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Hedge trading spieler system derived from futures spread trading

  • #2,821
  • Nov 10, 2010 5:34am Nov 10, 2010 5:34am
i dont get this guys.

on my igindex platform it shows the daily percentage change on a daily candle. so we observe this right and if it shows on the daily +- 0.25%, then we enter buy or sell on both eurusd and usdchf right ?

is this how the system works ?

but backtest shows not much success.

also do we look at percentage change of a daily candle or 1 hour candle ?

today for example i observed the percentage change on the eurchf. it showed + 0.28. so i entered sell on both eurusd and usdchf. but now the percentage change is going up to about + 0.36. and both my short positions are losing.

so i dont think this is a sound system. cos when a divergence or percentage change occurs it usually contnues that way.
  • #2,822
  • Nov 10, 2010 2:15pm Nov 10, 2010 2:15pm
Quoting whatfx
i dont get this guys.

on my igindex platform it shows the daily percentage change on a daily candle. so we observe this right and if it shows on the daily +- 0.25%, then we enter buy or sell on both eurusd and usdchf right ?

is this how the system works ?

but backtest shows not much success.

also do we look at percentage change of a daily candle or 1 hour candle ?

today for example i observed the percentage change on the eurchf. it showed + 0.28. so i entered sell on both eurusd and usdchf. but now the percentage change is going up...
The strategy itself is good (theory) but from what I have seen so far is that those pairs do not correlate negatively all the time and that is the risky part.

So Mr. Spieler, as you have started this idea up in this tread, where is the little missing information? What other conditions have to be on the screen besides the divergence % change? Any little hint would be appreciated.

Thanks
  • #2,823
  • Nov 10, 2010 5:43pm Nov 10, 2010 5:43pm
Quoting Pipstrumpf
The strategy itself is good (theory) but from what I have seen so far is that those pairs do not correlate negatively all the time and that is the risky part.

So Mr. Spieler, as you have started this idea up in this tread, where is the little missing information? What other conditions have to be on the screen besides the divergence % change? Any little hint would be appreciated.

Thanks
well it looks as though mr spieler has dissapeared for good. so dont expect much joy on this matter.

i was short on both usd/chf and eur/usd. what i noticed is that if usdchf moves up then eurusd moves down and vice versa. so i dont understand how one can make any profit with this ??

can anyone shed some light on how this trading is actually implemented and how it works ?? cos mr spieler is no more....here !!
  • #2,824
  • Nov 10, 2010 6:03pm Nov 10, 2010 6:03pm
Quoting whatfx
well it looks as though mr spieler has dissapeared for good. so dont expect much joy on this matter.

i was short on both usd/chf and eur/usd. what i noticed is that if usdchf moves up then eurusd moves down and vice versa. so i dont understand how one can make any profit with this ??

can anyone shed some light on how this trading is actually implemented and how it works ?? cos mr spieler is no more....here !!
Dissapeared, Mr. Spieler?

Well as far as I have watched those two pairs they do move opposite most of the time but in different steps. The USD/CHF moves slower then the EUR/USD especially the last few days.
So in having a 1 and 1.5 ratio lot size between those pairs and moving opposite with different steps gives you supposedly the winner.
It has worked for me but I believe there is a missing point in the whole strategy and that is when to exactly enter a trade bedsides the divergence %. So if Mr. Spieler has made all the chips and diapeared onto some island then all what I can do is continue scratching my head or forget about.
Spieler were are you?
  • #2,825
  • Nov 11, 2010 6:01am Nov 11, 2010 6:01am
Quoting Pipstrumpf
Dissapeared, Mr. Spieler?

Well as far as I have watched those two pairs they do move opposite most of the time but in different steps. The USD/CHF moves slower then the EUR/USD especially the last few days.
So in having a 1 and 1.5 ratio lot size between those pairs and moving opposite with different steps gives you supposedly the winner....

hi

you say it has worked for you. how long have you been trading this and could you post some results ? do you use any other indicators alongside or just stick to the main system ?

yesterdays short on eurusd and usdchf resulted in minus - 8 pips loss for me.

also i assume the trades are to be closed out at the end of each day if not in profit ?
  • #2,826
  • Nov 11, 2010 8:29am Nov 11, 2010 8:29am
Quoting whatfx
hi

you say it has worked for you. how long have you been trading this and could you post some results ? do you use any other indicators alongside or just stick to the main system ?

yesterdays short on eurusd and usdchf resulted in minus - 8 pips loss for me.

also i assume the trades are to be closed out at the end of each day if not in profit ?
The system is actually a red herring.

You need to look at what EURCHF is doing.

If EURCHF is trending up then BUY EURUSD and BUY USDCHF.
if EURCHF is trending down then SELL EURUSD and SELL USDCHF.

The people who have made money doing it have probably just been lucky that EURCHF has been trending the correct way.

Some, argue that you should just BUY or SELL EURCHF as you are paying twice the spread. But the idea is that you BUY both to help reduce DD.

Scoobs
  • #2,827
  • Nov 11, 2010 8:47pm Nov 11, 2010 8:47pm
Quoting scooby-doo
The system is actually a red herring.

You need to look at what EURCHF is doing.

If EURCHF is trending up then BUY EURUSD and BUY USDCHF.
if EURCHF is trending down then SELL EURUSD and SELL USDCHF.

The people who have made money doing it have probably just been lucky that EURCHF has been trending the correct way.

Some, argue that you should just BUY or SELL EURCHF as you are paying twice the spread. But the idea is that you BUY both to help reduce DD.

Scoobs

as i understand the rules for this hedge system are:

if eurchf shows a change of + 0.25% from last days close then enter BUY on both eur/usd and usd/chf.

if eur/chf shows a change of - 0.25% from last days close then SELL both eur/usd and usd/chf.

now, is this the same as what you stated above scoobs ?
  • #2,828
  • Nov 12, 2010 1:36am Nov 12, 2010 1:36am
Quoting whatfx
hi

you say it has worked for you. how long have you been trading this and could you post some results ? do you use any other indicators alongside or just stick to the main system ?

yesterdays short on eurusd and usdchf resulted in minus - 8 pips loss for me.

also i assume the trades are to be closed out at the end of each day if not in profit ?
I made only a few trades and they have been ok, so I can't say its dummy proof. I am not a fan of indicators at all but for the sake of just have a little more feedback of an entry situation I put the odd better volume and stochastic indicator on.
So for example when the divergence indi tells me to buy I check that the volume is reasonable and that the stochastic is at the oversold turning point.
Also on the main chart I put the SMA 200 and SMA 50 to give me a general feel of the EUR/CHF pair.

Cheers
  • #2,829
  • Nov 12, 2010 2:33am Nov 12, 2010 2:33am
Theoretically, playing de-correlations is a smart idea. This system, like any other, is not a simple money-making machine. On some days the profits are easy, on others you really have to work for your money.

Quoting whatfx
hi
also i assume the trades are to be closed out at the end of each day if not in profit ?
Trades can be open for a few days, there is some disagreement in the thread about how best to calculate correlation on a multi-day trade. knowing how to take continuous retracement profits appears to be key.

This is not a "set-it-and-forget-it" system and can demand substantial screen time when you're in a trade.

I have been using this with some success over the last few weeks and am now researching for myself the real differences between trading EUR-USD & USD-CHF together and EUR-CHF cross. Shame I have a day job that sometimes gets in the way.

Good Luck.
  • #2,830
  • Nov 12, 2010 3:05am Nov 12, 2010 3:05am
Quoting elchoco
Theoretically, playing de-correlations is a smart idea....
Yes agree trades can be open for days but hey ho, its the EUR/CHF.


Cheers
  • #2,831
  • Nov 12, 2010 4:58am Nov 12, 2010 4:58am
Hi All,

Just to give my feedback on testing the system. I tried it for almost a month and it was behaving very well. The best profits came when i had to "work out" the positions. However two weeks ago there was a very strong bull move on the eur/chf and it went for couple of days. There was one retracement which i didn't manage to capitalize on because it was during the night my time. Except this small retracement the move was pretty streight forward. I didn't move my VL line from the moment i entered the position and was addition to it respectively @ 0.25; 0.50; 0.75; 1.25; 1.75. even though i was working with 0.1 lots the losses became significant and eventually i received a margin call when the price overshoot the 2.10 area. What i draw as a conclusion out of this:
-probably i should have moved the VL every day so to get more conservative. The problem comes when you go above the 0.75 zone because then you have to play at 0.50 difference. If i had moved the VL line i would have always be playing with 0.25 difference.
-keep entering at the levels without watching the price action is not very reasonable. If I was paying more attention to the price action probably i would have extended some levels. It is reasonable to think entering more conservative probably @ 0.30 steps.
Overall i think this strategy can be profitable but it requires some discretion. Also the system is very manual and requires long time infornt of the PC.

EKS
  • #2,832
  • Nov 12, 2010 5:01am Nov 12, 2010 5:01am
Hi whatfx,

My comments are in RED.

EKS

Quoting whatfx
as i understand the rules for this hedge system are:

if eurchf shows a change of + 0.25% from last days close then enter SELL on both eur/usd and usd/chf.

if eur/chf shows a change of - 0.25% from last days close then BUY both eur/usd and usd/chf.

now, is this the same as what you stated above scoobs ?
  • #2,833
  • Nov 12, 2010 8:11am Nov 12, 2010 8:11am
Quoting whatfx
as i understand the rules for this hedge system are:

if eurchf shows a change of + 0.25% from last days close then enter BUY on both eur/usd and usd/chf.

if eur/chf shows a change of - 0.25% from last days close then SELL both eur/usd and usd/chf.

now, is this the same as what you stated above scoobs ?
The current system assumes that if there is +0.25% deviation on EURCHF then their will be a negative retrace on EURUSD and USDCHF. Likewise if there is a -0.25% deviation on EURCHF then there will be a positive retrace on EURUSD and USDCHF.

However, this does not always work if there is a strong trend on EURCHF in either direction. If your lucky then it works but if you happen to be on the wrong side then you will get serious DD.

Also, USDCHF does move slower than EURUSD but there are times in the market when USDCHF will out perform EURUSD in movement terms and again when this happens the EURUSD will not be able to keep pace and you will get serious DD.

Personally, I have seen EURCHF deviation go 0.25, 0.50, 0.75, 1.00, 1.25 etc before a retrace occurs.

However, it can work if your timing, entry and luck is correct. Dont try it if there is pending economic news for USD otherwise, again, you will get screwed.

Scoobs.
  • #2,834
  • Edited 9:44am Nov 13, 2010 9:33am | Edited 9:44am
wow, been a while since I'v been here.

I'd like to confirm what scooby-doo and Eks have said, not that they need to be confirmed, but to add caution to those investigating this system. However, every strategy/system has it's risk.

The system is painted as a hedge system. The mathematics of it is simply trading the EURCHF using martingale or sem-martigale MM, where positions are added at set intervals to bring the combined BE closer to the current price. Now this in itself is not a bad thing although there are countless topics on this forum discussing the benefits and risk of using a martingal MM strategy.

Spieler mensioned a few times that he managed a large fund. Assuming he traded position sizes similar to what most of our smaller accounts could handle, he would be able to outlast a far larger DD than almost all of us could. However, even his account would most likely not outlast some of the decorrelation we saw in 2008 and 2009, if you had been on the wrong side of them. By the very nature of this strategy you would always be caught on the wrong side of a continues decorrelation i.e. EURCHF trend.

Spieler also had propriety analysis to add to his toolset, which most of us do not. I assume that this was advanced statistical analysis. If I had a hedge fund the size of what I think he could have had, I would want to quantify the risks of my system. The overriding risk of this system is martingale MM. He knew that there is always a possibility of the market decorrelating long enough (i.e. the EURCHF trending against his trade), to the point where there is no more margin left to make the next incremental trade to bring the combined BE closer to the current price. Knowing the stats of moves and retracements could help you to decide on a better entry point into the "decorrelation" and position sizing depending on the riskiness of this entry point.

These are already two disadvantages that most of us have compared to Spieler. Saying this, even Spieler's account would not have survived the 2009 decorrelation caused by a Swizz announcement, had he not hard stopped. Can't remember what it was, but it is in this topic somewhere.

So if you're going to trade this method, don't be blinded by the word hedging and all the perceived benefits it brings with it. It is a simple semi-martingale MM method on the EURCHF.

JC
  • #2,835
  • Nov 13, 2010 9:59am Nov 13, 2010 9:59am
Hi Waka,
this method is risky if applied in a wrong way, infact Spieler suggested to close all positions after 2 weeks if there are still positions running, this should ensure that you never suffer big drawdown during big decorrelation period such happened in 2008-2009. Another suggestion he gave was to set a max DD% (for example 4-5%) after which all positions are closed.
So it's true what you say, this method could be very dangerous if you continuosly stack positions against a big trend but with few tricks it's possible to at least control drawdown.

Cheers,
Skyline
  • #2,836
  • Nov 14, 2010 6:35am Nov 14, 2010 6:35am
wow. what you guys are saying makes this system look very complicated.

i thought the basic idea was this:

say the eur/chf showed a deviation of +0.25% from last days close. so we enter sell on both eur/usd and usd/chf. we then set a stop loss and a take profit. then just leave the trade running until stop loss or tp are hit ?

what spieler suggested was that it is more than likely that the trades will go our way due to the very nature of this system.

furthermore you could set an alert at the required deviations to adjust your positions. for example set an alert at +0.35% , +0.45% etc. and when these levels are reached adjust your stop loss / tp accordingly. so there will be no need for large DD.
the opposite is true that you can set alerts just in case the trades go against you i.e. at levels 0.0%, -0.15% etc. so you can decide on whether to close the trades or add positions to them. again no need for large DD.

so in effect there is no need to be glued to the computer all day.

so is it not as simple as that, or am i missing something here ?


regards
  • #2,837
  • Nov 14, 2010 1:38pm Nov 14, 2010 1:38pm
Quoting whatfx
wow. what you guys are saying makes this system look very complicated.

i thought the basic idea was this:

say the eur/chf showed a deviation of +0.25% from last days close. so we enter sell on both eur/usd and usd/chf. we then set a stop loss and a take profit. then just leave the trade running until stop loss or tp are hit ?

what spieler suggested was that it is more than likely that the trades will go our way due to the very nature of this system.

furthermore you could set an alert at the required deviations to adjust your positions....
No stops according to Spieler's idea.
As far as I understood you shall open new positions every time the deviation level goes further.
Once a reversal occurs (deviation back to 0%) your positions combined should be closed for a profit, at break-even or a slight loss. So again the trick is to open the first positions at the right level.
  • #2,838
  • Nov 14, 2010 4:35pm Nov 14, 2010 4:35pm
Quoting Pipstrumpf
No stops according to Spieler's idea.
As far as I understood you shall open new positions every time the deviation level goes further.
Once a reversal occurs (deviation back to 0%) your positions combined should be closed for a profit, at break-even or a slight loss. So again the trick is to open the first positions at the right level.

in that case it is a recipe for disaster ! without stops the system will not be profitable. and i can assure you the deviation goes way over 1.0% on many days. contrary what spieler stated (never going over 1%). you will find yourself in deep trouble with large DD and simply a question of time before account is blown.


the system will be more profitable with stops in place. if anyone has the time they should develop this idea and backtest.
  • #2,839
  • Nov 14, 2010 4:44pm Nov 14, 2010 4:44pm
Quoting whatfx
in that case it is a recipe for disaster ! without stops the system will not be profitable. and i can assure you the deviation goes way over 1.0% on many days. contrary what spieler stated (never going over 1%). you will find yourself in deep trouble with large DD and simply a question of time before account is blown.


the system will be more profitable with stops in place. if anyone has the time they should develop this idea and backtest.
I agree with stops traded this sytem when EU was at 1.58-1.60 and works very well but when the EU had twice daily range as UCH it didn't turn out pretty. I was new to trading and was following a mentor that didn't use stops. Never again but it is very profitable.
  • #2,840
  • Nov 14, 2010 5:02pm Nov 14, 2010 5:02pm
What would be a better way of trading this system is.....

1. Wait for EURCHF to beak a 7 day low.
2. Stoch 7 and Stoch 14 oversold.
3. Buy EURUSD and Buy USDCHF.

1. Wait for EURCHF to beak a 7 day high.
2. Stoch 7 and Stoch 14 overbought.
3. Sell EURUSD and Sell USDCHF.

In both cases do not trade if there is high impact news affecting the EUR, USD or CHF.

Scoobs.
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