. You can see how much the overlay is adjusting. I think I will close this combination because prices are close enough for me. What I realize is I did not enter at the optimal moment as gaps got bigger. I definitely need some indicator as to when to enter more precisely. BB bands on the ratio could be the one.

http://i32.tinypic.com/2dlujuo.gif

http://i32.tinypic.com/e9vgx2.gif
  • #1,265
  • Sep 14, 2009 9:01am Sep 14, 2009 9:01am
Quoting chamane
Last week, I took three trades AUDUSD/NZDUSD, EURJPY/GBPUSD and EURUSD/USDCHF because I thought I was entering with a spread large enough. By the end of Friday, I was something like -325 pips. Since I am only demoing, I let the pairs run. This morning, I got many pips back with a -81 pips overall. The pictures shows my entry for EURJPY/GBPUSD and actual situation. You can see how much the overlay is adjusting. I think I will close this combination because prices are close enough for me. What I realize is I did not enter at the optimal moment as...

Here is an excellent thread on using Bollinger Bands to do what you're doing.

http://www.forexfactory.com/showthre...highlight=ccfp
  • #1,266
  • Sep 14, 2009 9:31am Sep 14, 2009 9:31am
Quoting billbss
Here is an excellent thread on using Bollinger Bands to do what you're doing.

http://www.forexfactory.com/showthre...highlight=ccfp
Thanks Billbss. I know there are a few threads on the subject and in other forums and I am starting to think that the key to success for this strategy is the time of entry. Not only threads, but many studies as well (see pdf). There must be a state of the art for this.

Quoting SkyzerFX
Problem with this method is clear

If you going to use safe pairs like AUDUSD/NZDUSD

you going to wait possibly months for Entry

Also you guys, have to check longer term charts before entry

check for example EURUSD/USDCHF

1) I'm not that crazy about to short Euro and buy Dollar right now looking
at the chart

2) Look over Weekly TF for the very same pair, you'll see that

spread is not even half way to where is was in the end of 2008

and if you going to look your Hourly TF you would just jump right in and lose.

Safest pairs...
I am not so sure you would have to wait that long. If you use a method with standard deviation for a signal (i.e. like 2 stdev), that means that you are waiting after the 5% of the data out of limits. In the case of well correlated pairs like EURUSD and NZDUSD, that means the spread will not be as important as with another combination. IMO it depends on how the variation is distributed. Anyway, there is still the possibility of using smaller timeframes.
Attached File(s)
File Type: pdf Analysis Pairs Trading.PDF   88 KB | 1,722 downloads
File Type: pdf opr00LG9.pdf   375 KB | 846 downloads
  • #1,267
  • Sep 14, 2009 10:59am Sep 14, 2009 10:59am
Most of the people who have been following this thread from the beginning are aware that you could get yourself into drawdown, its part of trading without a stop loss. Dreamliner himself made that caveat to be careful and know what you are doing...!

I entered a GU vs GJ trade last week and was getting hammered big time but I averaged once on both legs and held my nerve and today I am in profit...i.e. the correlation held and the GU caught up with the GJ as I had hoped..!

I think this strategy isnt for the faint hearted - careful MM and averaging your position is part of what can make it successful, dont expect to see a gap and think 'Oh i'm going to make money now' as it isnt always that simple...

cheers

Red

Quoting Gothamcity
Hello forex community,

I entered a trade gbp /usd gbp chf

last monday...

I was down 200 pips today so I finally pulled the plug

Be very careful with this strategy please...

I don't think I will implement this strategy for a long time
unless adjustments are made...

Good luck everyone
  • #1,268
  • Sep 14, 2009 12:21pm Sep 14, 2009 12:21pm
Quoting redart007
Most of the people who have been following this thread from the beginning are aware that you could get yourself into drawdown, its part of trading without a stop loss. Dreamliner himself made that caveat to be careful and know what you are doing...!

I entered a GU vs GJ trade last week and was getting hammered big time but I averaged once on both legs and held my nerve and today I am in profit...i.e. the correlation held and the GU caught up with the GJ as I had hoped..!

I think this strategy isnt for the faint hearted - careful MM and averaging...
Same for me. I just closed one of my trades for +5pips gain. I am now -48pips overall for the two combos left. I will let them run just to see what happens. I looked at the thread billbss was refering to and one entry technique is to watch for overbought/oversold situation in 1hr-15min-5min using CCI and BB for the common pair of a combo. Once the 3 charts agree, enter trades. When I look back at my EURJPY/GBPUSD combo (EURJPY had a huge drawdown friday), I would have entered when the spread was at a peak and would have made quite a few pips.
  • #1,269
  • Sep 14, 2009 1:12pm Sep 14, 2009 1:12pm
I'm entering sell GBPUSD buy GBPJPY

Don't care about correlation table but Chart looks good

in pretty much any TF, Will average down, from now on..

Huge spread right now..
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  • #1,270
  • Sep 14, 2009 1:25pm Sep 14, 2009 1:25pm
I am entering EURJPY (sell) and GBPJPY (buy). CCI (21) is overbought in 4hr and 1hr charts and just crossing +100 downwards.
  • #1,271
  • Sep 14, 2009 1:25pm Sep 14, 2009 1:25pm
Quoting chamane
I am entering EURJPY (sell) and GBPJPY (buy). CCI (21) is overbought in 4hr and 1hr charts and just crossing +100 downwards.
... in 15 min chart.
  • #1,272
  • Sep 14, 2009 1:33pm Sep 14, 2009 1:33pm
Quoting chamane
I am entering EURJPY (sell) and GBPJPY (buy). CCI (21) is overbought in 4hr and 1hr charts and just crossing +100 downwards.
Nothing wrong there except EURJPY is in the uptrend.

I would place 'Swing man TRIX indy" and wait for the SELL signal before

place a SELL on EURJPY

Well, we are still in TEST, should figure out those beasts..

So, identify pairs first and if 1 pair get signal then enter and wait

till another pair also get a signal (sell/buy) in correlated pair.

IMHO
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  • #1,273
  • Sep 14, 2009 1:42pm Sep 14, 2009 1:42pm
Quoting SkyzerFX
Nothing wrong there except EURJPY is in the uptrend.

I would place 'Swing man TRIX indy" and wait for the SELL signal before

place a SELL on EURJPY

Well, we are still in TEST, should figure out those beasts..

So, identify pairs first and if 1 pair get signal then enter and wait

till another pair also get a signal (sell/buy) in correlated pair.

IMHO
Somebody made a similar remark earlier, but I am relying on EURGBP overbought/oversold for entry signals. GBPJPY is going up also. To me, what is important is that the gap between the two pairs will decrease. But we'll see. As you say, I am testing right now.
  • #1,274
  • Sep 14, 2009 2:40pm Sep 14, 2009 2:40pm
I also looking at CCI indy just not sure about description

"Commodity Channel Index" ? What commodity has to do with FOREX

overbought and oversold conditions?

Very strange (at least the Name of the indy)
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  • #1,275
  • Sep 14, 2009 2:41pm Sep 14, 2009 2:41pm
I never thought this would happen. I just closed EURJPY/GBPUSD with +3 pips. Last Friday, I had -225 pips on it after the big drawdown.
  • #1,276
  • Sep 14, 2009 2:52pm Sep 14, 2009 2:52pm
"I just closed EURJPY/GBPUSD with +3 pips. Last Friday, I had -225 pips on it after the big drawdown."

Cool, I used to trade only selling USD against EURO on every pop..
System always worked, but ones I was down close to 25% of the
account, but when this pair returns I bank 20% in 3 days..

Same here, I think we just have to stick with the trade and average

down if we sure what we are doing.. If we going to sell every time we down

50 pips, we just going to lose money most of the time..

I just look over Monthly GPBJPY and its near all time low since 2002

This is not sustainable, so I'm sticking with it
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  • #1,277
  • Edited 6:20am Sep 15, 2009 5:56am | Edited 6:20am
EU - GU anyone...
Attached Image (click to enlarge)
Click to Enlarge Name: eu-gu.jpg Size: 135 KB
  • #1,278
  • Sep 15, 2009 6:50am Sep 15, 2009 6:50am
  •  tmal
  • | Joined Oct 2007 | Status: Arrogant FX Bastards Club Member | 24 Posts
Quoting redart007
EU - GU anyone...
I'm waitin' because cable is goin' down, eu is chopy before the US news, the gap is big but I will enter after...
  • #1,279
  • Sep 15, 2009 7:01am Sep 15, 2009 7:01am
Quoting redart007
EU - GU anyone...

In this case you would have to sell EURO and I wouldn't do that.

EURO always rise faster and GU falling faster than EURO that's how

it is right now.. I'll wait till after news see if EURO might fall

By the way just close my GU GJ for profit this morning..

Maybe will re-enter later
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  • #1,280
  • Sep 15, 2009 7:53am Sep 15, 2009 7:53am
EURO should drop like a stone soon, too high too fast..
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