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Three Pairs Hedging

Quoting oluwadare
Good-day,
cash4u
It is not just jpy issue, it is the market situation. I have discovered the adequate rules for entring into any trade on any basket. There are 8 rules I will share it in my next post.

I gues your trade would have GU/UJ/GY the reason why u still have a loss is because the uj and gy are correlated upwards and gu has been stagnant going up and down with no direction. if gu goes up and gy and uj remain stagnant or come down a little you will be in profit.
Note:
It is either gu and uj are highly positive correlated or highly negative...
Looking forward to 8 rules.. Your method you described in corelation strtegy is good and working for me.
Intraday only.
  • Post #382
  • Quote
  • Edited Apr 5, 2011 1:10pm Apr 4, 2011 10:53pm | Edited Apr 5, 2011 1:10pm
Good-day All,
I discovered all these by deep and simplified thinking.
First and foremost you need to understand Negative and Positive correlated pairs concept.
Study more on that on the links below:
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

The Basic concept of currency correlation goes Thus:
1. When a base currency or a counter currency in a particular pair is the base currency or the counter currency in another pair respectively, be sure that both pairs will be POSITIVELY CORRELATED. Eg. EURUSD,GBPUSD; USDJPY,USDCHF etc.

2. When a currency is a base currency in a particular pair and it is the counter currency in another pair, be sure that both pairs will be NEGATIVELY CORRELATED.eg. AUDUSD,GBPAUD;CADJPY,GBPCAD etc.

Note: Use The Stochastic Paired Difference indicator to confirm if the paires are highly Highly Positively or Negatively Correlated:
Attached File(s)
File Type: mq4 Stochastic different pairs 1.1.mq4   3 KB | 1,828 downloads


If Positively correlated, the two pairs goes the same direction.
If Negatively correlated, the two pairs goes the opposite direction.


THE 8 RULES OR PROBABILITIES FOR PROFIT ON THREE PAIRS HEDGING:
Let us use Basket: EURUSD,USDCHF,EURCHF - Note that the first two Pairs are negatively correlated pairs in theory.

A. The three pairs correlates positively or move in same direction:
1.BUY BUY SELL= EURUSD,USDCHF,EURCHF = DOWN DOWN DOWN

2.SELL SELL BUY= EURUSD,USDCHF,EURCHF = UP UP UP

B.The first two pairs are negatively correlated, then the last pair correlates positively with any of the first two pairs.
3.BUY BUY SELL= EURUSD,USDCHF,EURCHF = UP DOWN DOWN

4.BUY BUY SELL= EURUSD,USDCHF,EURCHF = UP DOWN UP

5.SELL SELL BUY= EURUSD,USDCHF,EURCHF = DOWN UP UP

6.SELL SELL BUY= EURUSD,USDCHF,EURCHF = DOWN UP DOWN

C.The first two pairs are positively correlated and the last pair is negatively correlated to the first two pairs.
7.BUY BUY SELL= EURUSD,USDCHF,EURCHF = UP UP DOWN

8.SELL SELL BUY= EURUSD,USDCHF,EURCHF = DOWN DOWN UP

SUMMARY:
1.When the 3pairs are highly correlated downwards, you BUY BUY SELL.

2.When the 3pairs are highly correlated upward, you SELL SELL BUY.

3.When the first pair is upward and any of the other two pairs is highly negatively correlated to it(or downward), you BUY BUY SELL.

4.When the first pair is downwards and any of the other two pairs is highly negatively correlated to it(or upward), you SELL SELL BUY.

Please make a set up of positive and negative correlated pairs on your platform using the stochastic paired difference indicator and back-test to confirm and understand the explanation above.

I Recommend that the safest entry is when the first two pairs are highly negatively correlated, so that when there is a turn in the market you still go profitable on time.For example on EURUSD,USDCHF,EURCHF; Enter at the Point where EURUSD is negatively correlated to USDCHF.

The changes in the correlation movement of pairs is what makes us profitable with time without being trapped in the market with permanent losses.

Successful Trading,
Oluwadare
Check your links. They're not working.

Quoting oluwadare
Good-day All,
I discovered all these by deep and simplified thinking.
First and foremost you need to understand Negative and Positive correlated pairs concept.
Study more on that on the links below:
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

The Basic concept...
all the links not functioning,

don't understand the other content
Good-day all,
You can check the link now, I have corrected it.
Quoting oluwadare
Good-day All,
I discovered all these by deep and simplified thinking.
First and foremost you need to understand Negative and Positive correlated pairs concept.
Study more on that on the links below:
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

The...
THANK YOU, of the three cases A, B, C what is the best case to enter?
Quoting kinect
good to hear that you are doing good. My BBS basket (GBP/USD/CHF) is doing well. As now I am up $1600 (160pips).
But there is one thing which scares me a lot. If I opened SSB basket on the same cross I would be down $2400 (240pips).
I wonder for how long it can run in only one direction...
Attachment 662611
I've got an off-topic question to your post
how do you set up your mobile android oanda application, that it shows profit/loss in $ for each single position open (mine shows this only in pips). For this 3 pairs strategy it;s vital to have each position profit/loss shown in $, not in pips
Oluwadare,
I'm not quite sure how does this indicator work in MT4, i clicked, nothing happened.

Stochastic Paired Difference indicator
I put it under MetaTrader 4expertsscripts
is that correct?
The problem here as I see it, is that one never knows when the correlation (parity) will be broken, nor to what extent (magnitude) it will be broken. Thus, if my strategy relies upon +correlation and both pairs diverge from parity, then one could drive-up their losses. The inverse is true for -correlation. If both pairs reverse polarity, the draw accelerates rapidly.

Currency Options can provide the kind of Non-Directional trading opportunities that seem to be sought here - where you can then apply good options strategies on a single pair with Puts and Calls.

Otherwise, not knowing when correlation is about to change, makes the risk factor just as normalized as trading a single pair naked in the market. If correlations were always fixed, then the above would not apply - but that is not the case among the major pairs in FX. Of course, the other issue when attempting this quasi-non-directional strategy, is to make sure that your pairs have small deltas between their respective spreads. Too high a spread delta (Pip Cost Delta) and your losers can outweigh your winners while not leaving enough room to off-set such effects with variable lot sizing strategies.

But, I'm just one man whistling in the dark here.
Quoting oluwadare
Good-day All,

In Face of Market Turbulent this strategy still worked:
This is how it happened:
1. I diversified my portfolio- Instead of Trading 1lot for 3 pairs(1basket) on 10k account, I traded 0.1 for 3pairs on 10baskets with target profit of $10+.Sound money management is important. You make profit on each of the 10basket 3-5times in a month.

2.Secondly I now discovered how to trade the strategy better. Just Trade currency pairs with the first two pairs highly negatively correlated, and the third pair oscillate in-between them to make you...
Hi Oluwadare, Hi Cash4u2, Hi Alls

I'm very happy to join this thread .
I entirely agree with you: if you want a "true" hedge with the schemes BBS and SSB you MUST use only HIGHLY (more than 80%) NEGATIVE correlated pairs, otherwise you get a normal directional trade with 3 spreads. If you want use positive correlated pairs you must change the schemes as SBB or BSS.

I have a question for you: which EA you use for trade multiple hedgings on one account calculating each one the single profit (not the overall profit of the account of course), the EAs posted here are not useful for this.

Thanks All
"If you want something go down, let it go up first" Lao-Tzu
Quoting Suchy
I've got an off-topic question to your post
how do you set up your mobile android oanda application, that it shows profit/loss in $ for each single position open (mine shows this only in pips). For this 3 pairs strategy it;s vital to have each position profit/loss shown in $, not in pips
When you click on P/L for pips it should change for $ and vice versa. Hope that helps.
Quoting imnicetoyou
Oluwadare,
I'm not quite sure how does this indicator work in MT4, i clicked, nothing happened.

Stochastic Paired Difference indicator
I put it under MetaTrader 4expertsscripts
is that correct?

Stochastic Pair Difference is an indicator so you must put in the expert/indicators folder. Frankly I don't found this indicator so usefull, much better is the indicator posted by Squalou for checking the Delta of two pairs.
Attached File(s)
File Type: mq4 Basket Profit 2 Pairs sq.mq4   17 KB | 1,234 downloads
"If you want something go down, let it go up first" Lao-Tzu
Quoting Simihouse
Hi Oluwadare, Hi Cash4u2, Hi Alls

I'm very happy to join this thread .
I entirely agree with you: if you want a "true" hedge with the schemes BBS and SSB you MUST use only HIGHLY (more than 80%) NEGATIVE correlated pairs, otherwise you get a normal directional trade with 3 spreads. If you want use positive correlated pairs you must change the schemes as SBB or BSS.

I have a question for you: which EA you use for trade multiple hedgings on one account calculating each one the single profit (not the overall profit of the account of course),...
I trade it manually and the system is still profitable till date. I trade only 60% of my account double hedging.
eg on a 10k account I trade 1lot each.
BBS: EURUSD, USDCHF, EURCHF and SSB : EURUSD, USDCHF, EURCHF making 6k or 6lots at the same time. I take profit continuously in the market in either direction.

Successful Trading
Quoting oluwadare
I trade it manually and the system is still profitable till date. I trade only 60% of my account double hedging.
eg on a 10k account I trade 1lot each.
BBS: EURUSD, USDCHF, EURCHF and SSB : EURUSD, USDCHF, EURCHF making 6k or 6lots at the same time. I take profit continuously in the market in either direction.

Successful Trading
I use three pairs stochatic indicator
Attached File(s)
File Type: mq4 Stochastic different three pairs 1.4b (1).mq4   5 KB | 2,271 downloads


Attached File(s)
File Type: ex4 Stochastic different three pairs 1.4b (1).ex4   6 KB | 1,232 downloads


for example, I set it in this order to monitor the market: EURUSD, USDCHF, EURCHF

Successful Trading
Thanks Oluwadare,

so you trade the EU UC EC BBS and SSB in the meantime in the same account with a small take profit of 10 pips MANUALLY...sounds a little bit hard, with an EA should be more easy I think.

The Stochastic multipair is a good indicator but a bit messy, I think the Basket Profit 2 Pairs of Squalou is much more clear, I noticed that exist also a version of Basket Profit 3 Pairs, that could be very usefull for monitoring the EU UC EC hedge, but I can't find it, maybe someone can help.

Good Easter to everybody
"If you want something go down, let it go up first" Lao-Tzu
Quoting oluwadare
I use three pairs stochatic indicator
Attachment 685319

Attachment 685320

for example, I set it in this order to monitor the market: EURUSD, USDCHF, EURCHF

Successful Trading
Oluwadare,
Would be kind enough to post some pictures of the charts that show your setup and the BBS / SSB trades so that we can see it?

Thanks.

Bruce
Quoting Simihouse
Thanks Oluwadare,

so you trade the EU UC EC BBS and SSB in the meantime in the same account with a small take profit of 10 pips MANUALLY...sounds a little bit hard, with an EA should be more easy I think.

The Stochastic multipair is a good indicator but a bit messy, I think the Basket Profit 2 Pairs of Squalou is much more clear, I noticed that exist also a version of Basket Profit 3 Pairs, that could be very usefull for monitoring the EU UC EC hedge, but I can't find it, maybe someone can help.

Good Easter to everybody
Simihouse, can you explain me how you use Basket Profit 2 Pairs indicator for BBS/SSB entries?

Thanks.
Hi Altoronto,

if you trade EU UC and EC in the two ways BBS and SSB actually you get a perfect hedge, so you don't need any indicator (this is the best feature of this system); the Basket Profit 2 pairs is not usefull at all for this strategy. But the Basket Profit 3 pairs can be usefull ONLY for monitor the trades and have some backtest. What could be very useful is an EA that can open the two hedges and close the hedges once each of them reach the profit target (not more than 10 pips) than suddenly open the closed hedge again and so on. Actually I try to use a slightly modified old EA of Master Steve Hopwood (the Dryclean's Brijon game playing multi-pairauto trader by SteveHopwood.mq4). I made the two version for BBS and SSB, but for some reason that I'm not able to fix, if you put the two EAs on the same account, only one of them work excluding the other, also if the Magic Number is set different. Maybe someone more expert than me can fix it.

Thanks

P.S.: The EA attached have also many different features that are disabled because not usefull for this strategy
Attached File(s)
File Type: mq4 Hedge EU UC EC BBS.mq4   24 KB | 1,226 downloads
File Type: mq4 Hedge EU UC EC SSB.mq4   24 KB | 1,011 downloads
"If you want something go down, let it go up first" Lao-Tzu
Quoting Simihouse
Hi Altoronto,

if you trade EU UC and EC in the two ways BBS and SSB actually you get a perfect hedge, so you don't need any indicator (this is the best feature of this system); the Basket Profit 2 pairs is not usefull at all for this strategy. But the Basket Profit 3 pairs can be usefull ONLY for monitor the trades and have some backtest. What could be very useful is an EA that can open the two hedges and close the hedges once each of them reach the profit target (not more than 10 pips) than suddenly open the closed hedge again and so on. Actually...
Thanks Simihouse, I'll take a look.
Following the same logic other tradables 3 pairs hedgings (BBS and SSB) shoulhd be the followings:

USDCHF CHFJPY USDJPY
GBPNZD NZDCAD GBPCAD
AUDNZD NZDCAD AUDCAD
AUDNZD NZDCHF AUDCHF
GBPNZD NZDUSD GBPUSD
GBPCHF EURGBP EURCHF

But maybe the correlation values of these pairs are less stable than EU UC EC. Anyway can worth give a try.
"If you want something go down, let it go up first" Lao-Tzu
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