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Hedge and Correlation Strategy

  • #1,441
  • Jan 17, 2011 11:02am Jan 17, 2011 11:02am
How do you set MT4 to fixed scaling? Let's give this a try!

Quoting josch
Dreamliner,

I think, most software should be able to do this. I'm using MT4 and you may set the chart to fixed scaling. Again - I didn't try this yet, but using the overlay chart template, which was shared in this thread and using positive correlated pairs you should get what you want by moving the chart range if necessary.

josch
  • #1,442
  • Jan 17, 2011 11:18am Jan 17, 2011 11:18am
You would have to somehow create a formula to proportion the changing price differences between the two pairs. Once you have a way to plot their prices relative to each other (and consistently), then you can manually plot them on a chart. The only thing about correlation strategy is it doean't make price less predictable. It just sets up a discipline as to when to open and close trades. I have seen other "systems" that in my opinion are better if you are going to follow a uniform trading method.
  • #1,443
  • Jan 17, 2011 11:46am Jan 17, 2011 11:46am
Dreamliner,

an overlay-chart GBPUSD|USDCHF with a fixed scaling is attached. As long as the GBPUSD remains in the range 1.65 x 1.50, there's nothing to do. If moving above/below, you have to adjust.


josch
Attached Image (click to enlarge)
Click to Enlarge Name: MT4FixedScaling.png Size: 63 KB
trading is war - life is simple
  • #1,444
  • Jan 17, 2011 11:47am Jan 17, 2011 11:47am
Hi Dreamliner,

There may be a way to to "stabilise" scaling by using Renko Chart. Renko chart uses "fixed number of pips and not time based. But now the question is how do we place one renko chart on another.

Of course we can open two Renko charts next to each other and look for diversion. Just a thought.
Thanks
Kris
  • #1,445
  • Jan 24, 2011 4:12am Jan 24, 2011 4:12am
Hi All,

I've been using post 1 method and up to now i'm still making money no doubt some wnet up to -200pips but it came back to + ( only thing if i'm discipline enough i would only trade one pair with very very smaller lot size). At the end of the day the price sure co-rellates back and cross to a certain point you will make money.

only thing that matters is the drawdown and also ability to hold it for a very long time.

I would say even if this system is a failure ( for those who think it is), i'd reckon you could have not make easy money like this eslewhere with any super indicator or startegy.

If you think i'm wrong kindly tell me a strategy in this forum which is much better than this.

cheers!!!!!.....................


Attacheds is my result.
Attached Image (click to enlarge)
Click to Enlarge Name: trades.GIF Size: 28 KB
  • #1,446
  • Jan 24, 2011 10:05am Jan 24, 2011 10:05am
Somehow I missed this post, thank you Josch. I now see how you get the fixed chart in MT4, but what did you use for overlaying USD/CHF on top of GBP/USD?

Also, have you now tested this strategy at all?

Quoting josch
Dreamliner,

an overlay-chart GBPUSD|USDCHF with a fixed scaling is attached. As long as the GBPUSD remains in the range 1.65 x 1.50, there's nothing to do. If moving above/below, you have to adjust.


josch
  • #1,447
  • Jan 24, 2011 10:06am Jan 24, 2011 10:06am
Well you're certainly doing what I envisioned in post 1. The problem as I see it is this: while anyone can certainly make pips with this strategy, it does not seem to be a real trading solution that you could operate at all times. For instance, when do you take losses, rather than an eternal drawdown?

I certainly wish you the best, you're doing well, and please keep posting. Tell us how you trade this, what pairs, what timeframe chart, etc. etc.

Quoting bsm888
Hi All,

I've been using post 1 method and up to now i'm still making money no doubt some wnet up to -200pips but it came back to + ( only thing if i'm discipline enough i would only trade one pair with very very smaller lot size). At the end of the day the price sure co-rellates back and cross to a certain point you will make money.

only thing that matters is the drawdown and also ability to hold it for a very long time.

I would say even if this system is a failure ( for those who think it is), i'd reckon you could have not make easy money...
  • #1,448
  • Jan 24, 2011 11:59am Jan 24, 2011 11:59am
Quoting bsm888
Hi All,

I've been using post 1 method and up to now i'm still making money no doubt some wnet up to -200pips ...

bsm888,

this looks like much opportunities. Which timeframe did you use - and by the way, if you are not using it the 2 shown days only, what would you say, is the roughly duration of a trade? Thank you.

josch
trading is war - life is simple
  • #1,449
  • Jan 24, 2011 12:07pm Jan 24, 2011 12:07pm
I couldn't resist this trade. Check out the attached!
Attached File(s)
File Type: doc Correlation.doc   174 KB | 1,307 downloads
  • #1,450
  • Jan 24, 2011 12:09pm Jan 24, 2011 12:09pm
Quoting Dreamliner
Somehow I missed this post, thank you Josch. I now see how you get the fixed chart in MT4, but what did you use for overlaying USD/CHF on top of GBP/USD?

Also, have you now tested this strategy at all?

Dreamliner,

I simply used the ALL_USD_PAIR_V2.mq4, modified and shared here in the thread by Arnold from apr 03, 2009 -> http://www.forexfactory.com/showpost.php?p=2649285.

No as I mentioned, I was reading the whole thread few weeks ago and consideration behind it seems logical to me. But I'm not backtesting, only forward and so I didn't start to use it. But I'll try it and let you know the results.

josch
trading is war - life is simple
  • #1,451
  • Jan 24, 2011 12:18pm Jan 24, 2011 12:18pm
Quoting Dreamliner
I couldn't resist this trade. Check out the attached!

Looks really great. Hope, they will come back to kiss soon!

josch
trading is war - life is simple
  • #1,452
  • Jan 24, 2011 12:32pm Jan 24, 2011 12:32pm
Ok thanks Josch, let us know...right now is a great trade on GBP/CHF and GBP/USD. (or GBP/CHF and anything )

Quoting josch
Dreamliner,

I simply used the ALL_USD_PAIR_V2.mq4, modified and shared here in the thread by Arnold from apr 03, 2009 -> http://www.forexfactory.com/showpost.php?p=2649285.

No as I mentioned, I was reading the whole thread few weeks ago and consideration behind it seems logical to me. But I'm not backtesting, only forward and so I didn't start to use it. But I'll try it and let you know the results.

josch
  • #1,453
  • Jan 24, 2011 12:33pm Jan 24, 2011 12:33pm
Adding to my post above ...

checking, I have to admit, Arnold's indicator covers only USD-related pairs, as the name is self-explaining.
Dreamliner or others with MT4, what are you using to get the overlaying pairs on the chart?

josch
trading is war - life is simple
  • #1,454
  • Jan 24, 2011 12:36pm Jan 24, 2011 12:36pm
I had previously just been using the NetDania charts as in post 1. But this is where the resizing/rescaling problems came in.

Quoting josch
Adding to my post above ...

checking, I have to admit, Arnold's indicator covers only USD-related pairs, as the name is self-explaining.
Dreamliner or others with MT4, what are you using to get the overlaying pairs on the chart?

josch
  • #1,455
  • Jan 24, 2011 1:41pm Jan 24, 2011 1:41pm
Hi Dreamliner and everyone,

I have read your thread a few months ago and I found it incredible interesting. I tried it for a while but as you said, the problem of resizing became crucial.

I have been thinking about a possible solution and, sorry if someone in the thread has already mentioned it, but I donīt remember.
Instead of using the price movement, why donīt we use the stochastic (100, 1, 1) movement of each pair: when they move away we sell the pair on the top and we buy the pair on the bottom.

The Stochastic (100, 1, 1) mimics price movement (thanks to Spud for this) but on a scale between 0 and 100. I donīt know if it is possible to overlay a stochastic chart but we can put the 2 Stochastics lines one above and one below and start a trade when the 2 stochastics values differ and exit the trade when the 2 values get similars.

I will post a chart later.......
  • #1,456
  • Jan 24, 2011 1:59pm Jan 24, 2011 1:59pm
This is very interesting, and no I don't believe it has been mentioned before. Please post a chart when you can and let's look into this.

Quoting Caillou
Hi Dreamliner and everyone,

I have read your thread a few months ago and I found it incredible interesting. I tried it for a while but as you said, the problem of resizing became crucial.

I have been thinking about a possible solution and, sorry if someone in the thread has already mentioned it, but I donīt remember.
Instead of using the price movement, why donīt we use the stochastic (100, 1, 1) movement of each pair: when they move away we sell the pair on the top and we buy the pair on the bottom.

The Stochastic (100, 1, 1) mimics price movement...
  • #1,457
  • Jan 24, 2011 2:51pm Jan 24, 2011 2:51pm
Quoting Dreamliner
This is very interesting, and no I don't believe it has been mentioned before. Please post a chart when you can and let's look into this.

Here we go...

I took a possible trade for today, EUR/USD and GBP/USD, M5, Iīm GMT + 1 (I think):

10h40: green line, entry, Sell EUR/USD: 1.3525, Buy GBP/USD: 1.5877.
11h30: magenta line, exit, EUR/USD: 1.3530, GBP/USD: 1.5918.

Result: + 36 pips.

Tomorrow I will have a look to others TF, like H1 and M1......

It looks really interesting.......

Thank you Dreamliner.....
Attached Image (click to enlarge)
Click to Enlarge Name: Chart.png Size: 49 KB
  • #1,458
  • Jan 24, 2011 3:27pm Jan 24, 2011 3:27pm
Well that was fun!

So help us all understand what you did here. You simply put stoch on 2 charts: EUR/USD and GBP/USD on M5. You then scrunched the actual price chart out of the way so that all you can see on the charts is the stochs. Then you saw EUR/USD stoch was over 80 and GBP/USD stoch was under 80 (or at least much lower) and so you entered.

Is this all correct?

If so, how did you decide to take profit?

Quoting Caillou
Here we go...

I took a possible trade for today, EUR/USD and GBP/USD, M5, Iīm GMT + 1 (I think):

10h40: green line, entry, Sell EUR/USD: 1.3525, Buy GBP/USD: 1.5877.
11h30: magenta line, exit, EUR/USD: 1.3530, GBP/USD: 1.5918.

Result: + 36 pips.

Tomorrow I will have a look to others TF, like H1 and M1......

It looks really interesting.......

Thank you Dreamliner.....
  • #1,459
  • Jan 24, 2011 3:48pm Jan 24, 2011 3:48pm
Quoting Dreamliner
Well that was fun!

So help us all understand what you did here. You simply put stoch on 2 charts: EUR/USD and GBP/USD on M5. You then scrunched the actual price chart out of the way so that all you can see on the charts is the stochs. Then you saw EUR/USD stoch was over 80 and GBP/USD stoch was under 80 (or at least much lower) and so you entered.

Is this all correct?

If so, how did you decide to take profit?
Yes, thatīs correct. I think a good entry could be when:

1.- Pair A is in overbought or oversold area (above 80 or below 20).

2.- Pair B is neutral area (between 80 and 20).


In this situation I think usually we have 2 possibilities:

A.- Pair A leaves quickly overbought/oversold area and comes closer Pair B.

B.- Pair B reaches quickly overbought/oversold area and comes closer Pair A.

Anyway, when the Stoch level is similar for both pairs, itīs time to exit the trade, with gains or losses, no matter, because this is our exit point.

I have just thought about Stochastics this afternoon, so we have to test it much more, tomorrow I will try with M1 in order to have more trades.

If this works, we can set an optimal distance between both stochastics to open the trades, maybe 30%, 40%, .......

Letīs see......
  • #1,460
  • Jan 24, 2011 3:50pm Jan 24, 2011 3:50pm
This is a very interesting twist to a so-so concept . Nicely done. Let's see what tomorrow, or maybe even Asian session tonight brings us.

Quoting Caillou
Yes, thatīs correct. I think a good entry could be when:

1.- Pair A is in overbought or oversold area (above 80 or below 20).

2.- Pair B is neutral area (between 80 and 20).


In this situation I think usually we have 2 possibilities:

A.- Pair A leaves quickly overbought/oversold area and comes closer Pair B.

B.- Pair B reaches quickly overbought/oversold area and comes closer Pair A.

Anyway, when the Stoch level is similar for both pairs, itīs time to exit the trade, with gains or losses, no matter, because this is our exit point.

I have...
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