Hedge trading spieler system derived from futures spread trading | Page 143 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Volume for indices, tick and the exchange derived volume 4 replies

Are quotes for minor pairs real or just derived from majors? 0 replies

Oanda spread versus MB Trading spread 27 replies

HOW TO PLOT derived cross 0 replies

Derived Currency Strength Indicator from multiple pairs 0 replies

Attachments: Hedge trading spieler system derived from futures spread trading
Exit Attachments

Hedge trading spieler system derived from futures spread trading

  • #2,841
  • Nov 14, 2010 5:08pm Nov 14, 2010 5:08pm
Quoting scooby-doo
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...
USD news has no impact on the spread. It's a $-neutral position.

Any price movement is determined by the value of euro vs swiss-franc.

regards
daytrading
Enter Signature
  • #2,842
  • Nov 14, 2010 5:09pm Nov 14, 2010 5:09pm
Quoting daytrading
USD news has no impact on the spread. It's a $-neutral position.

Any price movement is determined by the value of euro vs swiss-franc.

regards
daytrading
I never mentioned the spread ????

Also, try running it when NFP news comes out and you will get killed if you are on the wrong side.

Scoobs.
  • #2,843
  • Nov 14, 2010 5:11pm Nov 14, 2010 5:11pm
Quoting scooby-doo
I never mentioned the spread ????
That is what you trade (I assume the last few pages were talking about buying/selling EU and UF a la spieler)?

regards
daytrading
Enter Signature
  • #2,844
  • Nov 14, 2010 5:12pm Nov 14, 2010 5:12pm
Quoting scooby-doo
I never mentioned the spread ????

Also, try running it when NFP news comes out and you will get killed if you are on the wrong side.

Scoobs.
I do - regularly.

regards
daytrading
Enter Signature
  • #2,845
  • Nov 14, 2010 6:34pm Nov 14, 2010 6:34pm
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.
Thats right the deviation can go well over 1% but the stops will not save anybody from a bad trade. So again, I rather focus on the entry level then setting a stop. For examle the first open positions could be at +1% instead of taking it at +0.25%. Why enter short for the sake of the indicator when clearly the market is ranging with no volume at all ? Makes absolutely no sense that part. Spieler where the bloody hell are you?
  • #2,846
  • Nov 14, 2010 8:35pm Nov 14, 2010 8:35pm
Guys, you miss something here.
First, USDCHF is not a swiss franc - it's actually USD against swiss franc. Franc itself is positively correlated with EUR and usually is outperformed by EUR. So in trending markets 0.2%, 0.4% etc difference is absolutely normal behaviour. Don't jump blindly aboard, first check what caused the divergence. And set appropriate stop-loss - don't use martingale.
  • #2,847
  • Nov 15, 2010 12:40am Nov 15, 2010 12:40am
Hi guys,

I think some of you are trying to take the short cut. Before starting to comment and test this system i suggest you read the rest 188 pages of this thread. Then you'll understand what is the idea. Just to point out what i just read:
- s/l - in this system there is no s/l
- t/p - when the position is build up you take profit at 0% - NO. You work out the position by doing the following as example: you have e/f @ 0.25 you sell e/d-d/f, e/f goes to 0.50 you sell again. Now when the price goes to 0.25 then you close the positions opened at 0.50. If the price goes again @ 0.50 you reopen them. This is what spieler said to be "working out the position".

I do not advocate that this system is doable and profitable, just saying what was the general idea of spieler.

EKS
  • #2,848
  • Edited 2:54am Nov 15, 2010 2:36am | Edited 2:54am
Quoting voff
Guys, you miss something here.
First, USDCHF is not a swiss franc - it's actually USD against swiss franc. Franc itself is positively correlated with EUR and usually is outperformed by EUR. So in trending markets 0.2%, 0.4% etc difference is absolutely normal behaviour. Don't jump blindly aboard, first check what caused the divergence. And set appropriate stop-loss - don't use martingale.
I am not sure where all the talk about USD stems from. The USD has little or nothing to do with the trade.

I am not frequenting this forum much any more since I have a strong aversion toward many of the inflated ego's who believe they have invented knowledge about trading and forex in particular.

Nevertheless, I have decided to write a post regarding 'Spielers' spread.

While I am writing this, I am short the spread at +0.5% (as I trade it daily).

He has explained everything that needs to be known about how to trade it profitably.

Firstly, what is traded here is the fluctuation in fundamental value between to very similar economies in terms if their respective currencies.

Technically, one can trade the spread in a similar manner if the USD numerator/denominator would be replaced with another 'neutral currency'.

That is the way in which to build a 'synthetic' position in EUR/CHF. For all who don't know what I am referring to, please go back to pre-school mathematics and fractions in particular.

One of the reasons a synthetic position (bid or offer in the spread) is built, is to sustain the fluctuation which the account would have difficulty to withstand in an outright EUR/CHF position with the same value.

Trading of spreads involves higher margin requirements. If someone receives a margin call, it does not mean that the P&L looks bad, but they are most likely maxed out on the money you have to put up in order to run up to 4 of the increments (or indiv. trades) needed to 'work' the spread position.

Now to the correlation: the two economies and their respective currencies (Euro and Swiss-franc) are approximately 80% correlated - that does not mean that they move in tandem 80% of the time, but that when they move in tandem, the Franc moves approx. 80% of the value of the equivalent Euro position. The directional visualization on a chart is of course dependent on the numerator/denominator currency chosen for the spread, i.e. positive or negative correlation.

The actual correlation fluctuates on a daily basis - that again is not the 80% of the ratio which operates between them (the currencies) but the value of the two economies perceived and expressed through the price of EUR/CHF.

Looking at a daily chart of EUR/CHF will of course show trends - which relate to the long term correlation of the two 'nations' so to speak - but on the smaller time frames (such as H1 used for intraday/weekly spread trading), oscillation of the correlation is evident enough to work it -

Again, while I write this, the spread had converged to +0.14%, giving me 0.36% profit on the position I have taken when I began to write this.

Now to the Martingale aspect: it is not martingale. Martingale requires to double the initial position each time when losing the previous position. It is not done that way. You have a total position of 4 individual trades - the size of each should be the same and is up to the account holder's discretion.

For example, if a trader decides to wage a trade on any outright position with a pip value of let's say $10 (1 std lot), the trader can also scale in by entering 4 times @ $2.50 to 'build' the total position with a combined value of $10 (1 std lot).

And the fact that a trader decides to enter if the price of the original position goes against them is not martingale either - if you believe EU will fall to 1.30 within a month or two, you can of course enter here (1.3650) with a small portion of your desired position and also enter another part at 1.3750 (which coincidently for many is not the way to trade - because they think that if a position does not show profits within a very tight range -their chosen stop - means that its a bad position....to find often that the position idea was right....and the stop was too tight).

So, whether one decides to trade the spread or stick with outright, one has to get used to the concept of 'building' AND 'working' positions. That is done (and some poster mentioned that here) by working the individual trades of a position according to price expansion/contraction.

For example, when entering the spread at 0.25% with the 1st trade and the second at 0.5% and the price shoots to 1.25% from there, you would of course skip entries at 0.75% and at 1%. You decide to enter at 1.25% with the 3rd trade and manage that trade individually. It might only retrace to 0.75% which gives you 0.5% profit on the last trade. That gets weighed against the loss of the other two trades. By taking profit on the 3rd trade (from 1.25% to 0.75%), you also free up ammunition since you have (again) 2 more trades left to put on....and so on and so forth.

Just putting on position in robotic fashion at each 0.25% is not the way to trade it....and Spieler has explained that. That is why an EA would never work. Trading this requires the traders skill and understanding of the underlying markets.

Btw, the spread has now moved to (-0.05%) from my entry at +0.5% this morning (screen shot attached).

Hope this helps clear up some of the questions.

regards
daytrading
Attached Image (click to enlarge)
Click to Enlarge Name: 2010-11-15_0835.png Size: 72 KB
Enter Signature
  • #2,849
  • Nov 15, 2010 2:45am Nov 15, 2010 2:45am
Quoting daytrading
I am not sure where all the talk about USD stems from....
Very valuable explanation, thank you
  • #2,850
  • Nov 15, 2010 2:58am Nov 15, 2010 2:58am
Hi Daytrading,

Thank you for the valuable explanation. Could you tell me how you decide the starting point on which to set the VL. Do you move it every day or you have it fixed till the trade you are in is completed? Spieled explained that you have to pay attention to the prior days trend but honestly speaking this part i could understand very well, which led to my negative result, mentioned in the previous post. Thanks.

EKS

Quoting daytrading
I am not sure where all the talk about USD stems from. The USD has little or nothing to do with the trade.

I am not frequenting this forum much any more since I have a strong aversion toward many of the inflated ego's who believe they have invented knowledge about trading and forex in particular.

Nevertheless, I have decided to write a post regarding 'Spielers' spread.

While I am writing this, I am short the spread at +0.5% (as I trade it daily).

He has explained everything that needs to be known about how to trade it profitably.

Firstly,...
  • #2,851
  • Nov 15, 2010 3:06am Nov 15, 2010 3:06am
Quoting Eks
Hi Daytrading,

Thank you for the valuable explanation. Could you tell me how you decide the starting point on which to set the VL. Do you move it every day or you have it fixed till the trade you are in is completed? Spieled explained that you have to pay attention to the prior days trend but honestly speaking this part i could understand very well, which led to my negative result, mentioned in the previous post. Thanks.

EKS
I take the daily GMT open as my reference. Having said that, I look at the daily chart (of EUR/CHF) and track the weekly % change from Monday to Friday as well at the monthly % change in order to gauge the extent of any possible move.

For example, last Friday closed up +122 pips or 0.92%.
Last week closed down (-99) pips or (-0.73%)
The month on Friday's close was (-303) pips or (-2.21%)

The above numbers show down trend (week ended down and month is down).

Based on that, any advance up this morning (adding to Fridays advance of +0.92%) is a minor rally and good for a short.

If I am in a trade that lasts for longer than the intraday session, I will keep the %-levels of the day I entered on the chart and take them into account while working the position.

The logic is no different from any trend trading methodology.

regards
daytrading
Enter Signature
  • #2,852
  • Nov 15, 2010 3:23am Nov 15, 2010 3:23am
In this situation, when you have downtrend would you hesitate to go long @ -0.25?


Quoting daytrading
I take the daily GMT open as my reference. Having said that, I look at the daily chart (of EUR/CHF) and track the weekly % change from Monday to Friday as well at the monthly % change in order to gauge the extent of any possible move.

For example, last Friday closed up +122 pips or 0.92%.
Last week closed down (-99) pips or (-0.73%)
The month on Friday's close was (-303) pips or (-2.21%)

The above numbers show down trend (week ended down and month is down).

Based on that, any advance up this morning (adding to Fridays advance of +0.92%) is...
  • #2,853
  • Nov 15, 2010 3:28am Nov 15, 2010 3:28am
Quoting Eks
In this situation, when you have downtrend would you hesitate to go long @ -0.25?
That depends where I see support. If I think support might be lower than (-1.0%) from the open, I would space my entries to 0.5% instead 0.25% (e.g. enter 1st trade @ -0.5, second @ -1.0 etc.).

Since the trade of the day was short, I am also not sure whether I would enter any long at all.

regards
daytrading
Enter Signature
  • #2,854
  • Nov 15, 2010 3:35am Nov 15, 2010 3:35am
This makes sence. Thank you very much!

EKS

Quoting daytrading
That depends where I see support. If I think support might be lower than (-1.0%) from the open, I would space my entries to 0.5% instead 0.25% (e.g. enter 1st trade @ -0.5, second @ -1.0 etc.).

Since the trade of the day was short, I am also not sure whether I would enter any long at all.

regards
daytrading
  • #2,855
  • Nov 18, 2010 6:17pm Nov 18, 2010 6:17pm
Quoting daytrading
I am not sure where all the talk about USD stems from. The USD has little or nothing to do with the trade.

I am not frequenting this forum much any more since I have a strong aversion toward many of the inflated ego's who believe they have invented knowledge about trading and forex in particular.

Nevertheless, I have decided to write a post regarding 'Spielers' spread.

While I am writing this, I am short the spread at +0.5% (as I trade it daily).

He has explained everything that needs to be known about how to trade it profitably.

Firstly,...

how long have you been trading this ? and what were your results ? are you entering 1 x eu, and 1.5 x uchf ?

i have had a few trades, entering short at 0.25, 0.50 and 1.0. didn't work out. the loss on uchf outweighed the gain on eu.

similarly had longs at -0.25, -0.5, -1.0 etc. still not profitable.


question: at point do you decide NOT to add any more positions or indeed to close the positions out taking the losses ? at +/- 1.0 or higher ?

would it not be a good idea to just wait for a deviation of -/+ 1.0 and then enter trade ?


regards
  • #2,856
  • Nov 19, 2010 1:20am Nov 19, 2010 1:20am
hi whatfx,

in this strategy you need to be as much dollar neutral as possible. With 1 lot on eur/usd and 1.5 lots on usd/chf, you are not $ neutral. The relation changes over time and it should be adjusted. At the moment it is about 1 e/u and 1.37 u/f. Also according to the strategy when the position is building you should not give up, otherwise the losses will be significant. If you cannot buildup the position on 5-6 levels then you have problem with the position sizing.

hope this helps.

EKS

Quoting whatfx
how long have you been trading this ? and what were your results ? are you entering 1 x eu, and 1.5 x uchf ?

i have had a few trades, entering short at 0.25, 0.50 and 1.0. didn't work out. the loss on uchf outweighed the gain on eu.

similarly had longs at -0.25, -0.5, -1.0 etc. still not profitable.


question: at point do you decide NOT to add any more positions or indeed to close the positions out taking the losses ? at +/- 1.0 or higher ?

would it not be a good idea to just wait for a deviation of -/+ 1.0 and then enter trade ?


regards...
  • #2,857
  • Nov 19, 2010 2:20am Nov 19, 2010 2:20am
Quoting whatfx
how long have you been trading this ? and what were your results ? are you entering 1 x eu, and 1.5 x uchf ?

i have had a few trades, entering short at 0.25, 0.50 and 1.0. didn't work out. the loss on uchf outweighed the gain on eu.

similarly had longs at -0.25, -0.5, -1.0 etc. still not profitable.


question: at point do you decide NOT to add any more positions or indeed to close the positions out taking the losses ? at +/- 1.0 or higher ?

would it not be a good idea to just wait for a deviation of -/+ 1.0 and then enter trade...

In 'normal' market conditions EF oscillates approximately 0.5% - 1.0% around the open, i.e. it diverges and converges. Some days more, some days less and some days more directional than others (when there is a trend happening).

You need to be aware of 2 things:

Firstly, you should not enter blindly at +/- 0.25, 0.5 etc. If the price slices through the first level like butter, wait for 0.5% - or even longer if need be.

Secondly, having built a position with 4 entries doesn't mean you can sit and wait for it to simply come back to your original entry. When the decorrelation happens over several days (trend in EF), you have to work each trade individually until such time you are in the money.

You achieve this by 'working' the position as explained earlier.

Trading any instrument does not work out in a 'set and forget' manner, especially with this strategy.

Be aware that for the spread to make money (or to be in DD), can be a result of several combinations. EU might rise faster than UF, EU might rise wile UF does nothing and EU might rise while UF is falling slower than EU rises....and vice versa for a short position.

regards
daytrading

P.S. check for volatility - track daily high/low range for EF....if it gets bigger, use wider entries.
Enter Signature
  • #2,858
  • Nov 23, 2010 4:02am Nov 23, 2010 4:02am
Hi,

I've attached a spreadsheet that I used to calculate possible drawdown with this system going to 10 levels. You can change the pip value to see what the cumulative loss might be as each level is reached. I've calculated using just EUR-CHF, not the hedge, but it will give you an idea of what you need to prepare for.

I have had some success with this method recently, but following these figures I realise I have to trade substantially smaller to not be blown out of the water on a continued trend. Even just looking at August 2010 EUR-CHF lost about 1,000 pips with not a lot of opportunity for retrace. The same thing happened in May and June 2010. I don't know if the small retrace between 10-15 June would have been enough to recover some losses.

Also, this strategy kind of demands that you DO get a drawdown simply to be able to add more legs on each run so that profits can accumulate on the return. If de-correlation just hovers around +/- 1% then we're hardly going to earn anything. I'm not sure yet if hoping we're going to lose money first is perverse.
Attached File(s)
File Type: xls Spieler_Drawdown.xls   18 KB | 862 downloads
  • #2,859
  • Nov 23, 2010 4:10am Nov 23, 2010 4:10am
Quoting elchoco
Hi,

I've attached a spreadsheet that I used to calculate possible drawdown with this system going to 10 levels....
elchoco,

What do you mean in calculating just EUR/CHF?
  • #2,860
  • Nov 23, 2010 4:58am Nov 23, 2010 4:58am
Quoting Pipstrumpf
What do you mean in calculating just EUR/CHF?
I mean I've used the % change of EUR-CHF to work out the drawdown on the hedge. It works out about the same.

Obviously the idea of "entering/exiting one leg at if it's moving to your advantage" is not taken into account in this calculation, however it gives you a ball-park idea of how quickly the Drawdown can increase.
6 traders viewing now