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Hedge and Correlation Strategy

  • #2,761
  • Feb 17, 2011 9:51pm Feb 17, 2011 9:51pm
  •  Ckp
  • | Joined Aug 2010 | Status: Master ur EXIT. Entry is secondary. | 29 Posts
Quoting fortheex
Hi Ckp,

i'd assume you'd attached the basket profit 2 pairs indi, are you using it together with sq's ea? and where did the trend line came from?

adios...
The indi is SQ's latest update. If you look back on his latest posts you will find it. No i'm not using SQ's ea.. yet. I use Steve Hopwood's multi purpose trade manager "MPTM" for basket trades. Search for it if you want to know more.
I drew the trendline manually to illustrate a point.
  • #2,762
  • Feb 17, 2011 11:17pm Feb 17, 2011 11:17pm
Quoting navk
Yes, i use jones indicator to see corelations. I use SQ's EA for auto trading. Testing in hourly and 5 min. Both have resulted good profits.At times DD was max about 120 pips. Can live with it.

I use SQ's basket profit indi for manual trading. If used correctly, DD could be much lower by using this indi.

I use Mataf site to see daily volatility in order to avoid high volatile pairs.

HOW TO USE daily volatility (MATAF) IN THIS STRETAGY ?
  • #2,763
  • Feb 18, 2011 12:02am Feb 18, 2011 12:02am
hi, i had read it thru all de page finally... i attach de latest ea stot2, on my chart, but it seem not working.. i hv no idea.... anyone can help to put a template with the ea again?? thanks for helping...
  • #2,764
  • Feb 18, 2011 6:46am Feb 18, 2011 6:46am
Hi all,

I am wondering why the numbers in the chart showing differently with the appearance of the yellow lines,and with those in the Table of"Tradable Corr" too?

GC/GU: Text 46%. Yellow line: 80% approx. While in Table of "Tradable correlation 1.8": 19%

EC/EU: Text 47%. Yellow line: 75% approx. While in Table of "Tradable correlation1.8": 20%

I might have done something wrong? hehe...

Thank you.

Wishing green pips to you all.
Attached Image (click to enlarge)
Click to Enlarge Name: coba save 4.gif Size: 22 KB
  • #2,765
  • Feb 18, 2011 7:54am Feb 18, 2011 7:54am
Quoting kishu0605
HOW TO USE daily volatility (MATAF) IN THIS STRETAGY ?
If you look at mataf link which i posted, it will give you volatility of various pairs for the current week or past weeks. GBPCHF,GBPJPY,GBPCAD have high volatility means big movements compared to other currency pairs.

If the volatility of certain pairs are high, when you trade in this strategy, whenever the trades are going opposite, we will come across big DD. To avoid big DD, i do not use these pairs.
Intraday only.
  • #2,766
  • Feb 18, 2011 8:07am Feb 18, 2011 8:07am
Quoting navk
If you look at mataf link which i posted, it will give you volatility of various pairs for the current week or past weeks. GBPCHF,GBPJPY,GBPCAD have high volatility means big movements compared to other currency pairs.

If the volatility of certain pairs are high, when you trade in this strategy, whenever the trades are going opposite, we will come across big DD. To avoid big DD, i do not use these pairs.

if we avoid these pairs then we are not getting much signal most of the baskets are belongs to these pairs.anyways how many past weeks you check ?
  • #2,767
  • Feb 18, 2011 8:20am Feb 18, 2011 8:20am
Quoting kishu0605
if we avoid these pairs then we are not getting much signal most of the baskets are belongs to these pairs.anyways how many past weeks you check ?
Use the corelation indi in 5 min stoc frame. You will see lots of other pairs excluding these pairs.

I avoided the high volatile pairs after checking which one had large DD in basket trading.
Intraday only.
  • #2,768
  • Feb 18, 2011 11:26am Feb 18, 2011 11:26am
Hi All,

If I trading on positive correlation pairs (EU/GU). The default setting for InvertFirstSymbol and InvertSecondSymbol in "Stochastic different pairs 1.6b" indicator should be set to false? Am I right?

Thanks for your reply.
Attached Image
  • #2,769
  • Feb 18, 2011 11:39am Feb 18, 2011 11:39am
Quoting rulla
Hi Nicastro, I tried the News indi found here but it required some DLL file. I do not have the DLL file name as I am not at my home computer but that was the reasone why it did not work for me. If you happen to have that DLL please post here.

Hi, there is an FFCal indicator on the site.

Among my system I found a version of it by Scoobs which is probably better than the basic version.

I attach this hoping that Scoobs wont mid
Attached File(s)
File Type: mq4 FFCal Scoobs.mq4   47 KB | 716 downloads
  • #2,770
  • Feb 18, 2011 11:18pm Feb 18, 2011 11:18pm
Quoting squalou
Yes Roundrock, trading correlated pairs like this shows better potential, but that would be on higher timeframes / longer term.

So I coded the SMA and StdDev lines into the Basket Profit indicator, to see if that would give an edge.
It plots the SMA(100) line on top of the Profit Basket line, and calcs the stddev of the Profit-line-to-SMA difference.
Similar as Bollinger Bands, except that we don't use the same amount of periods for the SMA and the StdDev:
we want a short-term SMA to stay close enough to the price line, but we want to use the...
about basketprofit2pairs how to decide on which curriences to go buy and sell ?
  • #2,771
  • Feb 19, 2011 2:53am Feb 19, 2011 2:53am
Quoting squalou
Yes Roundrock, trading correlated pairs like this shows better potential, but that would be on higher timeframes / longer term.

So I coded the SMA and StdDev lines into the Basket Profit indicator, to see if that would give an edge.
It plots the SMA(100) line on top of the Profit Basket line, and calcs the stddev of the Profit-line-to-SMA difference.
Similar as Bollinger Bands, except that we don't use the same amount of periods for the SMA and the StdDev:
we want a short-term SMA to stay close enough to the price line, but we want to use the...

Hi,
can you please tell me the entry ,exit and sl criteria for this indi ?

thank you
  • #2,772
  • Feb 20, 2011 3:13am Feb 20, 2011 3:13am
Quoting kishu0605
Hi,
can you please tell me the entry ,exit and sl criteria for this indi ?

thank you

I think that if I attack indicator basket 2 pair in the chart for example eur usd
and 1 pair eur usd and second pair gbpusd

when yellow line is -2*stddev I buy eurusd and sell gbpusd

when yellow line is +2*stddev I sell eur usd and buy gbpusd !
  • #2,773
  • Feb 20, 2011 3:35am Feb 20, 2011 3:35am
what about williams percentage indicator at setting (21)

using same settings we have for stoch. 80-20 or 90-10

could someone program that like the overline chart smjones made. instead stoch use willimas percentage indicator.

indicator is a standard one in metatrader, under indicators ( so not custom indicators)
  • #2,774
  • Edited 9:41am Feb 20, 2011 3:39am | Edited 9:41am
Many thanks DL/others to bring the concept of correlation into light...I was always curious how this concept can be traded in the forex market.

So let me see if I got the picture right...pls correct me if I am wrong!

Attached picture is the conceptual idea of trading a positive correlation:

pair A in black
pair B in red

Event A: Both pairs moving in the same direction along with their stoch...
Event B: Pair B moves away from Pair A, stochA -> overbought > 80
stochB -> oversold < 20
Event C: Pair B resumes correlating with pair A along with their stoch...

During Event B: Sell pair A & Buy pair B when stoch diff >60 (80-20)

Exit when stoch diff <= 50
Attached Image (click to enlarge)
Click to Enlarge Name: ForexCorrelation.jpg Size: 93 KB
  • #2,775
  • Feb 20, 2011 5:38am Feb 20, 2011 5:38am
trade4fun,

as I researched, the William's is similar to Stochastic. So -I assume, you have some experience with it- what is the difference especially advantage ref to the Stocastic to use it?

josch
trading is war - life is simple
  • #2,776
  • Feb 20, 2011 5:43am Feb 20, 2011 5:43am
It's resonable not to execute correlation trades before news. But if you are in a or some trades, you can't prevent news release over time of open trades. I remember some members having trades continuing over 1-2 days.

Until now I didn't check this closely - but am interested in experiences of managing such trades, if news are released in affected pairs.

josch
trading is war - life is simple
  • #2,777
  • Feb 20, 2011 10:08am Feb 20, 2011 10:08am
i think williams is a bit better then stoch incase we get a big news event that will add your buy and sell to soon. so you end in a largde drawdown for a long period of time.

therefor i would like to see what would happen if we add williams code for the smjones indicator instead of stoch.

since i cant code, i like someone to change stoch code for williams code and see how it looks like.

if williams looks better then stoch, then why not use that 1 in Ea compared to stoch?

also Josh your right about news event. they are a blessing or a curse. so they could give you good profit or huge drawdown.

when having a huge drawdown i used hedging/scalping to get me rid of the huge drawdown.

this is possible to do when your in a ranging period. just look at the price of the correlation pairs that have your drawdown. check if there is no huge news event coming up for some time. then your save to trade. i use this idea on 5 minute chart. and only do this for 1 hour to scalp. whatever profit you made in that 1 hour , for me it was anything between 15 and 60 pips. i did this until my trade was breakeven then i closed both correlation pairs. went from -120 pips to breakeven. so far i have not lost any correlation trades, because of this scalping hedging idea.

if this is possible to add in an EA then your done. so whenever for example drawdonw reaches -100. then Ea should activate hedging/ scalping on timeframe you want. after trade of correlation reaches breakeven. then close all trades.
  • #2,778
  • Feb 20, 2011 11:34am Feb 20, 2011 11:34am
Quoting trade4fun
i think williams is a bit better then stoch incase we get a big news event that will add your buy and sell to soon. so you end in a largde drawdown for a long period of time.

therefor i would like to see what would happen if we add williams code for the smjones indicator instead of stoch.

since i cant code, i like someone to change stoch code for williams code and see how it looks like.

if williams looks better then stoch, then why not use that 1 in Ea compared to stoch?
William's and Stochastic are exactly the same, just shifted in range (-100..0 for W, 0..100 for Stoch).
Plot a Stochastic(21,1,1) on top of your William's(21) and you'll see they overlap exactly.
This is confirmed by their formulas (go to ml4 codebase to have the math details).

sq
  • #2,779
  • Feb 20, 2011 4:12pm Feb 20, 2011 4:12pm
thanks SQ,

i didnt knew that. back to the drawing board.

by the way. what if we would use steves beast EA recovering system for the trades that go in drawdown?
  • #2,780
  • Feb 20, 2011 8:58pm Feb 20, 2011 8:58pm
Hi smjones,

Keep getting this error in the Expert tab when loading Tradable Correlations indicator:

2011.02.20 23:55:29 Tradable Correlations 1.5 USDCHF,M5: ArrayCopySeries function internal error

Do you have a fix?

Many thanks.
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