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Hedge and Correlation Strategy

  • #3,041
  • Mar 23, 2011 5:32am Mar 23, 2011 5:32am
Quoting chrisx
..... I'll also enter arround the std. dev. 3 line
When the price difference goes straight back to the mean I'll look for an exit arround the mean.
If the difference reverses before, I'll exit arround 1 std dev.
But all that is pretty hard to manage manually, because you would have to sit infront of the screen all the time.

chrisx,

may be I overlooked it: but how you get the 3rd std dev line (any additional settings in the indi necessary)? - Thank you.

josch
trading is war - life is simple
  • #3,042
  • Mar 23, 2011 5:52am Mar 23, 2011 5:52am
Quoting Caillou
Hello everyone,

.... Open trades manually.
MPTM close all trades when profit = 1% account, I donīt look at Stoch Diff for close, just for entry.
Triplets, quads, but not during news, from 7h00 till 20h00 (GMT+1)
Only one week tested, average 3% daily,.....
Will test for one month but looks promising......
Caillou,

hope your house moving was successful.

Questions to your testing environment:

- you use the 5 min TF?
- if excluding news, you close open trades before despite losses?
- using quads too, how many pairs you had open at the same time so far?
- and ... already asked ... planned SL?

Thank you!

josch
trading is war - life is simple
  • #3,043
  • Mar 23, 2011 6:08am Mar 23, 2011 6:08am
Quoting Madness
Calilou,

what do you use as an emergency stop loss?
I donīt use any SL, I always monitor my trades, for me the best SL is another new couple of trades when Stoch Diff is 70-80...
  • #3,044
  • Mar 23, 2011 6:10am Mar 23, 2011 6:10am
Quoting jack-fx
Hi caillou... I'm about to start live, your same specifications.
What's you preferable time frame? I often start from little divergences (>30-40 stoch.) on 60m - I don't know how reliable 5m is....
Hi,

Iīm only testing 5M, but it should work on any TF. The bigger the TF, the bigger the possible DD, the bigger the profit, as always.
I choose 5M because I prefer quicker trades......
  • #3,045
  • Mar 23, 2011 6:15am Mar 23, 2011 6:15am
Quoting josch
Caillou,

hope your house moving was successful.

Questions to your testing environment:

- you use the 5 min TF?
- if excluding news, you close open trades before despite losses?
- using quads too, how many pairs you had open at the same time so far?
- and ... already asked ... planned SL?

Thank you!

josch
Hi Josch

Yes, 5M TF, with news I donīt trade the pair if this day thereīs a red new for that pair. For now, I had max 8 trades open, and always close for 1% profit.
And no, no SL, itīs strange but I fell better without a SL, with a SL, I have the SL always on my mind. If another couple of trades have a Stoch Diff of 70-80 I open 2 more trades and always the DD decreases......
  • #3,046
  • Mar 23, 2011 6:59am Mar 23, 2011 6:59am
Quoting Caillou
Hi,

Iīm only testing 5M, but it should work on any TF. The bigger the TF, the bigger the possible DD, the bigger the profit, as always.
I choose 5M because I prefer quicker trades......
Hi Caillou and thank for your reply. I have to say I fully agree with your way of trading and the way of managing DD (without SL).

I would suggest a -probably- more refined method to manage DD.
Technique is the same: adding further positions (on BOTH sides).
Entry might be different. I mean: instead of relying exclusively on the stoch diff (say +80, then +90, or even 100), we can use some sound traditional technical analysis of supports and resistances on the DERIVED chart. This imply trading exclusively triplets (as they are called here ). Let's make an example. This morning I started a trade BUY GBPUSD - SELL EURUSD (at 11:03 gmt+1). After a certain time, the gap started widening (20+ pips) thus producing a DD. Well, I was looking for a re-entry point (adding positions on both sides), but instead of checking the stoch diff. only (say: +90, etc.), I was checking the derived chart. Guess what? EURGBP, of course. Not trading it, just spotting S/R lines, representing possible reversal points = positive gap closing of my trades.
Well, I found it in area 0.8725 (EURGBP). And entered 2 lots there (Buy 1 GU, Sell 1 EU).
Price actually reversed and I closed my overall trade in profit

Your feedback is welcome!
  • #3,047
  • Mar 23, 2011 7:08am Mar 23, 2011 7:08am
Quoting t1minator
Much thanks roundrock! You totally rock.

I was thinking and it has probably been discussed, since the DD almost always happens with this strategy, perhaps a optional time frame lag could be introduced to mitigate the initial entry. So in the 5 minute time frame an accumulation of 3 threshold events (stoch diff > 90 on 3 different bars) before the initial trade gets triggered.

food for thought

T
the best trades are those that dont stay longer above 90. it should touch 90 and come back and start going down. longer it stays in 80-95 zone the more DD.

if we allow a lag, there is a possibility we may miss good trades. but it also reduces DD to some extent. but if it compltely goes out of your way, then no matter what you end up with huge DD. This hapened last week with AUD related pairs (japan issue)

also there is no direct relation to stoch and price. sometimes sto diff comes down to 50 but you still have accumulated DD. I dont know how to avoid DD even if the entry is good.

another variant that came up recently is alberts corelation check on lower TF. I am testing the entry with these 3 conditions

1. corelation on 200 days should be above +80

2. corealtion on 200 M5 should be below a number like -20 (depends on each pair history)

3. sto diff should be above 80

i am 'hoping' this will reduce the DD while giving more profits. idea is pairs are positively corelated on higher TF and have gone out of corealtion on lower TF tempararily, we enter with hope corelation comes back again.

i am yet to find a successful way to get consistent profits with this method. trying several things didnt help either. i will give a week before coming to final conclusion on this system. right now gains are small, losses are big and huge DD in case of unscheduled events (earth quakes etc). i am yet to find even a proper exit ....
  • #3,048
  • Mar 23, 2011 8:04am Mar 23, 2011 8:04am
Quoting jack-fx
Hi Caillou and thank for your reply. I have to say I fully agree with your way of trading and the way of managing DD (without SL).

I would suggest a -probably- more refined method to manage DD.
Technique is the same: adding further positions (on BOTH sides).
Entry might be different. I mean: instead of relying exclusively on the stoch diff (say +80, then +90, or even 100), we can use some sound traditional technical analysis of supports and resistances on the DERIVED chart. This imply trading exclusively triplets (as they are called here )....
Hi Jack-fx,

Very good point in my opinion. With triplets we have this advantage.

In my test, I have seen too that best entries were at 70, not 80 or 90. When Stoch Diff is at 80, the movement is extreme and we can see Stoch at 90, 95 or 100, but when I enter at 70, usually Stoch goes down, and not up. Just my observation.....
  • #3,049
  • Edited 8:33am Mar 23, 2011 8:20am | Edited 8:33am
I test systems two weeks, but without positive results.
In this strategy globally not earned. In the 80-90 differential is adjusted to 20, but the trade remains in deficit.
Correlation is always adjusted but trade is a loss.
Trading strategy based only on correlation not earned.
Correlation is a tool for trading.
Trading only through the correlation is not possible.
  • #3,050
  • Mar 23, 2011 9:21am Mar 23, 2011 9:21am
Quoting josch
chrisx,

may be I overlooked it: but how you get the 3rd std dev line (any additional settings in the indi necessary)? - Thank you.

josch
I've modified squalous indi and implemented the std. dev. 3 lines.
I removed the std. dev. 1 lines though because you can only set a total of 8 buffer variables in the code ( correct me if thats wrong )

I'll attach it for you, I hope squalou doesn't mind.
Attached File(s)
File Type: mq4 Basket Profit 2 Pairs sq 3stddev mod.mq4   15 KB | 865 downloads
  • #3,051
  • Mar 23, 2011 9:23am Mar 23, 2011 9:23am
what kind of drawdowns are you all talking about? over 100 pips?
  • #3,052
  • Mar 23, 2011 9:28am Mar 23, 2011 9:28am
Thanks!


Quoting chrisx
I've modified squalous indi and implemented the std. dev. 3 lines.
I removed the std. dev. 1 lines though because you can only set a total of 8 buffer variables in the code ( correct me if thats wrong )

I'll attach it for you, I hope squalou doesn't mind.
  • #3,053
  • Mar 23, 2011 9:51am Mar 23, 2011 9:51am
I'm just playing arround with it for myself, testing to see if I can come up with anything good. So there are no detailed instructions I could give you yet.

But basically I wait for the line to go outside the 2 oder 3 std. lines and enter the trade when it comes back in.
Then I'll let steves mptm manage the trades via trade comment.
It will set a trailing stop of 70% at 30€ profit.

I don't know if those settings are any good though.
  • #3,054
  • Mar 23, 2011 10:22am Mar 23, 2011 10:22am
I have found yet for one thing.
stochastic indicator 1.7 has bad data.
I read that one candle = one period.
on the hourly chart is 24 candles = 24 period
Chart M30 = 48 period
M15 = 96 Period
M5 = 288 period
M1 = 1440 period.
Mataf.net look at the correlation between day and hour to match more than 75 correlation. hour should be more than 80
stochastic indicator to enter the period of 288 and are trading on the M5 chart
now it has little meaning.
  • #3,055
  • Mar 23, 2011 10:29am Mar 23, 2011 10:29am
Quoting kgblock
I have found yet for one thing.
stochastic indicator 1.7 has bad data.
I read that one candle = one period.
on the hourly chart is 24 candles = 24 period
Chart M30 = 48 period
M15 = 96 Period
M5 = 288 period
M1 = 1440 period.
Mataf.net look at the correlation between day and hour to match more than 75 correlation. hour should be more than 80
stochastic indicator to enter the period of 288 and are trading on the M5 chart
now it has little meaning.

what were some of the worse DD that you experienced trading in your 2 weeks of testing? in terms of pips...
  • #3,056
  • Mar 23, 2011 10:49am Mar 23, 2011 10:49am
Quoting Madness
what were some of the worse DD that you experienced trading in your 2 weeks of testing? in terms of pips...
I traded with the stochastic indicator 1.7 and the period of 50
These were bad results. Difference is reduced, the correlation was adjusted and
trades were 50% loss
Now I've found that the period 50 is identical to the M30.
You can not trade the M30 period on the M1 chart.
Distorts the correlation.
I'm going to try what I wrote above.
  • #3,057
  • Mar 23, 2011 12:15pm Mar 23, 2011 12:15pm
Quoting chrisx
I've modified squalous indi and implemented the std. dev. 3 lines. .....
chrisx,

thank you very much sharing it.

josch
trading is war - life is simple
  • #3,058
  • Mar 23, 2011 12:17pm Mar 23, 2011 12:17pm
Quoting kgblock
I traded with the stochastic indicator 1.7 and the period of 50 ...
kgblock,

I don't believe that this strategy is tradable on th TF M1. The TF was discussed earlier in this thread. Tests as far as I remember were made on M5 at last, M15 and up more.

josch
trading is war - life is simple
  • #3,059
  • Mar 23, 2011 2:06pm Mar 23, 2011 2:06pm
Quoting josch
kgblock,

I don't believe that this strategy is tradable on th TF M1. The TF was discussed earlier in this thread. Tests as far as I remember were made on M5 at last, M15 and up more.

josch
I am not saying that is traded on the M1.
Looks like it probably will not be marketable at all.
Correlation is modified, but trade is still less.
I tried many things, but good results I not achieved.
  • #3,060
  • Mar 23, 2011 2:38pm Mar 23, 2011 2:38pm
Quoting jack-fx
Hi hblekot,

what do you mean when you talk about stdev?
It's exactly what I'm looking for.
It isn't part of "Stoch. different pairs 1.7" indi.

Maybe are you talking about "Basket profit 2 pairs" indi?
I show it in the central part of the attached graph.
I'm still trying to correctly use it. (Especially) on hourly graph it can provide us with signals even when the 'traditional' "Stoch. different pairs 1.7" indi doesn't.

That's what I meant when I wrote about possible statistical improvement of this strategy.

A feedback from...
Hi. Where can I download this indicators?
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