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Hedge and Correlation Strategy

  • #3,061
  • Mar 23, 2011 5:49pm Mar 23, 2011 5:49pm
Graff,

all tools are downloadable as attachments (paper-clip start of page at right).

josch
trading is war - life is simple
  • #3,062
  • Mar 23, 2011 6:34pm Mar 23, 2011 6:34pm
I posted this before, but does anyone have a track record of the performance of this strategy over a specified time period (longer the better)?
  • #3,063
  • Mar 23, 2011 8:51pm Mar 23, 2011 8:51pm
Quoting AlbertoFX
Hi!
Well, I received a margin call due I have microacc and small money.
Even, trade gbpaud/gbpchf will produce big profit due big gap.

Can you share the indi and image of use of std dv ? May be we can take ideas for better entries/exits.
Thanks!
Hi Albert,

I trading correlation hedge in my mam acc, maybe u can try my method too, i only trade EU-GU at asian session before london market open, refer M5 & M15, minimize the chart, makesure overlay chart only count last 20~30 bars only, calculatd gap, makesure it able to tp atleast 10 pips, then refer EG chart and wait EG retrace to make entry at EU-GU.

EU - GU lot size ratio is 1 lot and 0.8 lot
maybe we can improve this method together.
  • #3,064
  • Mar 24, 2011 12:49am Mar 24, 2011 12:49am
Thanks a lot!
Can you put graphics with your method?

Also indicators

Thanks!


Quoting mancai
Hi Albert,

I trading correlation hedge in my mam acc, maybe u can try my method too, i only trade EU-GU at asian session before london market open, refer M5 & M15, minimize the chart, makesure overlay chart only count last 20~30 bars only, calculatd gap, makesure it able to tp atleast 10 pips, then refer EG chart and wait EG retrace to make entry at EU-GU.

EU - GU lot size ratio is 1 lot and 0.8 lot
maybe we can improve this method together.
  • #3,065
  • Mar 24, 2011 2:36am Mar 24, 2011 2:36am
Quoting mancai
Hi Albert,

I trading correlation hedge in my mam acc, maybe u can try my method too, i only trade EU-GU at asian session before london market open, refer M5 & M15, minimize the chart, makesure overlay chart only count last 20~30 bars only, calculatd gap, makesure it able to tp atleast 10 pips, then refer EG chart and wait EG retrace to make entry at EU-GU.

EU - GU lot size ratio is 1 lot and 0.8 lot
maybe we can improve this method together.
Great Mancai! I was suggesting just this, yesterday: watching EG to control EU-GU. Even though I don't trade the asian session (I live in Europe).
Do you only trade these 2 pairs? And if so, how many trading chances are there in a say 24 hours?
  • #3,066
  • Mar 24, 2011 6:51am Mar 24, 2011 6:51am
Quoting AlbertoFX
Thanks a lot!
Can you put graphics with your method?

Also indicators

Thanks!

I only use overlay chart, stochastic, put 3 chart side by side, EG can use any system, just to see retracement for better entry.

my method just make sure EU-GU is correlated in bigger timeframe, I just scalp in lower timeframe when one of these 2 pairs out of the track, It will join back, so i take a chance to scalp it.

remember, when see a gap, calculate gap range, makesure it able to cover your target pips, then refer EG, wait for EG retracement.

overlay indicator sometime will confuse trader, because it calculated full chart bars hi lo to overlay another chart in, let say your full screen 1st few bars is highest or lowest bar, then u will see a big gap in chart, if that highest/lowest bars gone from chart after few new bars, then u don't see any gap in your chart. so, minimize your chart, i recommend just read 20~30 bars.
Attached Image (click to enlarge)
Click to Enlarge Name: correlation hedge.jpg Size: 213 KB
  • #3,067
  • Edited 7:21am Mar 24, 2011 7:09am | Edited 7:21am
Quoting jack-fx
Great Mancai! I was suggesting just this, yesterday: watching EG to control EU-GU. Even though I don't trade the asian session (I live in Europe).
Do you only trade these 2 pairs? And if so, how many trading chances are there in a say 24 hours?
Last time i also trade EU-EJ, but after tsunami, i stop trade on this 2 pairs, so now only EU-GU, I refer M5/M15, there is many chance everyday, but remember try to avoid news, and entry must refer EG, don't just depend on gap u see, we don't know how big the gap will go, EU lot size is bigger, so try to entry when EU & EG retrace. if gap expand again, wait for another EG retracement, enter another level, my limit is max 4 level, and i will cut all if really can't turn floating to positive before I sleep.
if your lot size small, u can enter more level, normally i will close in 1~2 level, seldom go for 3 levels.

lot size ratio calculation is EU 1 lot, GU lot size formula is EU ATR / GU ATR = ~0.8 lot

last time i use ecn broker, low spread very easy to scalp, try on demo 1st
  • #3,068
  • Mar 24, 2011 7:58am Mar 24, 2011 7:58am
Has anyone tried to combine "Tradable Correlation" indicator with "Overlay Charts from Dailyfx.com" ?
I mean when a couple of pairs show a Stoch Diff : 80-90, take the trade only if there is the same gap on Dailyfx.com and exit when both charts cross on Dailyfx.com. I know the problem of resizing but with Stoch Diff maybe we could filter that.
I have avoided 2 trades this morning because on Dailyfx there was no gap and they would now be in DD.....

I´m going to test more..........
  • #3,069
  • Mar 24, 2011 8:48am Mar 24, 2011 8:48am
Quoting Caillou
Hello everyone,

After some weeks really busy with a moving house, I have re-tested this strategy.
I only use "Tradable Correlations with Spread" indicator from Roundrock and "MPTM" EA from Steve.
10.000.-$ demo account, 1 lot each trade, usually entry at Stoch Diff: 80, if it goes up 90 another lot, but if I´m bored, I enter at 60, if 70 another lot, if 80 another lot,......
Open trades manually.
MPTM close all trades when profit = 1% account, I don´t look at Stoch Diff for close, just for entry.
Triplets, quads, but not during news, from...
Sir,

You are a wonder to behold in helping us all at FF. The generous gift of your time knows no limits.

Would it be possible for you to amend the latest version of the EA (I believe this is the one dated 1st march 2011 and to be found at post 481) so that we can test starting with 1 trade at say one at 70, one at 80, one at 90 and even one at 95.

Apart from Tsunami's, Eathquakes, Government defaults and Red Flag days on the FF Calendar, under which market conditions do you think it is best to use this system? Ranging pairs? Trending pairs?

Which do you think is the more conservative/effective strategy using MPTM at 1% closure - Using only triples? Or Using quads too?

I hope you can help in this.

Sincerely

G Nicastro
  • #3,070
  • Mar 24, 2011 10:14am Mar 24, 2011 10:14am
Quoting Nicastro
Sir,

You are a wonder to behold in helping us all at FF. The generous gift of your time knows no limits.

Would it be possible for you to amend the latest version of the EA (I believe this is the one dated 1st march 2011 and to be found at post 481) so that we can test starting with 1 trade at say one at 70, one at 80, one at 90 and even one at 95.

Apart from Tsunami's, Eathquakes, Government defaults and Red Flag days on the FF Calendar, under which market conditions do you think it is best to use this system? Ranging pairs? Trending pairs?...
Hello Nicastro,

Thanks for your kind words. I´m just testing with "Tradable Correlations with spreads" indicator and MPTM EA from Steve, with triples and quads.

DD is unavoidable like this, so I´m trying to filter some bad entries with overlay charts from Dailyfx.

It´s too early yet but since there is no direct relation between price and Stoch, we have to use some kind of filter, just my opinion.

Regards
Attached File(s)
File Type: mq4 Tradable Correlations with spreads.mq4   13 KB | 1,145 downloads
  • #3,071
  • Mar 24, 2011 10:48am Mar 24, 2011 10:48am
[quote=Caillou;4496605
Correlations with spreads" indicator and MPTM EA from Steve, with triples and quads.

Regards[/quote]

Do you or anyone else, have a corr indi that can show exactly what is being shown on MATAF for 5 min corr for EUR/CHF GBP/JPY and other pairs.

The reason, so I do not have check with MATAF all day long.

Thanks.
  • #3,072
  • Mar 24, 2011 11:04am Mar 24, 2011 11:04am
Quoting Caillou
Hello Nicastro,

Thanks for your kind words. I´m just testing with "Tradable Correlations with spreads" indicator and MPTM EA from Steve, with triples and quads.

DD is unavoidable like this, so I´m trying to filter some bad entries with overlay charts from Dailyfx.

It´s too early yet but since there is no direct relation between price and Stoch, we have to use some kind of filter, just my opinion.

Regards

Sir,

Thank you for this. I will do some testing too and see where it takes us.
I have used the EA today at a 70 stoch, no additional lots, with Diff set to 0. I've had three basket closures already at 1%.

Just beginners luck?

Once again, many thanks.
  • #3,073
  • Mar 24, 2011 11:14am Mar 24, 2011 11:14am
Quoting Nicastro
Sir,

Thank you for this. I will do some testing too and see where it takes us.
I have used the EA today at a 70 stoch, no additional lots, with Diff set to 0. I've had three basket closures already at 1%.

Just beginners luck?

Once again, many thanks.
Congratulations Nicastro,

Once we enter a trade, if you follow your floating P/L and your Stoch Diff, you will see many times that there is no relation, if you follow your floating P/L and your 2 charts on dailyfx (or another platform), there is a direct relation, not linear, but direct......

Once I enter, I leave Stochastics and just look at price. Let´s see.....
  • #3,074
  • Mar 25, 2011 12:23am Mar 25, 2011 12:23am
as long as DD goes up even while sto diff goes down, i cant be comforable with this system. the very basis of entering using sto diff looks wrong to me. invariably there is a DD no matter where you enter. i tried several tricks, nothing worked. i entered north bound 70, 75, 80, 90, didnt work. then i tried south bound 70, didnt work. lot of times dd increases even though sto diff decreases. i tried exiting based on pips than sto diff. the longer i wait more dd i accumulate.

biggest probles are

1. cant control DD regardless of entry point

2. cant find a proper exit method

3. gains are small losses are big. RRR is very bad.

so i stopped testing this

i loaded std3 indi posted recently. looking at the charts it looks like a good system. we are taking decisions absed on PL which is directly proportinal to the price. no stoch, no indi

whenever PL line touches outer band (std3 band), enter. and exit when it comes home (SMA line) or with fixed pips. buy the basket when it touches lower band, sell the basket when it touches upper band. i take first touch, that means price must be coming from SMA line and touch the band. i dont take subsequenet touches. it should go back home

H1 looks good. this is manual testing. if somebody can write a EA with these simple rules, it will really be of great help.
  • #3,075
  • Mar 25, 2011 3:35am Mar 25, 2011 3:35am
Quoting roundrock
as long as DD goes up even while sto diff goes down, i cant be comforable with this system. the very basis of entering using sto diff looks wrong to me. invariably there is a DD no matter where you enter. i tried several tricks, nothing worked. i entered north bound 70, 75, 80, 90, didnt work. then i tried south bound 70, didnt work. lot of times dd increases even though sto diff decreases. i tried exiting based on pips than sto diff. the longer i wait more dd i accumulate.

biggest probles are

1. cant control DD regardless of entry point

2....
As you trade EURUSD+GBPUSD, f.e., you trade EURGBP. This is not an horizontal graph. So, you have to exept DD, but you have to know how to overcome this.

As you will know this I will give you the keys to the CLUB.
  • #3,076
  • Mar 25, 2011 3:53am Mar 25, 2011 3:53am
Quoting roundrock
as long as DD goes up even while sto diff goes down, i cant be comforable with this system. the very basis of entering using sto diff looks wrong to me. invariably there is...
Hi roundrock,
I agree with what you say. But I like this strategy and wish to better understand how to use it.

For example, I've alway been succesful when trades are closed within a few minutes and with very low pips profit (<10, or often <5).
Too small? Don't forget when we have, say, +3 pips profit, it means 3+spread x 2 pairs. Thus, usually not less than +6-7 pips total.

Entry.
So: std dev indi is what I'm focusing on. I'd suggest using the old one (+1, +2) since many pairs never reaches +3.

DD
I experienced DD when:
- didn't stay away before news (red flag). "Before" I mean even 2-3 hours (in London session);
- didn't accurately check for POSITIVE correlated pairs. It's not only a matter of indicators or MATAF: it's just simple math. When we choose couples, (in TRIPLETS of course), the common currency MUST be at numerator or denominator in both.
ie.: eurUSD/gbpUSD or EURchf/EURgbp. This must be the first check.

Roundrock and all, can you please check if your DD didn't satisfy this last rule?

I'll keep you updated about use of std dev.
  • #3,077
  • Mar 25, 2011 5:57am Mar 25, 2011 5:57am
Quoting jack-fx
Hi roundrock,
I agree with what you say. But I like this strategy and wish to better understand how to use it.

For example, I've alway been succesful when trades are closed within a few minutes and with very low pips profit (<10, or often <5).
Too small? Don't forget when we have, say, +3 pips profit, it means 3+spread x 2 pairs. Thus, usually not less than +6-7 pips total.

Entry.
So: std dev indi is what I'm focusing on. I'd suggest using the old one (+1, +2) since many pairs never reaches +3.

DD
I experienced DD when:
- didn't stay away...
i always trade triplets
  • #3,078
  • Edited 7:25pm Mar 26, 2011 6:44pm | Edited 7:25pm
Good-day All,
This is how I trade this strategy that gave me 10-20% return in a week without losses.

1. Study all correlation theory and highly correlated pairs on this site very well- http://www.babypips.com/school/what-...rrelation.html
http://www.babypips.com/school/how-t...on-tables.html
http://www.babypips.com/school/alway...-exposure.html
http://www.babypips.com/school/how-t...r-trading.html
http://www.babypips.com/school/know-...ns-change.html

Note-I trade only correlated pairs whether positive or negative.
For Example:
A. GBPUSD,EURUSD,AUDUSD,NZDUSD,EURJPY,EURGBP are highly positive correlated paires and;
B. USDCHF,USDJPY,USDCAD are highly positive correlated pairs.
C. USDCHF,USDJPY,USDCAD are all highly negatively correlated to GBPUSD,EURUSD,AUDUSD,NZDUSD,EURJPY,EURGBP.

You also need to recognize correlation theory when there is a change in market movement and one or two currency are moving the market;In this case trade correlated pairs having the market mover or currency also, that is,pairs moving in same direction(positive correlation) or pairs moving in opposite direction(negative correlation) having that currency.

2.I also use ema 3,10 and parabolic SAR(0.1,0.1)- where ema 3 cross ema 10 with one parabolic indicator as entry signal for buy or sell.

3.I also use stochastic paired difference indicator -
Signal:
A.Diffrence between 0-30% -Signal for explosion of high pip generation.
B.Buy below stoch 50, Sell above stoch 50

Note:
A. For Positive correlated Pairs: The stochastic indicator lines move almost in the same direction.
B. For Negative correlated pairs:The stochastic indicator move in opposite direction.When the two indicators meet at difference 0% and gives ema and parabolic signal- be ready to make money.

If the two pairs are positively correlated and you see and entry signal of ema and parabolic, confirm the validity with another pair that has negative correlation with the pair you want to trade to know if you are actually buying low or selling high.

4. I don't use stop loss. I risk 1% and use either a buystop or sellstop about 200 pips away.If the trade is buy, I use sellstop; if it is sell, I use buystop.(I only use it in-case the unforeseen happens)

When the market goes against me and the pairs are no longer correlated I shift my take profit to zero.My experience is that the price return to that point and closes out the trade at zero profit.

TILL NOW I NEVER MADE ANY LOSS

5. Immediately I see a move of profit, I take my profit at 40, 60, 100,150,200 pips. I discovered I had never traded more than 6candles of my timeframe- often times 3-4candles.

Also, I trade only 4hrs and daily timeframe.

For you to understand it easily, do the setup first and study the chart in line with the above for deeper discoveries.


Successful Trading
Oluwadare Nigeria
  • #3,079
  • Mar 26, 2011 6:54pm Mar 26, 2011 6:54pm
Good-day All,
I like to add this, when ever I am in a trade and the candles are sideways; that is, not going towards any direction.When I have 3-4candles not going towards any direction and I am in profit, I will exit. If I am on loss, I will shift my Take profit to zero, so that it will finally close out on zero profit when it reverses.


Successful Trading
Oluwadare Nigeria
  • #3,080
  • Mar 26, 2011 11:44pm Mar 26, 2011 11:44pm
Good explanation Oluwadare
I found another good explanation the other day on another forum which I also had to save on my hard drive.
This type of rules shall be programmed in all EAs as standard when you trade more than one pair at the same time. Else you always get some loosing pairs when this kind of rules are not followed.
---------------------------------------------------------------------------
Example: GBPUSD candles moving up STRONG and USDCHF candles moving UP STRONG = GBPCHF moving up STRONG (Actually this means that the USD is getting weak against the GBP and at the same time the USD is getting strong against the CHF) Interpret: Candles on BOTH GBPUSD and USDCHF are moving up together strong = STRONG move up on GBPCHF (but, at almost 1.7:1 ratio!! GBPJPY doing this is almost a 2:1 ratio!)
However, if you can see that GBPUSD and USDCHF are strongly trending up - then rather than buying either of those pairs you're better off buying GBPCHF because it will move further.

The 9 Strength-Weakness Correlation positions:

1. GBP/USD Up and USD/CHF Up - Cross will move UP STRONG (Primary trade objective moves)
2. GBP/USD Down and USD/CHF Down - Cross will move DOWN STRONG (Primary trade objective moves)

3. GBP/USD Up and USD/CHF Down equally - Cross will REMAIN FLAT (Don’t trade these moves)
4. GBP/USD Down and USD/CHF Up equally - Cross will REMAIN FLAT (Don’t trade these moves)


5. GBP/USD Up and USD/CHF FLAT - Cross will move UP MODERATELY (Can bring decent profits)
6. GBP/USD FLAT and USD/CHF Up - Cross will move UP MODERATELY (Can bring decent profits)

7. GBP/USD Down and USD/CHF FLAT - Cross will move DOWN MODERATELY (Can bring decent profits)
8. GBP/USD FLAT and USD/CHF Down - Cross will move DOWN MODERATELY (Can bring decent profits)

9. GBP/USD FLAT and USD/CHF FLAT - Cross will remain FLAT (Market is undecided - leave alone)
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