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Three Pairs Hedging

  • #1
  • First Post: Edited 7:32am Feb 6, 2011 7:21am | Edited 7:32am
Hi Guys,
I am 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)
Click to Enlarge Name: hedging.jpg Size: 340 KB


Here some more examples for three pairs hedging:


BUY BUY SELL
or SELL SELL BUY

EUR/CHF CHF/JPY EUR/JPY

GBP/CHF CHF/JPY GBP/JPY

USD/CHF CHF/JPY USD/JPY

EUR/GBP GBP/CHF EUR/CHF

EUR/USD USD/CHF EUR/CHF

EUR/GBP GBP/JPY EUR/JPY

EUR/GBP GBP/USD EUR/USD

EUR/USD USD/JPY EUR/JPY

GBP/USD USD/CHF GBP/CHF

GBP/USD USD/JPY GBP/JPY


There are still some more opportunities, but then the spreads are very high!

I used a simple EA, where I only had to enter the three pairs, whether I want to open a sell or buy order for the single pairs, the lotsize and the TP. It did not use any indicator and opened new trades as soon as the previous ones where closed.
But I do not have this EA and do not know its name anymore. But I had it from this forum. I would have preferred to have automatic Lot size (calculated by percentage of free margin) and automatic TP (calculated by percentage of equity).
  • #2
  • Feb 6, 2011 7:40am Feb 6, 2011 7:40am
hello Cash,

Thanks for your thread. I do not understand what you mean by take profit is $100. Look at the TP coulmn in your trading report. You have values greater that $100. Also I do not know what your stop loss is.

It appears that you had very large draw downs in some trades......., some draw downs almost 30% of your account size??
  • #3
  • Feb 6, 2011 7:43am Feb 6, 2011 7:43am
Yes sometime this EA did not close the trades so I had to close them manually. The DD is not that high, because when one pair gets down, another pair compensates this DD.
  • #4
  • Feb 6, 2011 8:23am Feb 6, 2011 8:23am
Quoting cash4u2
Yes sometime this EA did not close the trades so I had to close them manually. The DD is not that high, because when one pair gets down, another pair compensates this DD.

A $2910.00 draw down out of a $10,000 account is not that HIGH to you????
  • #5
  • Feb 6, 2011 8:26am Feb 6, 2011 8:26am
Quoting maxwell-eqtn
A $2910.00 draw down out of a $10,000 account is not that HIGH to you????
This is not a high draw down, when the other pair has about the same size in plus! Therefore we trade the other pairs as well. Don`t you get it?
  • #6
  • Feb 6, 2011 8:28am Feb 6, 2011 8:28am
Quoting maxwell-eqtn
A $2910.00 draw down out of a $10,000 account is not that HIGH to you????
Maxwell I think you are missing something...

When you have that -2910$ at the same time you have that +3667$ and -558$ so it's not a drawdown....the net value is +199$ more or less

There is an italian famous trader that works in a similar way....
Market is like a puzzle, YOU have to fit the pieces!!
  • #7
  • Feb 6, 2011 8:32am Feb 6, 2011 8:32am
With hedging you'll always show "drawdown" when in reality the equity on the account may very well be up, as one pair goes negative while the other (or two) go positive.
  • #8
  • Feb 6, 2011 8:51am Feb 6, 2011 8:51am
Quoting Chris_B
Maxwell I think you are missing something...

When you have that -2910$ at the same time you have that +3667$ and -558$ so it's not a drawdown....the net value is +199$ more or less

There is an italian famous trader that works in a similar way....
Thanks for the explanation man. I see my mistake now....! I had to take all the three traded pairs in consideration.

Anyway Cash, Would you mind posting the trade trigger EA since with this method it is important to enter a trade with all three at thesame time.
  • #9
  • Feb 6, 2011 8:54am Feb 6, 2011 8:54am
With a draw down that is manageable the system could show very good results
  • #10
  • Feb 6, 2011 9:05am Feb 6, 2011 9:05am
Quoting cash4u2
Hi Guys,
I am 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...

Hi

Looking at your result it appears that you would have been more profitable if you changed it to

GBPUSD=BUY
USDCHF=SELL
GBPCHF=SELL


GBPUSD=SELL
USDCHF=BUY
GBPCHF=BUY


Have you tried it this way? What setup do you use to enter a trade?
With God its impossible to lose
  • #11
  • Feb 6, 2011 9:08am Feb 6, 2011 9:08am
Quoting rglenn
Hi

Looking at your result it appears that you would have been more profitable if you changed it to

GBPUSD=BUY
USDCHF=SELL
GBPCHF=SELL


GBPUSD=SELL
USDCHF=BUY
GBPCHF=BUY


Have you tried it this way? What setup do you use to enter a trade?
Try it, and you will blow your account!
  • #12
  • Feb 6, 2011 9:09am Feb 6, 2011 9:09am
Quoting rglenn
Hi

Looking at your result it appears that you would have been more profitable if you changed it to

GBPUSD=BUY
USDCHF=SELL
GBPCHF=SELL


GBPUSD=SELL
USDCHF=BUY
GBPCHF=BUY


Have you tried it this way? What setup do you use to enter a trade?
I think in your example you are not hedged....
Hedging means that you are flat on the market with every currency

If you do something like you say:
GBPUSD=BUY
USDCHF=SELL
GBPCHF=SELL

you are hedged only on GBPUSD but you remain double short on USD and double long on CHF...the same think as opening 2 positions short on USDCHF
Market is like a puzzle, YOU have to fit the pieces!!
  • #13
  • Feb 6, 2011 9:12am Feb 6, 2011 9:12am
Quoting Chris_B
I think in your example you are not hedged....
Hedging means that you are flat on the market with every currency

If you do something like you say:
GBPUSD=BUY
USDCHF=SELL
GBPCHF=SELL

you are hedged only on GBPUSD but you remain double short on USD and double long on CHF...the same think as opening 2 positions short on USDCHF
Sorry to write that, what you show is the opposite of hedging!
Just try it and you will find out yourself.
  • #14
  • Feb 6, 2011 9:16am Feb 6, 2011 9:16am
Quoting cash4u2
Sorry to write that, what you show is the opposite of hedging!
Just try it and you will find out yourself.
I know perfectly...I was just showing that to Rglenn
Market is like a puzzle, YOU have to fit the pieces!!
  • #15
  • Edited 9:31am Feb 6, 2011 9:18am | Edited 9:31am
Quoting Chris_B
I know perfectly...I was just showing that to Rglenn

Thanks Chris that makes sense! Never used hedging before - maybe it might be worthwhile looking into.
With God its impossible to lose
  • #16
  • Feb 6, 2011 9:23am Feb 6, 2011 9:23am
Quoting Chris_B
I know perfectly...I was just showing that to Rglenn
GBPUSD and USDCHF are negative correlated, which should be always traded sell sell or buy buy.
USDCHF and GBPCHF are positive correlated,which should be always traded sell buy or buy sell.
GBPUSD and GBPCHF are also positive correlated,which should be always traded sell buy or buy sell.

So, please do not mix it up!
  • #17
  • Feb 6, 2011 9:31am Feb 6, 2011 9:31am
Hi Cash,

What will be your trading rules like?

I mean:

1. Any limits to the number of trades (as per Buy or Sell basket)? I see your results that sometimes you do more than 1 set of Buy or Sell in a trading day.

2. Any particular session(s)?

3. Entry requirement(s)? Or just enter Buy / Sell basket when closed the previous basket with profit?

Hoping someone will code this EA for us.

Cheers
福 子 Victor V
  • #18
  • Feb 6, 2011 9:33am Feb 6, 2011 9:33am
Quoting cash4u2
GBPUSD and USDCHF are negative correlated, which should be always traded sell sell or buy buy.
USDCHF and GBPCHF are positive correlated,which should be always traded sell buy or buy sell.
GBPUSD and GBPCHF are also positive correlated,which should be always traded sell buy or buy sell.

So, please do not mix it up!
Maybe there is a misunderstanding....

I AGREE with you....it was not me to mix it up...it was Rglenn and I was just explaining it to him....
English is not my mother language so maybe I've said something wrong but I repeat...I AGREE with you Cash4u2
Market is like a puzzle, YOU have to fit the pieces!!
  • #19
  • Feb 6, 2011 9:38am Feb 6, 2011 9:38am
Quoting camvcvoo
Hi Cash,
What will be your trading rules like?
I mean:
1. Any limits to the number of trades (as per Buy or Sell basket)? I see your results that sometimes you do more than 1 set of Buy or Sell in a trading day.
2. Any particular session(s)?
3. Entry requirement(s)? Or just enter Buy / Sell basket when closed the previous basket with profit?
Hoping someone will code this EA for us.
Cheers
I did not use any signals or indicators, the EA opened orders with the same lotsize on the three pairs and closed it in profit. After the close it opened the next trades directly.
But I guess an useful indicator could speed up the positive trades.
  • #20
  • Feb 6, 2011 9:49am Feb 6, 2011 9:49am
Quoting cash4u2
I did not use any signals or indicators, the EA opened orders with the same lotsize on the three pairs and closed it in profit. After the close it opened the next trades directly.
But I guess an useful indicator could speed up the positive trades.
I really wonder.. is it so easy to make money in forex. I have tried such systems earlier but not so much profitable. and one of the reason is brokers spread.
Well i have attached like same ea you may be talking about... it is for 4 pairs... anybody can enter 3 pair and leave 4th pair blank..

Well best of luck for your new thread!
Attached File(s)
File Type: mq4 Hedging Strategy (4Pairs).mq4   8 KB | 12,892 downloads
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