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Hedge and Correlation Strategy

  • #1,301
  • Sep 15, 2009 11:51pm Sep 15, 2009 11:51pm
Dreamliner, read your earlier post about losing 25% on the negatively correlated EurUsd & UsdChf. Did the swap on the EurUsd sell make you close the trade?
  • #1,302
  • Sep 15, 2009 11:53pm Sep 15, 2009 11:53pm
Quoting 2+2=4ex
Dreamliner, read your earlier post about losing 25% on the negatively correlated EurUsd & UsdChf. Did the swap on the EurUsd sell make you close the trade?
No, the huge loss made me close the trade; I didn't want a huge-er loss!
  • #1,303
  • Sep 15, 2009 11:58pm Sep 15, 2009 11:58pm
Quoting Dreamliner
Hi guys,

I'm back from Disney World vacation, somewhat ruined by horrible trading of negative correlated pairs while there.

I only checked charts once a day while I was on vacation, and to my chagrin every single day EUR/USD went up and USD/CHF went down. Finally I exited at a huge loss of 25%. And while I'm still ahead by trading this method, because of the many months of profitability using correlated pairs, this was a very expensive lesson to learn.

So I've put a disclaimer on the front page, in red, stating to never trade this method using...

Welcome back buddy , good to have you back on here !!!
  • #1,304
  • Sep 16, 2009 12:00am Sep 16, 2009 12:00am
Quoting bravester
Welcome back buddy , good to have you back on here !!!
Thanks, I'm never going on vacation again; too costly!
  • #1,305
  • Sep 16, 2009 12:04am Sep 16, 2009 12:04am
Quoting Dreamliner
No, the huge loss made me close the trade; I didn't want a huge-er loss!
Yea that pair set can be dangerous...I personally like to wait until there's a very big gap. I'll wait weeks with that set if I have to. Then when I enter I come in very small. That way if it runs against me after a day or two I can average down (with another small entry). I never considered trading that set as one of my main trades. I do it "on the side" to get a little extra.

Also, did you ever use that ea where the set of trades closes out after a predetermined profit had been reached? I tried it a couple times last week on my demo account but haven't gone back to check since the gap hasn't closed since my entry. I also had to close out and remove the ea from the platform because it was triggering trades automatically everytime I restarted the platform.

Good luck.
  • #1,306
  • Sep 16, 2009 1:39am Sep 16, 2009 1:39am
Redart is having fun now, i bet...

Fellas why don't you use this strategy trading Gold, Silver, and oil versus each other or a commodity linked currency like AUD and CAD ? For example ... i purchased silver back in october 2008 for a bargain price of 9.50 an ounce. Since im in oz, i paid with AUD while there was a gap in correlation and Aussie was outperforming silver. My hedge was obvious, cause we use AUD here anyways. So only way to make money on such a trade would be a discorrelation, which occured precisely 5 month after my purchase. Silver went to outperform the AUD and i made over 35% return during this time. Now it was physical, but you can do it with your broker, just hedge silver with aud and wait for discorrelations like this, or you can reverse the whole procedure and wait for convergence. Betta yet, use futures contracts to trade this.

THats the only way i know how to apply what you have been discussing here. Its obvious if you have a leveraged product, consider your stoploss at all times.

Heres a pic...
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  • #1,307
  • Sep 16, 2009 5:41am Sep 16, 2009 5:41am
I'm in trade: USD/JPY / EUR/JPY since yesterday, anyone else?

P.S.

Dreamliner, I think you should add 'positively' in your 1st post, in your warning about negatively correlated pairs - just for clarity's sake.
  • #1,308
  • Edited Sep 17, 2009 6:26am Sep 16, 2009 7:48am | Edited Sep 17, 2009 6:26am
+50 pips for the week

monitoring:
NU/EU
AU/EU
AU/ZU

Biggest DD seen was 75
  • #1,309
  • Sep 16, 2009 7:53am Sep 16, 2009 7:53am
I am trading the negative correlation EURUSD/USDCHF using Spieler's method with the reverse of USDCHF. It's been giving me 10-20 pips constantly the past few trades. It is one of the most if not the most regular correlation there is. Also using highly correlated AUDUSD/NZDUSD. I use overbought/oversold in the third pair (EURCHF AUDNZD) as triggers. To me, it's important to optimize the moment of entry.
  • #1,310
  • Sep 16, 2009 7:53am Sep 16, 2009 7:53am
Quoting T.E.Lawrence
I'm in trade: USD/JPY / EUR/JPY since yesterday, anyone else?

P.S.

Dreamliner, I think you should add 'positively' in your 1st post, in your warning about negatively correlated pairs - just for clarity's sake.
Yes, I took that trade yesterday too and is in good profit now, I'm holding a little longer though.

I added "positively" to the first post, thanks for catching that.
  • #1,311
  • Sep 16, 2009 8:23am Sep 16, 2009 8:23am
Yes i am doing the same, on both of these

Quoting chamane
I am trading the negative correlation EURUSD/USDCHF using Spieler's method with the reverse of USDCHF. It's been giving me 10-20 pips constantly the past few trades. It is one of the most if not the most regular correlation there is. Also using highly correlated AUDUSD/NZDUSD. I use overbought/oversold in the third pair (EURCHF AUDNZD) as triggers. To me, it's important to optimize the moment of entry.
  • #1,312
  • Sep 16, 2009 8:26am Sep 16, 2009 8:26am
Quoting toddanderson
Yes i am doing the same, on both of these
I could never make it work longterm, I admire you guys who can.
  • #1,313
  • Sep 16, 2009 8:59am Sep 16, 2009 8:59am
There's no pleasure without pain...

[quote=Petronix;3063083]Redart is having fun now, i bet...
  • #1,314
  • Sep 16, 2009 11:42am Sep 16, 2009 11:42am
eur/jpy usd/jpy your selling eur/jpy correct?? i had this trade for awhile now too around 15 hours but mine is way negative.. this is probably one of the top correlating pairs though.
  • #1,315
  • Sep 16, 2009 11:58am Sep 16, 2009 11:58am
Quoting renski911
eur/jpy usd/jpy your selling eur/jpy correct?? i had this trade for awhile now too around 15 hours but mine is way negative.. this is probably one of the top correlating pairs though.
Correct on all.
  • #1,316
  • Sep 16, 2009 12:05pm Sep 16, 2009 12:05pm
here is my 6 pairs i only pick the onse i could find that Correlated REALLY high like 85- 96 over a longer term 3 months and onse that have the exact same pip value.

eur/jpy vs usd/jpy
eur/usd vs aud/usd mainly these top 3 are highest correlating
eur/usd vs nzd/usd

usd/jpy vs gbp/jpy

gbp/jpy vs eur/jpy

gbp/jpy vs gbp/usd

i really havent had a losing trade other then me screwing around with the trades to much and losing..
  • #1,317
  • Sep 16, 2009 12:23pm Sep 16, 2009 12:23pm
closed eur/usd - aud/usd +40 pips, max drawdown was maybe in the 50 - 60 range.
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  • #1,318
  • Sep 16, 2009 9:14pm Sep 16, 2009 9:14pm
Just got in AU/NU
  • #1,319
  • Sep 16, 2009 9:32pm Sep 16, 2009 9:32pm
hello forex commmunity,

For those of us who are not tolerant of high drawdowns,

I recommend exploiting the AUD / USD & NZD / USD correlation
as the pairs move extremely similar to each other
and no extreme DDs are experienced...

After I got burnt in GBP / USD & GBP / CHF trade last week,
I am going for much tighter correlations and so far having success...

Any thoughts?

Again I would like to thank dreamliner for starting this thread...
  • #1,320
  • Sep 16, 2009 9:39pm Sep 16, 2009 9:39pm
Quoting Gothamcity
hello forex commmunity,

For those of us who are not tolerant of high drawdowns,

I recommend exploiting the AUD / USD & NZD / USD correlation
as the pairs move extremely similar to each other
and no extreme DDs are experienced...

After I got burnt in GBP / USD & GBP / CHF trade last week,
I am going for much tighter correlations and so far having success...

Any thoughts?

Again I would like to thank dreamliner for starting this thread...
the negative correlation pairs are for small position long term trading (possibly weeks). you need to average in if the trade goes against you so again start off small. I also recommend choosing a pair and entry point where the swap is positive.

As for the tightly correlated pairs, they're pretty safe as long as you're watching it closely and tweaking along the way. I also start off small here but not as small as negative pairs.
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