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Hedge and Correlation Strategy

  • #3,101
  • Apr 4, 2011 2:07pm Apr 4, 2011 2:07pm
Quoting Les_Paul
Dear Oluwadare,

in your list of trades I can see that on 21-Mar you bought EURUSD and GBPUSD. However, these two pairs were both overbought - stoch well above 50. How could you take the trades - aren't they in direct contradiction with the rules you have specified for entry?

Could you please explain?

Thanks a lot

Les_Paul
Thank you paul,
I entered based on correlated brakeout on both pairs. You noticed I picked just some pips.
  • #3,102
  • Edited 7:15am Apr 6, 2011 6:05am | Edited 7:15am
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
Hello, sorry for a newbie question, if I use the tradeable correlation using 1440 (daily timeframe) for locating the daily correlation to trade lower TF like the 5 mins timeframe. In theory, will it work? Normally the daily correlation is more or less the same unless there is important news released such as changing the interest rate, in practice can we safely assume that the daily correlation will not differ much suddenly?

I am confused because let's say I discovered that the daily correlation between CADJPY and GBPJPY is highly correlated ~90% yesterday and then I trade it for 5 mins TF today, however, today they are not very correlated..like 60% and then my trades lose, tommorrow my system will not pick these pairs because they are no longer correlated enough. Every time I pick both pairs based on their historical correlation only, but not reflect the future. Should I use only a timeframe that is slightly higher for reference? For example, when I trade 5 mins TF, then I refer to 15 mins TF? Is it safer?
  • #3,103
  • Edited 6:44am Apr 6, 2011 6:13am | Edited 6:44am
Quoting oluwadare
Good-day All,
.....
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.
.....
Oluwadare Nigeria
Hello Oluwadare, I am really amazed by your lossless report. After I setup the ema 3, 10 and parabolic SAR, it seems that they both give the same signal together or just differ by 1 bar, for parabolic SAR signal do you mean the change of plotting on the higher side to lower side and vice versa?

You seems enter the market only when both pairs start to converge by using the trend change indicators, in your case you use simple EMA crossover plus parabolic SAR.

Will you close the trade immediately when either pairs have a reversed ema crossover signal (violating both pairs converging) ?

Also, why do you only trade the stochastic differential to be just 0-30%? Will it further improve the figure if you trade all correlated/-ve correlated currencies to scan over 80%/-80% ? Is it because the entry conditions (trending towards each other) already too restrictive and thus you lower selection to just 30%?
  • #3,104
  • Edited 6:30am Apr 6, 2011 6:17am | Edited 6:30am
Quoting oluwadare
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
Yes, you only trade when there is sto diff and the trend of both pairs are towards each others. If you discovered either one has a trend change (thus not towards each others) or not trending, then you change take profit to zero meaning that changing to break even or close the trade immediately?
  • #3,105
  • Apr 6, 2011 6:21am Apr 6, 2011 6:21am
Quoting oluwadare
Good-day Crossy,
This is the result for the daily chart.I also trade it on 4hrs time-frame on another plateform.I also used the correlation strategy on gold,silver and crude oil.
Attachment
I saw that you even trade silver, may I know where do you find the real-time correlation between gold, silver and other currencies? thank you
  • #3,106
  • Apr 7, 2011 4:15pm Apr 7, 2011 4:15pm
Good-day metroharbour,

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 | 1,014 downloads


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

When the positive correlation is strong- The difference between the two pairs will be less than 30%.When you now have ema 3,10 and parabolic signal, it is an opportunity to make massive pips.

when the negative correlation is strong-The difference between the two pairs
will be greater than 60%, and negative correlated pairs do converge and diverge.Convergence point is at less than 30% and divergence is at greater than 60%. At a strong convergence or divergence point if you can get ema 3,10 and parabolic signal, It is an opportunity to make massive pips.

Finally confirm all positive or negative correlated pairs with its corresponding negative or positive correlated pairs respectively, to be sure that there is a correlation in the market generally before you enter into any trade.You will have 4-6 pairs or more negatively and positively correlated.Then place your trades without fear.

It is better you trade daily chart.If lower time-frame is ok with you,you need to be more tactful.

Do a set-up for both and back-test.

Oluwadare
Successful Trading
  • #3,107
  • Apr 7, 2011 7:13pm Apr 7, 2011 7:13pm
This mean for example USDCHF and USDJPY are almost ready in D1?
3x10 EMAs are inversed and then we must wait for parabolic change?

Thanks!


Quoting oluwadare
Good-day metroharbour,

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...
  • #3,108
  • Apr 9, 2011 4:07am Apr 9, 2011 4:07am
1. look for daily correlation >75

2. wait for 5min correlation of the pairs become negative 75

3. waif for the cross pair trend reversal. ex. if trade EU GU hedge, cross is EG. using CC or CCFP may be good to see it. save big DD.

4. enter EG or hedge two pairs

5. exit: when overlay chart cross eachother. SL will be last swing high or low of the cross pair
  • #3,109
  • Apr 9, 2011 8:05am Apr 9, 2011 8:05am
Yes, may be simple....
Do you have some picture ?
Thanks..


Quoting hapunacci
1. look for daily correlation >75

2. wait for 5min correlation of the pairs become negative 75

3. waif for the cross pair trend reversal. ex. if trade EU GU hedge, cross is EG. using CC or CCFP may be good to see it. save big DD.

4. enter EG or hedge two pairs

5. exit: when overlay chart cross eachother. SL will be last swing high or low of the cross pair
  • #3,110
  • Apr 9, 2011 12:11pm Apr 9, 2011 12:11pm
Ah, some clarity and simplicity emerges through all the normal confusion about EAs and settings and backtestings, etc. etc.

This is the one missing step in this method--step number 3 below (wait for the cross pair trend reversal). This is what will prevent excessive drawdown.

Now the only question remains, what should be used to show the cross pair trend reversal?

Quoting hapunacci
1. look for daily correlation >75

2. wait for 5min correlation of the pairs become negative 75

3. waif for the cross pair trend reversal. ex. if trade EU GU hedge, cross is EG. using CC or CCFP may be good to see it. save big DD.

4. enter EG or hedge two pairs

5. exit: when overlay chart cross eachother. SL will be last swing high or low of the cross pair
  • #3,111
  • Apr 9, 2011 2:39pm Apr 9, 2011 2:39pm
Hello everyone, would anybody please tell me why I encounter "Unknown symbol for USDCHF" when I execute "Stoch Diff 2 Pair EAsq" ?
... First of all I thought that is the server side error, but I got this error from 2 brokers: ATC and Dukascopy... so it may be a code error ? I drill down the code and I found that "MarketInfo(buySymbol, MODE_ASK);" should have an error because it return the value "0.00000", then I replace it with "MarketInfo("USDCHF", MODE_ASK), the error still exist.. I feel sorry for a technical question.. but please help.. thank you very much..
  • #3,112
  • Apr 9, 2011 2:41pm Apr 9, 2011 2:41pm
Yes, I can tell you: because you're trying to trade with an EA!

Quoting metroharbour
Hello everyone, would anybody please tell me why I encounter "Unknown symbol for USDCHF" when I execute "Stoch Diff 2 Pair EAsq" ?
... First of all I thought that is the server side error, but I got this error from 2 brokers: ATC and Dukascopy... so it may be a code error ? I drill down the code and I found that "MarketInfo(buySymbol, MODE_ASK);" should have an error, then I replace it with "MarketInfo("USDCHF", MODE_ASK), the error still exist.. I feel sorry for a technical question.. but please help.. thank you very much..
  • #3,113
  • Apr 10, 2011 12:06am Apr 10, 2011 12:06am
Quoting hapunacci
1. look for daily correlation >75

2. wait for 5min correlation of the pairs become negative 75

3. waif for the cross pair trend reversal. ex. if trade EU GU hedge, cross is EG. using CC or CCFP may be good to see it. save big DD.

4. enter
EG or hedge two pairs

5. exit: when overlay chart cross eachother. SL will be last swing high or low of the cross pair
Sorry my confution (or my ignorance) but what mean "EG" ?
Humble & Kalcker CLO2 = Covid killer
  • #3,114
  • Apr 10, 2011 2:47am Apr 10, 2011 2:47am
Could any one help us by rewrite the rules and steps to chose pairs and then how and when to enter a trade...???

It will be much helpful if attaching some charts to explain the steps & rules...???
  • #3,115
  • Apr 10, 2011 4:29am Apr 10, 2011 4:29am
Quoting Dreamliner
Yes, I can tell you: because you're trying to trade with an EA!
No, I just use it in strategy tester but not real trading, the default inputs are EURUSD and USDCHF, when I run it and select no currency pair in strategy tester, there is no trade, when I select either one, then only either side have trades, however, I cant select both sides as there is only one selection box... actually who has ever run that EA successfully? Please advise.. thank you very much..
  • #3,116
  • Apr 10, 2011 9:11am Apr 10, 2011 9:11am
Quoting jusiur
Sorry my confution (or my ignorance) but what mean "EG" ?

EG= EURGBP
  • #3,117
  • Apr 11, 2011 2:40am Apr 11, 2011 2:40am
NU and UJ stoch gap was 80%, daily correlation >75 according to smjones indicator. so, I took NZDJPY long after confirmed the NJ trend reversal (it was late though). i want to see how it goes when gap stoch hit 50% area.
Attached Image (click to enlarge)
Click to Enlarge Name: 2011-4-11NU_UJ.JPG Size: 179 KB
  • #3,118
  • Apr 11, 2011 3:58am Apr 11, 2011 3:58am
Quoting metroharbour
No, I just use it in strategy tester ...
metroharbour,

it was stated earlier in the thread, that using the strategy tester is not reliable. Best you can do, is doing it live (on a demo version).

You asked in an earlier post about correlation-differences of D, M15 and other timeframes. It's similar to i.e. RSI-trend (up/side/down) on different TFs: they may be different of course.

You should decide what TF to use - primarily M15. You will look at the preconditions for executing a trade and -you may- have a look at the higher TF, if it supports stochastic difference of lower TF.

josch
trading is war - life is simple
  • #3,119
  • Apr 11, 2011 4:02am Apr 11, 2011 4:02am
Quoting oluwadare
Good-day metroharbour,

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...
Hi Olu,

Thanks for the responce to my mail, anyway any chance of posting more of this sort of set up chart on here so some of us newbies can follow and learn this strategy properly. As I said before, this, seems to be one of the best systerms so far as you can have a few pairs of trade at the same time.

Thanks
Born to rule my Economic World and Make a Difference!
  • #3,120
  • Apr 11, 2011 4:03am Apr 11, 2011 4:03am
Quoting Dreamliner
Yes, I can tell you: because you're trying to trade with an EA!
Hi Dreamliner,

nice to see you back. Looks like you still have an eye on your baby

josch
trading is war - life is simple
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