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Hedge and Correlation Strategy

  • #2,961
  • Mar 11, 2011 9:48pm Mar 11, 2011 9:48pm
Quoting navk
For those who are trading this strategy, a piece of advice.

The corelation changes every day. You need to load tradeble corelation 1.8 indicator and check after asian open. Many of euraud basket pairs are now out of corelation.

Look for corelation above 75 and also use stocastic indicator to see the history of deviations for a week at least. This will help you to fix stoc entry in your EA.

If the DD goes beyond 20 or 25 pips, add similar or slightly bigger lot in order to average it.

If the DD goes beyond 20 to 25 pips, entry and exit...

i am monitoring in the stochastic diffpairs 1.7b indicator it self. is it the same?

pls advice
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  • #2,962
  • Mar 14, 2011 6:07am Mar 14, 2011 6:07am
Quoting navk
For those who are trading this strategy, a piece of advice.

The corelation changes every day. You need to load tradeble corelation 1.8 indicator and check after asian open. Many of euraud basket pairs are now out of corelation.

Look for corelation above 75 and also use stocastic indicator to see the history of deviations for a week at least. This will help you to fix stoc entry in your EA.

If the DD goes beyond 20 or 25 pips, add similar or slightly bigger lot in order to average it.

If the DD goes beyond 20 to 25 pips, entry and exit...
Thanks Navk, good advice there.

Just a quick update on my own testing (mixture of test and live account). Over 3 weeks of trades now: 55 taken, 40 wins, 13 losses, 2 breakeven.
Using 5m timeframe, started on 85/10 now on 90/10.
Net result: +230 pips
Ave win: 11 pips
Ave loss: 15 pips
Max drawdown on a single trade: 60 pips

I have not yet used the averaging in method - I moved up from 85/10 to 90/10 to filter trades better.

Btw, Quads performing better than Triplets for me (+142 pips vs +88 pips) after approx 50:50 split on no of trades.

Avoided news (except the quake on friday morning where I incurred a couple of larger than average losses), avoided GBPJPY and pairs with very high spreads.

For some reason the EA dated 16.02.11 is closing the TP trades reliably for me (so far) but the EA dated 01.03.11 is not. My broker is Alpari UK.
  • #2,963
  • Mar 14, 2011 8:05am Mar 14, 2011 8:05am
Quoting dawjones
i am monitoring in the stochastic diffpairs 1.7b indicator it self. is it the same?

pls advice
Look for tradeble corelation 1.8 indicator
Intraday only.
  • #2,964
  • Mar 14, 2011 8:28am Mar 14, 2011 8:28am
Quoting Xfd
Thanks Navk, good advice there.

Just a quick update on my own testing (mixture of test and live account). Over 3 weeks of trades now: 55 taken, 40 wins, 13 losses, 2 breakeven.
Using 5m timeframe, started on 85/10 now on 90/10.
Net result: +230 pips
Ave win: 11 pips
Ave loss: 15 pips
Max drawdown on a single trade: 60 pips

I have not yet used the averaging in method - I moved up from 85/10 to 90/10 to filter trades better.

Btw, Quads performing better than Triplets for me (+142 pips vs +88 pips) after approx 50:50 split on no of trades....
At times the max DD goes up to 40 to 50 pips. So adding trades at soome interval helps to breakeven or little profit.
Intraday only.
  • #2,965
  • Mar 14, 2011 12:51pm Mar 14, 2011 12:51pm
Quoting Xfd
Thanks Navk, good advice there....
________________
XFD, good advise avoid GBPJPY of trading pairs.
pls., could u b so kind to attach indicators u use (i couldn't find the latest versions among the earlier posts.

Thank U in advanse & lucky tradings!
  • #2,966
  • Mar 14, 2011 1:06pm Mar 14, 2011 1:06pm
Hi,

for some reason I always get 'no correlations meet your criteria' in 1st line of the table, despite depending on my entries shown the correct pairs. 1st line is overwritten by the comment and not readable. Any idea how to fix this or any known setting is wrong to get this? Thank you.

josch
Attached Image
trading is war - life is simple
  • #2,967
  • Mar 15, 2011 11:15am Mar 15, 2011 11:15am
After the last very trendy days, I think that this method might be very dangerous for that kind of days.

Be careful.
  • #2,968
  • Mar 15, 2011 11:22am Mar 15, 2011 11:22am
Quoting crossy
After the last very trendy days, I think that this method might be very dangerous for that kind of days.

Be careful.
I have lost about 20% of my deposit during this week using this method.

Think that one of reasons was using "wrong" pairs (GBPJPY, GBPCHF, GBPCAD, NZDJPY). another reason, on my opinion, was using trading experts based on this method.

perhaps the a/m reasons should be taken in consideration for further trading.

good luck!
  • #2,969
  • Mar 15, 2011 4:56pm Mar 15, 2011 4:56pm
Quoting vismut
I have lost about 20% of my deposit during this week using this method.

Think that one of reasons was using "wrong" pairs (GBPJPY, GBPCHF, GBPCAD, NZDJPY). another reason, on my opinion, was using trading experts based on this method.

perhaps the a/m reasons should be taken in consideration for further trading.

good luck!
Sounds quite impossible to lose much when trading really correlated pairs. You just keep your trades until they bring profit, that's it.
Of course, I cannot comment on those weird pairs that you listed. Never got the idea to touch anything so strange...
But one thing is sure - using EAs is not serious trading. Leave that to losers, learn and practice instead, and you will be among winners.
  • #2,970
  • Mar 15, 2011 5:01pm Mar 15, 2011 5:01pm
Untill japan issues stabilise, do not trade in this strategy. Especially in asian session.

In a trending market, this strategy will not work.

I would say strat to trade in this strategy next week, whether it is demo or live.
Intraday only.
  • #2,971
  • Mar 15, 2011 5:09pm Mar 15, 2011 5:09pm
crossy and wismut,

adding to post of NAVK - agree. If you read through the thread you'll see, this strategy is using correlation -best in its smoothest way- to get profits. There were mentioned some pairs to exclude because of their large volatility. Using this now with JPY after this still continuing disaster, which sends most exchanges to red territory, is not the intended use of this strategy.

josch
trading is war - life is simple
  • #2,972
  • Mar 15, 2011 5:13pm Mar 15, 2011 5:13pm
Navk,

please have a look at post #2966. Do you have an idea about this error display? Thanks!

josch
trading is war - life is simple
  • #2,973
  • Mar 15, 2011 7:15pm Mar 15, 2011 7:15pm
Quoting josch
Navk,

please have a look at post #2966. Do you have an idea about this error display? Thanks!

josch
I too have same problem, but noramally ignore that particular basket of pairs.
Intraday only.
  • #2,974
  • Mar 15, 2011 8:49pm Mar 15, 2011 8:49pm
Quoting jcarne
Hi Doji...

A very good contribution
Regarding changing the background of the Ea, can you explain how it as fact?
I've done with objects and does not work well
It is a very interesting idea.
thanks
I just change the background color manually. It would be nice to do it automatically, but I do not know how...
  • #2,975
  • Mar 15, 2011 10:30pm Mar 15, 2011 10:30pm
corelation we are using is based on last 50 days. things could change everyday due to fundamentals. due to japan issues, there is a shift in the corelation between asia pairs and the rest. u will know this only after 50 days.

for example GA/GU has pos corelation 78%. yesterday i entered short GA , long GU. But to my surprise they moved in opposite direction and i am in huge DD. This happened to several pairs like EA/EU etc
  • #2,976
  • Mar 16, 2011 1:59am Mar 16, 2011 1:59am
Quoting Indrek
Sounds quite impossible to lose much when trading really correlated pairs. You just keep your trades until they bring profit, that's it.
Of course, I cannot comment on those weird pairs that you listed. Never got the idea to touch anything so strange...
But one thing is sure - using EAs is not serious trading. Leave that to losers, learn and practice instead, and you will be among winners.
Inderk,

What you say is very dangerous. Look at the attached 2 shotes.

As you trade the basket: EURUSD+GBPUSD means that you trade EURGBP, and this pair has its own trades, and nobody will promiss you that they will be meet. It is more dangrous when the value of each pip is quit different.
Attached Image(s) (click to enlarge)
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  • #2,977
  • Edited 3:44am Mar 16, 2011 3:27am | Edited 3:44am
Quoting crossy
Inderk,

What you say is very dangerous. Look at the attached 2 shotes.

As you trade the basket: EURUSD+GBPUSD means that you trade EURGBP, and this pair has its own trades, and nobody will promiss you that they will be meet. It is more dangrous when the value of each pip is quit different.
Firstly, it is all about how you manage your trades. For example, a 2-pair hedge can be paused with the help of third pair any time and continued when market changes. When trading EU and GU, and they both move to "wrong" direction longer term, you can always enter one more trade on EG to fix the situation and come out of the situation later.
It is pure brain work and play with the theory of probability. It is very, very far from mechanical trading, especially using EAs.
Using hedging means that you do not use too big lots and you are ready to be always in the market.
Secondly, you certainly have to take into account both 1) different pip values and 2) differencies in volatility of the pairs traded when choosing lot sizes.

All I want to say is that with right state of mind and a lot of brain work hedging is a very good way of trading.
  • #2,978
  • Mar 16, 2011 3:53am Mar 16, 2011 3:53am
You do not trade EURGBP but the difference in speed EUR and GBP change against dollar.

Gap size in pips between EURUSD and GBPUSD does not matter.

Correlation between EURUSD and GBPUSD means more less that when EUR rise 1% against dollar GBP should do the same. When EURUSD and GBPUSD will rise day after day 1% - the gap in pips will be growing because of the difference in volatility but there will be no difference in the speed of growth.

But when EURUSD rise 1% and GBPUSD only 0.5% - there is a gap in speed. You should sell overperforming EURUSD and buy underperforming GBPUSD - taking of course into consideration lot sizes - to make your position dollar neutral.

This is more less what correlation trading is all about - but of course in details is a little bit more complicated.

You can`t trade correlation between GBPUSD and GBPJPY because your result will depend on change in USDJPY price
  • #2,979
  • Mar 16, 2011 4:22am Mar 16, 2011 4:22am
Hi everybody that is my trade from yesterday live account

1 min TF
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  • #2,980
  • Mar 16, 2011 4:56am Mar 16, 2011 4:56am
Quoting hblekot
..... You can`t trade correlation between GBPUSD and GBPJPY because your result will depend on change in USDJPY price
hblekot,

if you're using correlating triple pairs, you always have risk on the non-identical currency-pair. Don't understand your last sentence - may you explain this a bit more? - Thank you.

josch
trading is war - life is simple
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