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Hedge and Correlation Strategy

  • #2,281
  • Feb 5, 2011 2:52pm Feb 5, 2011 2:52pm
Quoting Dreamliner
lol...sorry, I guess I should have let you answer.
No please do not be sorry. I am honoured that you answered on my behalf. You are the master anyway.
  • #2,282
  • Feb 5, 2011 2:57pm Feb 5, 2011 2:57pm
Quoting navk
Good results like mine.

Any reason why you trade only in these pairs ? I feel it could be only spread reason. Any other reasons? I have been successful in other pairs too which have positive corelation..
Purely spread. Although I am testing on Demo, I based these on the live spreads from Alpari UK which I use for live trading. I thought I should test the sets that I will eventually be going live with. I looked for combined spreads less than 9. Of course there may be others sets which generate more profit than the spread difference but I do not want to have too many sets live at the same time.
  • #2,283
  • Feb 5, 2011 3:44pm Feb 5, 2011 3:44pm
Is this the one with the duplicate pairs removed?

Quoting Kilian19
It doesn't matter it's just a string that is displayed on the screen. It's not interfering with anything. I just think that it's easier to read this way. But every one can change it to the way he/she likes it more. In the "new version I changed it....

for the -fx part I added an extern boolean at the beginning
  • #2,284
  • Feb 5, 2011 3:44pm Feb 5, 2011 3:44pm
My friend, I am NOT a master, I am a servant

Quoting Zr-fx
No please do not be sorry. I am honoured that you answered on my behalf. You are the master anyway.
  • #2,285
  • Feb 5, 2011 3:59pm Feb 5, 2011 3:59pm
Quoting Dreamliner
Is this the one with the duplicate pairs removed?
not yet. This just has a boolean where you can decide whether to use Symbol-fx or not. And the Periods are displayed in the format M1;M5;M15 ... instead of 1M;5M;15M.
It's not a big deal up to now. But at the moment I'm bus programming an EA for this concept, so that I will look over this indicator tomorrow morning.
  • #2,286
  • Feb 5, 2011 4:10pm Feb 5, 2011 4:10pm
Quoting smjones
If you don't like it, just type a quick post and I will delete it.
I just had to say, I've used many of your indi's off this forum, your comment was funny to me.
I've not used an indicator of yours I did not like.
Much thanks for sharing your time and ideas.

T
  • #2,287
  • Feb 5, 2011 5:05pm Feb 5, 2011 5:05pm
Thanks for all the work on correlation trading. Just joining.
  • #2,288
  • Edited 9:00pm Feb 5, 2011 7:51pm | Edited 9:00pm
Thanks for your backtesting indicator Squalou, very neat indeed.

As discussed previously in the thread, the stoch diff can go to 80%+ without the pairs actually moving much at all range wise. I'm finding I'm a number of my losers are due to this situation where there is a lack a movement before the signal. Is anyone else finding the same?

Obviously the stoch diff is reflecting the normal ebb and flow of stochastic. We are tryng capture a move back to equilibrium. But price needs to have moved substantially away from equilibrium in the first place in order for us to get a high probability trade. I'm wondering that if the desired stoch diff threshold is met, say 80%, we just use a secondary filter which checks the combined range each pair has moved since the stochdiff was say 20% (it can do this by just counting back the candles until it finds 20% stoch diff and subtracting the PA from current PA) to ensure that there is space for PA move back and for us to get a profitable trade. If the combined range move is only small (0-15 pips) we can ignore the trade.

The alert indicator would only need to display the combined range move and we can make the decision at trade time whether it is sufficient for that triple or quad to take the trade. We still have the issue that different pairs have different ATRs but this at least gets us to first base on whether there is room for the trade. Interested in what others think on this...

[Edit]: Please ignore chart below. I have attached the wrong chart and can't delete it...sorry...second time I've done that, and yep I've entered the lot sizes back the front in Sqalou's indicator...it was a profitable trade...
Attached Image
  • #2,289
  • Feb 5, 2011 7:56pm Feb 5, 2011 7:56pm
Quoting occamsrazors
...

sound like a great idea.

I will take care about that tomorrow!
  • #2,290
  • Feb 5, 2011 8:12pm Feb 5, 2011 8:12pm
Good thoughts here; I've basically been doing this visually. Usually when 90% difference has been reached there has been a significant move on one of the pairs, but you should visually check to make sure. I agree with you, if no move has really happened then the trade will either be a negative or at best a wash.

Quoting occamsrazors
Thanks for your backtesting indicator Squalou, very neat indeed.

As discussed previously in the thread, the stoch diff can go to 80%+ without the pairs actually moving much at all range wise. I'm finding I'm a number of my losers are due to this situation where there is a lack a movement before the signal. Is anyone else finding the same?

Obviously the stoch diff is reflecting the normal ebb and flow of stochastic. We are tryng capture a move back to equilibrium. But price needs to have moved substantially away from equilibrium in...
  • #2,291
  • Feb 5, 2011 8:50pm Feb 5, 2011 8:50pm
Nice work Squalou, as usual! I'm wondering if this indicator could use the particulars of the Stochastic Different Pairs calculation and automatically reset when the stochastic is above 80 and the difference is above 80...I'm thinking every time the stochastic hits the entered criteria, a blue line is drawn and the basket P&L line reset to zero. Does that make any sense?
Great work!
Cheers
CanuckCT


Quoting squalou
Hi guys,

All your brains are boiling by now ?

We all agree by now about the major flaw/limitation of using stochastics: OB/OS levels can carry on for long periods,
while "long" ranging/slow-market periods degrade stochastics performance by decreasing its signal/noise ratio, increasing its sensitivity to smaller price moves, giving much less return than would be for a similar "stochastic pattern" happening on fast-moving markets.

The other issue we are seing is about trading even number of lots for both pairs, and many now we feel...
  • #2,292
  • Feb 5, 2011 8:55pm Feb 5, 2011 8:55pm
Here is an example of what I'm talking about. Prior to the Stoch Diff hitting 80%, measuring from the previous stoch diff of 20% (white line), the AUDCHF moved only 4 pips and the USDCHF moved 18 pips for a combined move of 22 pips away from our starting equilibrium of 20% stoch diff. The prices went nowhere after that and the stoch diff drifted back to 50%, resulting in a loss. I think the prior range move of 22 pips is a probably a marginal distance for a trade taking into account spread, but I need to see more on this.

I think what also might be happening real time is that at the first touch of 80% price may not have moved very far but later in the candle or subsequent candles it has moved further giving a better entry but this doesn't show up necessarily in backtesting. Knowing the distance of the prior move real time may help in waiting for a better entry.


http://i228.photobucket.com/albums/e...mrangemove.gif
  • #2,293
  • Edited Feb 6, 2011 8:06am Feb 5, 2011 9:04pm | Edited Feb 6, 2011 8:06am
Quoting Kilian19
sound like a great idea.

I will take care about that tomorrow!
Okay now it's time to go to bed. already 4 am :O.

Newer Version at page 155
  • #2,294
  • Feb 5, 2011 9:14pm Feb 5, 2011 9:14pm
Thank you! Any chance when you guys post new indicators you can tell us what is different in the new one?

Quoting Kilian19
Okay now it's time to go to bed. already 4 am :O.
  • #2,295
  • Feb 5, 2011 9:20pm Feb 5, 2011 9:20pm
Quoting Dreamliner
Thank you! Any chance when you guys post new indicators you can tell us what is different in the new one?
I hope it does this what it's designed for.
It shall show the pip movement since the last break from the 20% Line.

If it doesn't show anything just right click. indicator edit and okay. The text should appear. MT4 is a little bit buggy. It should be the indicator occamsrazors requested. I'm not sure if it's working right, but the calculations and the chart looks okay. *You can see at EURUSD there wasn't really a lot movement since 16.00 (I think the comma is at the wrong place but this should be easy to fix).... at least I can't see my calculation error :/
Attached Image (click to enlarge)
Click to Enlarge Name: Test.jpg Size: 162 KB
  • #2,296
  • Feb 5, 2011 9:39pm Feb 5, 2011 9:39pm
Quoting Kilian19
Okay now it's time to go to bed. already 4 am :O.
Geez tomorrow comes around fast...like about only 1 hour! Wasn't expecting to see this until ummm tomorrow. The world must be speeded up where Kilian lives lol. Can't believe how fast the coders work in this thread. Good stuff Kilian!

The only issue is getting it to display where I can see it. I have to widen the chart alot to see it. If I had 4 charts on my platform it wouldn't show as they wouldn't be wide enough. But don't worry about it now...get some sleep....tomorrow is all good (earth hours not Kilian hours )
  • #2,297
  • Feb 5, 2011 11:27pm Feb 5, 2011 11:27pm
Quoting Pip Chaser
If you guys like spread trading, you may want to take a look at the futures market. I am currently long 1 (3/11) contract & short 1 (4/11) contract of crude oil. You can clearly see the upper/lower range on the 1 hr time frame for the past few days.
Hey Pip Chaser,

Which charting software are you using to chart the spread?
You have me extremely interested in this topic and would really like to look into this further.

I have used a different charting package to chart the spread but dont seem to be getting the same prices as you. I have the same avg spread for that day (around -1.75) however for the 25th Jan yours is showing spikes down to -2.50 and up to -1.00 however my spikes are only down to -1.78 and -1.61.

Any help would be greatly appreciated. I am a newbie her on the forum so I cant PM you.

BTW Dreamliner I have been following this thread for some time and you and the others have greatly increased my knowledge and understanding of correlations and spreads..

Keep it up
E
  • #2,298
  • Feb 6, 2011 2:23am Feb 6, 2011 2:23am
Quoting occamsrazors
Geez tomorrow comes around fast...like about only 1 hour! Wasn't expecting to see this until ummm tomorrow. The world must be speeded up where Kilian lives lol. Can't believe how fast the coders work in this thread. Good stuff Kilian!

The only issue is getting it to display where I can see it. I have to widen the chart alot to see it. If I had 4 charts on my platform it wouldn't show as they wouldn't be wide enough. But don't worry about it now...get some sleep....tomorrow is all good (earth hours not Kilian hours )
Hi Occam,

Very interesting filter and really thanks to Kilian for his extremely quick coding...

Canīt wait for testing.....
  • #2,299
  • Feb 6, 2011 2:30am Feb 6, 2011 2:30am
Quoting ebension
Hey Pip Chaser,

Which charting software are you using to chart the spread?
You have me extremely interested in this topic and would really like to look into this further.

I have used a different charting package to chart the spread but dont seem to be getting the same prices as you. I have the same avg spread for that day (around -1.75) however for the 25th Jan yours is showing spikes down to -2.50 and up to -1.00 however my spikes are only down to -1.78 and -1.61.

Any help would be greatly appreciated. I am a newbie her on the forum so I cant...
Firetip is the trading platform.
  • #2,300
  • Feb 6, 2011 2:44am Feb 6, 2011 2:44am
Hi Guys,
I am also a great fan of hedging ;-)

Here I show you how I hedge "circel pairs" = GBPUSD > USDCHF > GBPCHF"
"Circel pairs" means each currency "GBP" "USD" and "CHF" appears twice in these three pairs.
GBPUSD = Buy
USDCHF = Buy
GBPCHF = Sell

or

GBPUSD = Sell
USDCHF = Sell
GBPCHF = Buy

I used no indicator at all, but it took sometimes a while to get in profit.
I used same lotsize on all three pairs and TP of 100$

One might say, hey, why did you not trade just GBPUSD and GBPCHF?
Because, it causes such a big DD which can blow an account in very short time, so please do not try this at home ;-)

Attached Image (click to enlarge)
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