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Hedge and Correlation Strategy

  • #1,481
  • Jan 25, 2011 12:54am Jan 25, 2011 12:54am
Hi everybody,
Stochastic is interesting idea but the price still can grow up even oscillator has already exceeded 80 as well as the price still can drop off even oscillator has already exceeded 20 what can reduce a profit without looking at a price graph, I suppose.
  • #1,482
  • Jan 25, 2011 1:21am Jan 25, 2011 1:21am
Quoting peje
Hi everybody,
Stochastic is interesting idea but the price still can grow up even oscillator has already exceeded 80 as well as the price still can drop off even oscillator has already exceeded 20 what can reduce a profit without looking at a price graph, I suppose.
I agree with you, overbought/oversold area is a dangerous zone, thatīs why I think itīs safer to close trades when both pairs reach this area, no matter if Stoch levels are 80/90 or 80/95, we canīt wait for the crossing of both stochastic lines in these areas.......
  • #1,483
  • Jan 25, 2011 1:49am Jan 25, 2011 1:49am
Quoting Caillou
I agree with you, overbought/oversold area is a dangerous zone, thatīs why I think itīs safer to close trades when both pairs reach this area, no matter if Stoch levels are 80/90 or 80/95, we canīt wait for the crossing of both stochastic lines in these areas.......

I thing that optimal entry/exit would be a crossing of the limit lines 80/20 in the direction of common area. But how many times will be both pairs in these conditions or at least over 80/20?
  • #1,484
  • Jan 25, 2011 1:55am Jan 25, 2011 1:55am
Quoting peje
I thing that optimal entry/exit would be a crossing of the limit lines 80/20 in the direction of common area. But how many times will be both pairs in these conditions or at least over 80/20?
You are right, this could be the safest entry/exit but this could rarely happen....
Iīm going to test M1 this morning for that...

Maybe a good exit could be whatever arrives first:

1.- Crossing of both Stoch lines.

or

2.- When both lines reach overbought/oversold area.


Letīs see.....
  • #1,485
  • Jan 25, 2011 6:50am Jan 25, 2011 6:50am
Well my first attempt at this was not successful with GBP/USD and GBP/CHF. At the time I entered GBP/USD was above 80 on the stoch and GBP/CHF was below 20. The "mouth" was gaping open. When I woke this morning GBP/USD was now below 20, and GBP/CHF was below 5, as you can see in the picture. But the loss on the trade was about $3.00.

I'm thinking we need to find another way. Unless I did something wrong? See picture...
Attached Image (click to enlarge)
Click to Enlarge Name: stoch correlation.gif Size: 34 KB
  • #1,486
  • Jan 25, 2011 7:08am Jan 25, 2011 7:08am
Hi cailoe,

I tried this using 30 min stochastic method since yesterday night ( 9pm est ). I entered euro/usd sell and usd/chf buy. I had run another EA to close with 20 pip profit. Have seen this morning one basket of 20 pip closed. I entered again same sell and buy today morning after seeing the stochastic. Another 20 pips profit. Seems works well in this pair.
Intraday only.
  • #1,487
  • Jan 25, 2011 7:10am Jan 25, 2011 7:10am
Also i entered into usd/cad buy and euro/usd sell after seeing 30 min stochastic. Great result.
Intraday only.
  • #1,488
  • Jan 25, 2011 7:19am Jan 25, 2011 7:19am
Another 22 pips using 5 min stochastic this time in usd/chf sell and euro/usd buy. ha..ha..
Intraday only.
  • #1,489
  • Jan 25, 2011 7:32am Jan 25, 2011 7:32am
Quoting navk
Another 22 pips using 5 min stochastic this time in usd/chf sell and euro/usd buy. ha..ha..
Hi, would you mind posting exactly what your criteria for a trade is, when you get a minute? thanks Congrats on the success.
  • #1,490
  • Jan 25, 2011 7:48am Jan 25, 2011 7:48am
I take euro/usd and usd/chf pairs only. Better to trade using 5 min or 15 min stochastic. My max risk is 400,000 units, i enter 200,000 in euro/usd and 200,000 in usd/chf pairs.

When stochstic of both pairs approach each other, meaning euro/usd starts to fall and usd/chf starts to rise i enter sell and buy respectively.

When the stochastic lines cross or my set profit is reached, i come out of both trades.
Intraday only.
  • #1,491
  • Jan 25, 2011 7:53am Jan 25, 2011 7:53am
In all i took 64 pips since 9pm est.
Intraday only.
  • #1,492
  • Jan 25, 2011 8:31am Jan 25, 2011 8:31am
Quoting navk
I take euro/usd and usd/chf pairs only. Better to trade using 5 min or 15 min stochastic. My max risk is 400,000 units, i enter 200,000 in euro/usd and 200,000 in usd/chf pairs.

When stochstic of both pairs approach each other, meaning euro/usd starts to fall and usd/chf starts to rise i enter sell and buy respectively.

When the stochastic lines cross or my set profit is reached, i come out of both trades.
Thanks for the explanation. When you say approach each other, are you meaning after they have reached 80 and 20 respectively, or any time they approach each other? If it is not too much trouble, could you post a screen shot example? thanks again
  • #1,493
  • Jan 25, 2011 8:42am Jan 25, 2011 8:42am
Quoting smjones
Thanks for the explanation. When you say approach each other, are you meaning after they have reached 80 and 20 respectively, or any time they approach each other? If it is not too much trouble, could you post a screen shot example? thanks again
First of all thanks to your indicator.

The stochastic of both pairs not necessarily in over bought or over sold territary. The important thing i look for is whether they approach each other using 5 min chart. See how many times it approached each other today.
Attached Image (click to enlarge)
Click to Enlarge Name: euro stochastic.gif Size: 22 KB
Intraday only.
  • #1,494
  • Jan 25, 2011 8:52am Jan 25, 2011 8:52am
In my opinion one can have stochastic for following pairs :

1) euro/usd and usd/chf.
2)euro/usd and usd/cad.

If your maximum risk is 600,000 units, enter buy or sell all the pairs, 200,000 units each pair according to what stochastics says. Have an EA to close at a level of profit. This will maximise or reduce the time to achieve the desired profits.
Intraday only.
  • #1,495
  • Jan 25, 2011 9:11am Jan 25, 2011 9:11am
Thanks for the info.
  • #1,496
  • Jan 25, 2011 9:12am Jan 25, 2011 9:12am
Quoting navk
First of all thanks to your indicator.

The stochastic of both pairs not necessarily in over bought or over sold territary. The important thing i look for is whether they approach each other using 5 min chart. See how many times it approached each other today.

Hi Navk,

Happy to see you again.

Today I was a bit busy so I could only take 3 trades M1 on GBP/USD-GBP/CHF (2) and GBP/USD-GBP/JPY (1). 3 wins, 0 losses for today.

What I have done today and today this has worked for me is:

Entry: when % difference between 2 Stochastic Lines is above 40% (better if both lines are getting closer).

Exit: when 2 lines crossing.


I have one doubt: a 10% movement in Stochastic Line represents the same number of pips price movement for each pair ? Iīm not sure.
Thatīs why I have noticed that if I open an unbalanced couple of trades I reach the profit quicker. I mean this:

Lot size for Pair A: 1 * Spread Pair B

Lot size for Pair B: 1 * Spread Pair A

Maybe it is a nonsense but it works for me today......

PD: Smjones, would it be possible to have display in the chart the % difference between both Stochastics ? This would be really great. Thank you
  • #1,497
  • Jan 25, 2011 9:23am Jan 25, 2011 9:23am
Quoting Caillou
Hi Navk,

Happy to see you again.

Today I was a bit busy so I could only take 3 trades M1 on GBP/USD-GBP/CHF (2) and GBP/USD-GBP/JPY (1). 3 wins,...
Yes
Attached File(s)
File Type: mq4 Stochastic different pairs 1.1.mq4   3 KB | 4,423 downloads
  • #1,498
  • Jan 25, 2011 9:27am Jan 25, 2011 9:27am
Quoting Caillou
Hi Navk,

Happy to see you again.

Today I was a bit busy so I could only take 3 trades M1 on GBP/USD-GBP/CHF (2) and GBP/USD-GBP/JPY (1). 3 wins,...
I agree with you. The percentage difference b/w both stoc. should be closer, meaning approaching each other. Two pairs, oversold and over bought could be dangerous as the pair continue to remain in oversold/overbought for long time. This is technically noncence approach but b'cos We choose synthtically hedged pairs, at some point of time, the stoc. will approach each other thus profitability chances are more.
Intraday only.
  • #1,499
  • Jan 25, 2011 9:30am Jan 25, 2011 9:30am
I took today 68 pips in euro/usd and usd/chf; 26 pips in euro/usd and usd/cad.
Intraday only.
  • #1,500
  • Jan 25, 2011 9:35am Jan 25, 2011 9:35am
Quoting smjones
Yes


Thank you
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