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Synthetic Hedging Script, Conforms to new CFTC regulations

  • #1
  • First Post: Edited Nov 7, 2009 7:24pm Nov 6, 2009 3:23am | Edited Nov 7, 2009 7:24pm
For all of you traders looking for a way around the anti hedging rules here is a script for you.

It basically works by creating an inverse derivative of what ever position you want to hedge. For example if you want to hedge a long EURUSD position it might SELL EURCHF and BUY USDCHF in proportion to your EURUSD exposure.

To use, simply run the script and select the positions that you would like to hedge.

Your hedge positions are determined on a transactional cost basis, by selecting the inverse derivative combination with the lowest transaction cost.

There will be a commercial version available for MT5 with many more usefull features. I had to severely limit the functionality on this MT4 version due to lack of reasonable security.

Please let me know if there are any additional features or bug fixes that you would like to see added to this.



KK
Attached File(s)
File Type: ex4 Kurka - SynHedge.ex4   9 KB | 1,335 downloads
Keep it simple stoopid....
  • #2
  • Nov 6, 2009 3:56am Nov 6, 2009 3:56am
I loaded this up in NotePad... That's pretty funny. I HEARBY ACKNOWLEDGE THAT KURKA IS A FOREX GENIUS

Nice script BTW thanks.
  • #3
  • Nov 6, 2009 7:10am Nov 6, 2009 7:10am
Many thanks Kurka but I am getting a zero divide error on a standard ibfx demo. I had one trade open, a sell of 0.1 lot of EurUsd.
  • #4
  • Nov 6, 2009 7:16am Nov 6, 2009 7:16am
Quoting Kurka Fund
For example if you want to hedge a long EURUSD position it might SELL EURCHF and BUY USDCHF in proportion to your EURUSD exposure.
What is the intended use for this? Why not just close the EURUSD position instead of paying two additional spreads plus the swap and unnecessarily use margin?

To me this makes just as much sense as

// this will work even faster
while (equity() > 0){
buy("XAUUSD");
close("XAUUSD");
}
alert("all money transferred to broker!");
  • #5
  • Nov 6, 2009 11:47am Nov 6, 2009 11:47am
Quoting 7bit
What is the intended use for this? Why not just close the EURUSD position instead of paying two additional spreads plus the swap and unnecessarily use margin?

To me this makes just as much sense as

// this will work even faster
while (equity() > 0){
buy("XAUUSD");
close("XAUUSD");
}
alert("all money transferred to broker!");
I completely agree. Hedging make no sense from an economic standpoint.

This script simply gives all the traders that are complaining about how anti hedging laws destroyed their fantastically profitable strategy a working alternative that conforms to the current regulations. So no more complaining about not being able to hedge.

Also, since this is not hedging in the traditional sense, there are some interesting strategies that can be applied. Hopefully this can inspire some new trading ideas.

KK
Keep it simple stoopid....
  • #6
  • Nov 6, 2009 11:52am Nov 6, 2009 11:52am
Quoting smjones
I loaded this up in NotePad... That's pretty funny. I HEARBY ACKNOWLEDGE THAT KURKA IS A FOREX GENIUS

Nice script BTW thanks.
Nothing in life is free, in this case you pay by acknowledging my greatness.

I will work on making all of my future releases even more cocky.
Keep it simple stoopid....
  • #7
  • Nov 6, 2009 11:56am Nov 6, 2009 11:56am
Quoting waltini1
Many thanks Kurka but I am getting a zero divide error on a standard ibfx demo. I had one trade open, a sell of 0.1 lot of EurUsd.
I could not replicate this error. I tried with the same position on IBFX demo and it opened a Long - EURCHF and Short - USDCHF successfully. Please provide more info.
Keep it simple stoopid....
  • #8
  • Nov 6, 2009 12:25pm Nov 6, 2009 12:25pm
Quoting Kurka Fund
This script simply gives all the traders that are complaining about how anti hedging laws destroyed their fantastically profitable strategy a working alternative
Maybe it would make sense to give these traders tools that really help them:

* An indicator that would analyze the order history (in a hedged MT4 account) in real time and draw the non-hedged equivalent of all trades into the chart or into an indicator window for education purposes.

* Scripts with a simple user interface that would allow to open counter-trend trades with their own stoplosses and takeprofits (stop and limit orders managed by the script) and behave just like hedged counter trades (maybe even display their own partial floating P&L in real time) but without actually hedging.
  • #9
  • Nov 6, 2009 3:59pm Nov 6, 2009 3:59pm
Quoting 7bit
Maybe it would make sense to give these traders tools that really help them:
This will help them, by allowing them to continue to use their strategies and spend more time trading as opposed getting depressed and complaining on web forums. But mainly it helps me since I have turned to the dark side, consulting with dealers on offsetting risks. The use of this type of hedging will result in lower return on capital for less sophisticated dealers, which means that they will turn to me to raise margins. It also helps everyone else by increasing overall trading volume.
Keep it simple stoopid....
  • #10
  • Nov 6, 2009 4:17pm Nov 6, 2009 4:17pm
Show me a demo where this works on a AUDNZD grid. (A VERY profitable strategy if properly capitalized with a nano lot broker) - Nuff' Said...
  • #11
  • Nov 6, 2009 5:31pm Nov 6, 2009 5:31pm
Quoting Aja
Show me a demo where this works on a AUDNZD grid. (A VERY profitable strategy if properly capitalized with a nano lot broker) - Nuff' Said...
If I wanted to trade a bidirectional grid i would just instead of opening new buys and sells over and over just close one of the many open sells when i want to buy and close one of the buys when i want to sell and only open new buys when there are no sells left to close and only open new sells when there are no buys left to close. Simple, isn't it? No need for hedging at all!
  • #12
  • Nov 6, 2009 6:58pm Nov 6, 2009 6:58pm
Quoting Aja
Show me a demo where this works on a AUDNZD grid. (A VERY profitable strategy if properly capitalized with a nano lot broker) - Nuff' Said...
Are you serious ?
Keep it simple stoopid....
  • #13
  • Nov 6, 2009 8:42pm Nov 6, 2009 8:42pm
Quoting 7bit
If I wanted to trade a bidirectional grid i would just instead of opening new buys and sells over and over just close one of the many open sells when i want to buy and close one of the buys when i want to sell and only open new buys when there are no sells left to close and only open new sells when there are no buys left to close. Simple, isn't it? No need for hedging at all!
WOW!! - Now why didnt I think off that!? - Open a bunch of SELLS and close them while GBPUSD is shooting up 300 pips all for a nose-bleeding (and foreclosure creating) loss. While my hedged EA contains the loss and all my BUYS are in Vegas-Baby Profit!! - I might carry a floating loss but it'll never impact my balance cause I only cash in the profitable side of the seesaw. (You must work for a broker with math like that) - Sheeesh... I REALLY with you hedge haters would post a link to ANY successful non-hedge gridder. I've read 1000 theories but I havent seen a single working EA yet. (It must be hangin' out with Bigfoot)
  • #14
  • Nov 7, 2009 6:54am Nov 7, 2009 6:54am
Quoting Aja
I havent seen a single working EA yet. (It must be hangin' out with Bigfoot)
Because you haven't seen something doesn't mean it doesn't exist.

* Closing a buy is equivalent to opening a same size sell.
* Closing a sell is equivalent to opening a same size buy.
* It doesn't matter which buy or sell you close first, only the size matters.

These 3 inescapable truths will guarantee that the nfa compliant grid will have the same results as the hedged version. You should concentrate on trying to understand why the above 3 axioms are unquestionable true. I am not going to explain it to you another time, it has all been said and explained a thousand times in a hundred different ways by many smart people in these forums. You have seen these threads, you spammed them already with nonsense, you should better start reading them instead.

And if you are pathological unable to understand such simple self-evident truths and the conclusions they implicate, then i fear you can't be helped. In this case i suggest you shouldn't mess around with currency trading or with anything that involves counting money at all, it could be too complicated for you.
  • #15
  • Nov 9, 2009 12:30pm Nov 9, 2009 12:30pm
This thread got off topic in record time.
Keep it simple stoopid....
  • #16
  • Nov 11, 2009 1:14pm Nov 11, 2009 1:14pm
Just a heads up. I opened a small ($1000) account to start live testing a new strategy. It uses this type of hedging to capture volatility of the synthetic derivative. Worked great for about a week then I started getting orders rejected with significant frequency. I dont think that the broker likes the 3X exposer without any risk to my account balance. Making a market against a market maker, interesting concept...
Keep it simple stoopid....
  • #17
  • Mar 27, 2010 6:39pm Mar 27, 2010 6:39pm
Hello,

Regarding your synthetic volatility EA or Strategy, how about Applying it at 2 or 3 different brokers?How are the results so far?
  • #18
  • Last Post: Sep 15, 2010 6:25am Sep 15, 2010 6:25am
Quoting Kurka Fund
Just a heads up. I opened a small ($1000) account to start live testing a new strategy. It uses this type of hedging to capture volatility of the synthetic derivative. Worked great for about a week then I started getting orders rejected with significant frequency. I dont think that the broker likes the 3X exposer without any risk to my account balance. Making a market against a market maker, interesting concept...
Kurka,

why u use the same lots number on the 3x ? Not better with perfect hedge ?

Regards
Ludo
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