Hedge and Correlation Strategy

Is their any EA, that can move to break even or lock profit , when the pair
move to x number of pips profit. Their are hundreds of indicators that
can manage one pair . I dont think i have seen one that would manage both pairs to lock in some profit

here is an ea that might be useful to you

Yes i have these , i was looking for something like break evan, trail
for profit of both the pairs

This is not directed at anyone in particular, but since this was an above average nasty post it doesn't bother me to use it as a segue into my own.

Let's first realize that Dreamliner really has nothing of material importance to gain from starting and maintaining this thread. He offered an idea to help newcomers and even asked for critiques to find holes in his method. Even MOST of the detractors have at least offered something of substance, even if their suggestions have been passed by. I am still on the fence, so to speak, since I am still not convinced that the gains can out perform the inherent risk (pretty much your whole account at margin call if you don't intervene) but I am keeping an open mind.

Now, let's be fair in our assessment of this strategy. Until his Disney vacation, he had never lost a trade, in some 5-6 months trading live (albeit relatively small accounts) until he had to close a 25% loss. This was probably due to trading negatively correlated pairs. Until that point, he stated that the max DD that he had experienced was possibly no greater than 10%.

Now here is the point I am trying to make. If he trades as he states (1000 units per $1000 in account), that would put him at 10 cents per pip. 10% of $1000 is $100. $100 divided by 10 cents would mean that he had at least seen a trade go ONE THOUSAND pips against him... everyone that has been bailing and wailing about a couple hundred pips and questioning the method obviously are overextended or never really understood the risk to begin with.

Even with his recent loss, if he has been making at least 1% daily, that gives him at LEAST (5 months times 20 trading days in a month) 100% (not including compounding which is quite possible with his consistency) or 20% a month. Even though the drawdown/loss is dangerously large, it is still a promising system. The loss hopefully wasn't some random occurrence, but in fact due to the negative correlation trade.

I see three things that someone needs to do if they want to succeed at this (if long-term success, using this method, for anyone other than Dreamliner is even possible):

1.) Screentime; seeing a large amount of setups and quickly being able to visually determine which gaps are more likely to be ready to snap back together. (But screentime is necessary for any system)

2.)Not overextending your account. 1000 units per $1000 seems to be a good baseline... anything less than that seems to be playing it TOO safe
(Once again, overextending yourself can kill you in any system)

3.) Being able to cut your losses at a certain pain thresh hold (Dreamliner's appears to be around 25%?) This will reduce your profitability but will keep you alive. I recall at least one poster here would have had a margin call had they not cut their losses at 10%.
(Once again, another necessary evil in trading)

Anyways, I apologize for the long post... I just felt that the thread was getting off target and we needed to step back for a moment and reflect on what we have actually seen. Thank you Dreamliner and all the other contributors to this thread, it has kept me busy on my day off lol

12 days in a trade and finally came out with 128 pips. I am down 156 pips through a combo of averaging in since 9/10/09 through 9/18/09 on AU/NU. I haven't make any trades since the 18th due to this sysyem doesn't make sense. I have been watching the charts of this trade since the 10th and for MANY days they have been correlating and following one another yet profit never came. Just can't put 2 and 2 together. This is all demo. I still have a $100 in free live money untouched.

Now, to be clear right off the go, I am not trying to start an argument with you Scooby, but I am really confused as to your stance on this system.

In your earlier posts on this thread you offered some indicators and advice for trading this method (although you warned against trading it).

Then later on, you had a discussion with Dreamliner about an alternative "hedging" method, that was theoretically safer with less drawdown.

Then you suggested that retail traders should focus on VSA combined with S and R analysis.

Finally, you add a one-liner that makes me feel like I've wasted my entire time on this thread (or to be more blunt, like a complete idiot)....

It's this kind of flip-flopping (which is how I view it) that really confuses the bejesus out of newbies like myself. You are not alone in this regard(on this thread alone there are at least 3-4 posters that start out challenging the method and then actually start trading it???? WTF is that all about??) but since you seem to have the most professional experience and credentials, I weigh your posts more heavily than those of other pundits.

I hope you don't take this the wrong way and assume that I am making a personal attack against you. It is quite the opposite; I simply want guidance without all the extra noise. After all this conflicting information, is it truly your belief that VSA is ultimately the way to START learning this business?

I offered an indicator and possibly an althernative way of trading hedges, not because i think they will work, but because people dont understand fundamentals. So, if people want to trade this way, then so be it. i have warned against this on many threads but again people dont listen and before you know it they are reinventing the wheel getting Swingman to create yet another market indicator.

Banks do use hedge trades, mainly against futures but not in the way it is trying to be traded here using chart overlays.

Find me a published book (by someone) on overlay trading ?, your findings should really answer your questions once and for all.

Following on...when i say fundementals....

An example of a cable trader (GBPUSD), will also have a chart showing him/her what the FTSE100 and Dow30 is doing. Why ????????????

Answers on a post card please from anyone that has studied economics ???

Hello forex community,

why not buy and sell all the pairs on a demo account.

This way one can keep track exactly how many pips there are
on each gap. If the number exceeds let's say about 500 pips, then
it's very safe to start entering the buy and sell positions...

Each currency pair has its own daily trading range based on interest rate spread between the pairs in question.

Examples:

EURCHF interest spread is 125 and 12 Month trading range in pips is 350.
USDJPY interest spread is 425 and 12 Month trading range in pips is 1900.
GBPJPY interest spread is 450 and 12 Month trading range in pips is 2100.

etc

However, these change over time. A safe trading gap of 500 maybe ok today but may not be the same tomorrow. Also, you will need to take into account the timeframe used as this will obviously have a weighted factor on the gap size.

Thank you for the reply. I must apologize to Dream and everyone else for taking this thread off topic but since I cannot send a PM at the moment, I have to use this thread, one last time. As for the FTSE100 and Dow30 charts, the obvious reason would be to monitor possible effects on what they are trading. A good day/period for FTSE theoretically would create demand for GBP relative to USD, raising the pair and vice versa. Obviously the Dow30 is a USD demand proxy and works in the inverse manner. How could this simple relationship give any kind of advantage?
Once again, I apologize to Dreamliner for using your thread. It won't happen again, Scout's honor!

>_<

Hello All...

Me & my friend have been trying this system for 3 months.. with proper money management.. it still give me positive result.

What I did & Understood about this system :
------------------------------------------
1. find high correlated pairs, put it with overlay indicator
2. when the gap occurs, simply buy & sell ( each pair with different lot size according pip value & volatility of the pairs) hoping they will converge meet again. of course, i use indicator to measure wheter the gap already big enough to enter position, i got it from this forum.
3. If the gap is getting bigger, drawdown happens.. i average the position for both of them with the same lot size. i experienced maximum 3 times averaging before close in Profit.
4. Close All.. in profit.

for people whom say this sistem is garbage / useless.. i encourage you to give the solution or improvement... dont be the problem it self.. be the solution guys...

There are still lot of room for improvement about this system. for example, when i played with EurJpy and GbpJpy.. i saw the movement of Gap indicator is the same like EurGbp movement... so i think we can play one pair EurGbp with the help of Gap Indicators. Yes, Trending system can give you better profit.. but the convergence-divergence pairs trading is stress free system

Remember.. Forex market is trading in PAIR.... it's a blessing !
it's an advantage from other market.. stock, index, etc.

So.. use it Guys.. find the message what every currency wants to tell you their movement.. they can't lie.

come on guys.. build positive attitude.. let's improve this system.. stress-free !!

Best Regards,
- Mike -

Still having positive results T.E. Lawrence...?

I am still testing this method on my demo accounts...

I wish dreamliner would post a couple of his ideas and give us
feedback on his latest performance...

I think Dreamliner is trading a different system now. He has taken the Max trading course.

hey porkpie;

what is Max trading course ??

do tell please...??

Yes, I still trade this method, though I've focused on developing my scalping system, which is much more profitable.

T.E. Lawrence...
are you going to be starting a new thread with your new scalping strategy??

subscribe.

Is it good? Hedging?

I installed this indicator but it crashes the MT4 , could you please tell me how to get it to work ??

Thanks!!

For you info

--Correlation Secret---->This may help Dreamlines Method

--Correlation Scalping, Swing

Cheers,

By Jason Fielder...LMAO

He doesn't trade, he just sells "systems" and reports...