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Hedge and Correlation Strategy

  • #2,141
  • Feb 3, 2011 1:02am Feb 3, 2011 1:02am
  •  Ckp
  • | Joined Aug 2010 | Status: Master ur EXIT. Entry is secondary. | 29 Posts
Quoting ES Trader
Hi Ckp
How do you use tradeable correlation indicator to get correlation numbers for 240 days.That is 345600 hrs. I try to put that number on the indicator and nothing seem to happen.

First pick your "Correlation Time Frame" Say M30. And then calculate your "Correlation Period" is as follows:
There are 48 x M30 periods in one 24hr trading day. So its 48 M30 periods multiplied by 240 days = 11520 correlation periods.

To do the same for M15 would be; 240 x 96 M15 periods = 23040 correlation periods.
  • #2,142
  • Feb 3, 2011 1:16am Feb 3, 2011 1:16am
Quoting kishu0605
Hi rockstars,
first of all thank you very much for sharing this idea.want to ask there is two condition in ea (stoch diff 2 pair EAsq )

1. Close Trade if stoch difference is below this number --- 20.0

2. Close Trade if Profit target reached --- 10 $

but only 1st condition is working.want use only 2nd condition.cant wait for 20%.

Hi Kishu

Dreamliner recently asked if people wouldn't mind discussing EA questions in the other thread, the EA one by Steve, or in the MT4 thread on here and to keep this thread about the method itself. I'm sure one of the guys will help you out there... Post 2122
  • #2,143
  • Feb 3, 2011 1:30am Feb 3, 2011 1:30am
  •  Ckp
  • | Joined Aug 2010 | Status: Master ur EXIT. Entry is secondary. | 29 Posts
Quoting Dreamliner
The question is: do the trips make the trips back home faster than the quads? If we only trade triples (EURUSD/EURJPY) and not the quads (GBPCAD/NZDUSD) have we eliminated risk or increased reward? I think the historical correlation indicator gives us our answer (thanks again SMJones!). Answer: if they are correlated 75% of the time, they are correlated 75% of the time, just like the triples.

Just my thoughts...
Let me explain it this way... by using your pair choice above. If you enter a trade now... Buy-GBPCAD and Sell-NZDUSD. Any news event or stock event from 4 different currency pairs can negatively affect your trade. GBP, CAD, NZD, USD. You are at risk in 4 different ways. Trading is all about reducing risk.

You can reduce your risk to 2 different ways by simply trading a hedged pair like Buy-GBPCAD and Sell-GBPUSD (example only). Now if GBP news like GDP comes out at minus -0.5 like last week. And there is a 100pip jump in any direction, both GBPCAD and GBPUSD move together and you eliminated the risk. Now you are only at risk on CAD and USD, 2 ways only not 4 ways as you would be with the QAUD pair choice.

There are plenty of Non-quad pairs to trade. Consistency comes through reducing risk. This is an easy way to do that.
  • #2,144
  • Feb 3, 2011 1:53am Feb 3, 2011 1:53am
  •  Ckp
  • | Joined Aug 2010 | Status: Master ur EXIT. Entry is secondary. | 29 Posts
Quoting astral77
Thank you for sharing your useful experiences with us. I must confess when I first read through the thread it was my understanding that the buy/sell pairs (or quads as DL puts it) were selected according to the principals you mentioned (i.e. 3 different currencies one of which "MUST" be hedged. Then I noticed that this was not the case and quads consisting of 4 different currencies were considered to be eligible trades (e.g. buy GBPNZD, sell USDCHF). This did not sound logical to me and I do not trade such pairs.

If you could be so kind can you...
Hi Astral

Yes I have traded quads and practically all my losses were from them. Losses on hedged pairs only came when I entered to early or too late. When I analyzed my trading history, hedged pairs were WAY better with much lower draw down and you only need to check news for 2 currencies out of 4. It's less stressful and you can take more trades that way.

With the quad method 1 news event in 4 currencies stop your trade from being entered.
With the hedged method 1 news event in 2 currencies stop your trade from being entered.
In fact with the hedged method a news event on one pair might actually be the catalyst for the pairs "de-correlation" and then you enter your trade on the inevitable re-trace that will follow.
  • #2,145
  • Feb 3, 2011 1:58am Feb 3, 2011 1:58am
  •  Ckp
  • | Joined Aug 2010 | Status: Master ur EXIT. Entry is secondary. | 29 Posts
Quoting tjfxtrader
What does TF have to do with trading costs? The broker doesn't know what time frame you have on your chart. You lost me.

Trade entered and closed in 24 hours therefore no "roll-over" rates...
I call it "Daylight Robbery Rates"
  • #2,146
  • Edited 3:24am Feb 3, 2011 2:25am | Edited 3:24am
Hi All

Just wondering if anyone else is encountering this issue with Tradable Correlations 1.6b indicator.

The Diff calculation doesn't seem to be updating properly on my screen. I have the alert set to 1. It keeps giving an alert each minute but the stoch diff figure will stay the same for five minutes or longer for all the pairs shown. If I compare it to a stochdiff indicator I have on a chart for the same pairs, the stochdiff figure is continually changing (and I'm assuming is correct). Below is a pic of what I'm talking about.

The EURAUD/EURJPY stoch diff is -83 and the EURAUD GBPUSD stoch diff is -91. This was the figure they were first displayed at. However as you can see on the M15 stochdiff indicator the EJ had moved down to 61%, so should no longer be on the Tradable corrections indicator. In fact all 4 quad's Df's have stayed the same as first displayed until they disappeared off the screen. This screenshot was taken about 10 mins after it first showed. Tradable Correlations 1.6b is set to M15 as is shown.

The same situation is happening again right now for the EURAUD/EURCHF. It's showing a Df: -89 (and has been for 5 minutes but the chart stochdiff has dropped to 77%, so it shouldn't showing on the other indicator). The spread is changing with each tic as it should be.

Anyone else had something similar? [Edit: I have changed up and down to through all of the time frames with the stocdiff set at 1 to force history, before the indicator was loaded and screenshot taken]
Attached Image (click to enlarge)
Click to Enlarge Name: Diff differences 1.gif Size: 95 KB
  • #2,147
  • Feb 3, 2011 2:30am Feb 3, 2011 2:30am
Ckp's logic about reducing risk makes very good sense to me. For now I am testing on demo using the following combinations:

AUDCHFUSDCHF(trip)
EURCHFGBPAUD(quad)
EURCHFGBPCHF(trip)
EURCHFGBPJPY(quad)
EURJPYEURUSD(trip)
EURJPYGBPUSD(quad)
EURUSDGBPUSD(trip)
USDCHFGBPCHF(trip)
USDJPYUSDCHF(trip)
EURJPYGBPJPY(trip)
EURCADEURUSD(trip)

All are less than 9 pips total spread (Alpari Live), min 75% correlation (50 days).

Sticking mostly to the original strategy but somewhat conservative:
TF: 5 min (I am sticking with this to reduce my exposure time)
Entry: Stoch diff >85%
Exit: Stoch diff 50% or Ģ25 (0.5% equity)

Result since Monday: 1.92% equity, 189.2 pips
http://www.mt4i.com/users/zr-fx-gh/stats

This will go live soon if it continues to behave, although I will use less sets to start with (perhaps only triplets)
  • #2,148
  • Edited 4:51am Feb 3, 2011 3:32am | Edited 4:51am
Quoting occamsrazors
Hi All

Just wondering if anyone else is encountering this issue with Tradable Correlations 1.6b indicator.

The Diff calculation doesn't seem to be updating properly on my screen. I have the alert set to 1. It keeps giving an alert each minute but the stoch diff figure will stay the same for five minutes or longer for all the pairs shown. If I compare it to a stochdiff indicator I have on a chart for the same pairs, the stochdiff figure is continually changing (and I'm assuming is correct). Below is a pic of what I'm talking about.

The EURAUD/EURJPY...

The diff is not supposed to update in the current bar. It only accepts closed prices. Otherwise it would be flashing on and off constantly and you would get thousands of emails and alerts. So if you look at the last closed diff number it is accurate for that. the stoch pairs indicator is designed to be real time on the readout and last closed on the alert.

I have made a additional input
UseCloseDiff = true;
Will update the stoch diff from the current bar. So you can decide which way you want.

Also the alert will only update once for each AlertTime default is the chart time. Acceptable times are 1 5 15 30 60 240 1440 10080 43200

EDIT go to this post for the most current update version 1.8
http://www.forexfactory.com/showpost...postcount=2157
  • #2,149
  • Feb 3, 2011 3:40am Feb 3, 2011 3:40am
Quoting Ckp
Let me explain it this way... by using your pair choice above. If you enter a trade now... Buy-GBPCAD and Sell-NZDUSD. Any news event or stock event from 4 different currency pairs can negatively affect your trade. GBP, CAD, NZD, USD. You are at risk in 4 different ways. Trading is all about reducing risk.
Yep Ckp...this just happend now...Was in the EURAUD GBPUSD (selling GBPSUD) for nearly 2 hours, still hadn't hit 50 stochdiff, and ended up stuck in it going into the news. GU news spike of 60 pips...long...not a pretty trade anymore....
  • #2,150
  • Feb 3, 2011 3:43am Feb 3, 2011 3:43am
Quoting smjones
The diff is not supposed to update in the current bar. It only accepts closed prices. Otherwise it would be flashing on and off constantly and you would get thousands of emails and alerts. So if you look at the last closed diff number it is accurate for that. the stoch pairs indicator is designed to be realt time on the readout and last closed on the alert.
Aaahhhh got it . Great, thanks for the reply SMJ.
  • #2,151
  • Feb 3, 2011 3:47am Feb 3, 2011 3:47am
Quoting occamsrazors
Aaahhhh got it . Great, thanks for the reply SMJ.
Please re read my last post, I added new info. I agree with you on reconsideration and made some changes to it.
  • #2,152
  • Feb 3, 2011 3:51am Feb 3, 2011 3:51am
I made a small error in the code of Tradable Correlations 1.7 if you downloaded it prior to this post go back and re-download it.
  • #2,153
  • Feb 3, 2011 3:59am Feb 3, 2011 3:59am
Quoting squalou
grrrr.... those mangled pair names....
(i see you have GPBUSDm)

Here is a fix for it.

I hope this works...

Sq
Hi Squalou. The overlay is very good., Thank you.

It would be fantastic if it shows the sell/buy line for the overlay pair. Something for the future perhaps

Thanks

Z
  • #2,154
  • Feb 3, 2011 4:14am Feb 3, 2011 4:14am
Quoting smjones
Please re read my last post, I added new info. I agree with you on reconsideration and made some changes to it.
Ok thats great SMJ...got the latest loaded as per your post following the above one, eagerly awaiting next alert....

Update: Working perfectly!
  • #2,155
  • Feb 3, 2011 4:26am Feb 3, 2011 4:26am
Quoting occamsrazors
Ok thats great SMJ...got the latest loaded as per your post following the above one, eagerly awaiting next alert....

Update: Working perfectly!
Because people seem to want it, I am going to add an option to show only Hedged pairs (triples). It will take me a few minutes.
  • #2,156
  • Feb 3, 2011 4:30am Feb 3, 2011 4:30am
I keep trying to find a way to relate more directly Stoch movement to price movement but it is not clear.

Meanwhile, my plan is as follows:

TF: 5 min (if the strategy works, it must work on any TF with adjustments).

Pairs: the same as Zr-fx (thanks for that), Iīm with Alpari too, less 9 spread, 75% correlation, but only trips.

Entry: Stoch Diff 80%.

Exit: Stoch Cross but at M1. Sometimes this will mean 50% M5, 20% M5, 60% M5,... , I donīt know but maybe the exit is more accurate.

I think this is worth a try.
  • #2,157
  • Edited 6:11am Feb 3, 2011 4:37am | Edited 6:11am
I think this should about do it on this indicator. I really cannot think of any thing else it might need.

It has a input ShowOnlyHedgedPairs That if true, will only allow pairs that are triples like EURUSD EURJPY to be shown and not pairs that are quads like AUDUSD GBPJPY

The default is set to false.
Attached File(s)
File Type: mq4 Tradable Correlations 1.8.mq4   15 KB | 2,022 downloads
File Type: pdf Tradable Correlations 18.pdf   5 KB | 2,875 downloads
  • #2,158
  • Feb 3, 2011 4:48am Feb 3, 2011 4:48am
Quoting Zr-fx
Ckp's logic about reducing risk makes very good sense to me. For now I am testing on demo using the following combinations:

AUDCHFUSDCHF(trip)
EURCHFGBPAUD(quad)
EURCHFGBPCHF(trip)
EURCHFGBPJPY(quad)
EURJPYEURUSD(trip)
EURJPYGBPUSD(quad)
EURUSDGBPUSD(trip)
USDCHFGBPCHF(trip)
USDJPYUSDCHF(trip)
EURJPYGBPJPY(trip)
EURCADEURUSD(trip)

All are less than 9 pips total spread (Alpari Live), min 75% correlation (50 days).

Sticking mostly to the original strategy but somewhat conservative:
TF: 5 min (I am sticking...
Hi Zr,

On the triples why not just trade the the main pairs:

Aud chf Usd chf trade Aud/usd

eur chf gbp chf trade Eur/gbp

eur yen eur usd trade usd/yen


and so on it,

would definitely cut down on the spread.

I think Caillou mentioned it earlier
  • #2,159
  • Feb 3, 2011 5:08am Feb 3, 2011 5:08am
Quoting Eamonn
Hi Zr,

On the triples why not just trade the the main pairs:

Aud chf Usd chf trade Aud/usd

eur chf gbp chf trade Eur/gbp

eur yen eur usd trade usd/yen


and so on it,

would definitely cut down on the spread.

I think Caillou mentioned it earlier

Hi Eamonn,

I think I have not mentioned that because it is not the same. I give you an example with my last trade:

10h42 (GMT+1), Diff Stoch 80%, M5:

Buy EUR/USD: 1.3784
Sell GBP/USD: 1.6262

Imagine Buy EUR/GBP: 0.8474


12h03, Stoch Cross, M1:

EUR/USD: 1.3775
GBP/USD: 1.6220

Imagine EUR/GBP: 0.8493

So my 2 trades gave me 33 pips, with only EUR/GBP trade 19 pips...

A good beginning with the new exit strategy.......
  • #2,160
  • Feb 3, 2011 5:33am Feb 3, 2011 5:33am
  •  Ckp
  • | Joined Aug 2010 | Status: Master ur EXIT. Entry is secondary. | 29 Posts
Quoting Caillou
Hi Eamonn,

I think I have not mentioned that because it is not the same. I give you an example with my last trade:

10h42 (GMT+1), Diff Stoch 80%, M5:

Buy EUR/USD: 1.3784
Sell GBP/USD: 1.6262

Imagine Buy EUR/GBP: 0.8474


12h03, Stoch Cross, M1:

EUR/USD: 1.3775
GBP/USD: 1.6220

Imagine EUR/GBP: 0.8493

So my 2 trades gave me 33 pips, with only EUR/GBP trade 19 pips...

A good beginning with the new exit strategy.......
Think about the risk. A directional trade is more risky because any news event will either make you money or stop you out. A headged "trip trade" protects you better against any risk event and you also experience LESS draw down with a "trip trade' even if the news goes against you.
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