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Three Pairs Hedging

  • #401
  • Apr 25, 2011 6:10am Apr 25, 2011 6:10am
Ok Guys,

the system works! I just closed my first EU UC EC BBS basket with 0,73 $ on my live Forex.com account, I traded 0,01 lots. I feel that these small cents are the most important since I started trade forex. The EA TP is 10 pips but the market moved quickly and the close all trades of the EA took a little bit more time than ususal. Everything we need now is an EA that allow us to trade different hedges on the same account each one with the own TP and possibly close the profitable hedges as quickly as possible. Nothing more nothing less. We are so close to the Holy Grail with this KISS system??? Let's go see Knights
"If you want something go down, let it go up first" Lao-Tzu
  • #402
  • Apr 25, 2011 4:32pm Apr 25, 2011 4:32pm
Quoting Simihouse
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.
thanks, but still not quite sure how to read this indicator.
here's my screen, am i doing it correctly?
Attached Image (click to enlarge)
Click to Enlarge Name: hedgeindicator.jpg Size: 293 KB
  • #403
  • Apr 25, 2011 7:59pm Apr 25, 2011 7:59pm
alright, finally add the values in to the indicator.
Blue= EUR/USD Red=USD/CAD GREEN=EUR/CAD

how do we determine wheather is positive or negative correlations?
and what time should be the reference? 1-min, 5-min or even longer 30-min, 1-hour ?
Attached Image (click to enlarge)
Click to Enlarge Name: hedgeindicator.jpg Size: 294 KB
  • #404
  • Apr 25, 2011 8:36pm Apr 25, 2011 8:36pm
Hi Imnicetoyou,

as I wrote before, in my opinion, this strategy works without any indicator and is unrelated to any timeframe. If you BBS and SSB in the meantime the pair circle EU UC and EC you froze your account, so you can enter in any time you want. But also if the account is frozen the single circles have an inner dynamic that make them oscillating around relatively narrow values. Than you must only wait untill one of them go in profit and close that hedge, than open the close hedge again and start a new one. The only things usefull is a tool for monitoring the hedges. I found the indicator @Hedge-Backtest@ that works good. I attach here the screenshot of yesterday and the indicator. As you can see the two specular hedges follow an oscillating pattern, soon or late they will come in profit zone (up to 100 that means 10 pips because I put a lot value of 1.0 in the indicator).
I attach also an EA that can be useful for open multiple hedge trades, actually I'm testing if works properly. Is the MyHedge of Awangk.
Attached Image (click to enlarge)
Click to Enlarge Name: hedge monitor.jpg Size: 329 KB
Attached File(s)
File Type: mq4 @[email protected]   30 KB | 1,569 downloads
File Type: mq4 MyHedge.mq4   6 KB | 1,648 downloads
"If you want something go down, let it go up first" Lao-Tzu
  • #405
  • Apr 25, 2011 9:03pm Apr 25, 2011 9:03pm
Quoting Simihouse
If you BBS and SSB in the meantime the pair circle EU UC and EC you froze your account, so you can enter in any time you want. But also if the account is frozen the single circles have an inner dynamic that make them oscillating around relatively narrow values. Than you must only wait untill one of them go in profit and close that hedge, than open the close hedge again and start a new one.
Based on your screenshots, your SSB basket had a net Long position of approximately 0.46 lots USDCHF and your BBS basket had a net Short position of approximately 0.46 lots USDCHF.

Didn't you notice that your basket total profit lines perfectly followed the movement of USDCHF ?

Why would you pay approximately 6 times the spread cost trading 2 baskets of 3 pairs (1 lot each x 6 trades) when you could just as easily trade 0.46 lots of USDCHF both long and short (0.46 lots each x 2 trades) ?

Can you explain how this system could ever possibly be profitable in the long run?
  • #406
  • Apr 25, 2011 9:25pm Apr 25, 2011 9:25pm
Hi Zznbrm.

yes I realized it, and I realized also that the shape of the hedge monitor is far more smooth than the simple EC curve. Moreover, can you explain me how I can get profit if I simply buy and sell 1 lot of EC in the meantime? If we can find a way to save our two spreads I will be happy to know it, but the goal of hedging is pay spreads for save drawdown.
What about the Long Run...I don't know really...do you know?
"If you want something go down, let it go up first" Lao-Tzu
  • #407
  • Apr 25, 2011 9:40pm Apr 25, 2011 9:40pm
Quoting imnicetoyou
alright, finally add the values in to the indicator.
Blue= EUR/USD Red=USD/CAD GREEN=EUR/CAD

how do we determine wheather is positive or negative correlations?
and what time should be the reference? 1-min, 5-min or even longer 30-min, 1-hour ?
Thank you imnicetoyou,your explanation is correct. You can also make a good use of the indicator by changing the parameter of 100,1,1 to 10,3,3.

zznbrm, you dont need all those mathematics to be profitable using this system.It works like an automatic money exchanger.
  • #408
  • Apr 25, 2011 10:02pm Apr 25, 2011 10:02pm
Quoting Simihouse
yes I realized it, and I realized also that the shape of the hedge monitor is far more smooth than the simple EC curve.
The shape of the hedge monitor would parallel the movement of USDCHF, not EURCHF.

Quote
Moreover, can you explain me how I can get profit if I simply buy and sell 1 lot of EC in the meantime?

I cannot. I do not see how you could possibly get profit from simultaneously buying and selling 1 lot of EC.

Quote
If we can find a way to save our two spreads I will be happy to know it, but the goal of hedging is pay spreads for save drawdown.
What about the Long Run...I don't know really...do you know?

IMO, your current system cannot be profitable in the long run (or the short run for that matter).

You may want to consider the Phantom threads. They seem to be making some progress with basket trading.

Good luck with your trading!
  • #409
  • Apr 25, 2011 10:08pm Apr 25, 2011 10:08pm
Quoting oluwadare
zznbrm, you dont need all those mathematics to be profitable using this system.It works like an automatic money exchanger.
I'm not sure what "system" you are referring to, but my response to Simihouse was regarding his version from a few posts back. Basic mathematics is at the very core of his system (and can be used to show how it will not turn a profit).
  • #410
  • Apr 25, 2011 10:54pm Apr 25, 2011 10:54pm
Ok Zznbrm,

as you know EC and UC are positively correlated so the shape is more or less exactly the same.

here are the "pictures" of "Long Run" (since 14.01.2011) of the hedge.

As you can see the curve is NO similar to nothing, is a simple oscillator in a range of more or less 300 pips up and down.

I'm not shure if this system can give profit in the long time, but is the only way to buy and sell in the meantime EC (or UC if you like) and take profit from theirs oscillations (whatever Up or Down).

I'm pretty sure, because I tried it, that the Phantom system is an account killer. Better is the Basket 14 version 05 that I still run on a demo.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: hedge monitor 24.01,2011 1.gif Size: 43 KB
Click to Enlarge Name: hedge monitor 24.01,2011 2.gif Size: 39 KB
"If you want something go down, let it go up first" Lao-Tzu
  • #411
  • Apr 26, 2011 9:23am Apr 26, 2011 9:23am
Quoting Simihouse
you know EC and UC are positively correlated so the shape is more or less exactly the same.

As you can see the curve is NO similar to nothing, is a simple oscillator in a range of more or less 300 pips up and down.

I'm not shure if this system can give profit in the long time, but is the only way to buy and sell in the meantime EC (or UC if you like) and take profit from theirs oscillations (whatever Up or Down).
Simihouse,

I really don't know what to tell you. Again, it is just simple math. To understand basket trading (how you are trading it), you must understand the math behind the basket. You need to understand that every basket has a net exposure. Sometimes (in a perfectly hedged basket) the net exposure is 0. But usually, regardless of the number of pairs in the basket, there is some net exposure - it could be 1 currency or multiple currencies. Regardless, the secret to this type of basket trading is getting your net exposure where it has its best chance to get your profits. How do we do that? Well, I guess that is up to each trader to figure out.

I've attached a screenshot of a spreadsheet showing the math behind the EC-EU-UC Buy-Sell-Sell basket.

Good luck with your trading!
Attached Image (click to enlarge)
Click to Enlarge Name: BasketHedge.jpg Size: 44 KB
  • #412
  • Apr 26, 2011 3:59pm Apr 26, 2011 3:59pm
I am willing to write this, but I'm missing a few things:

  1. Entry and Exit rules (if you "scalp", when does the scalp end).
  2. Pairs and timeframes. What is your "base" pair (the "B" in SSB) and the "Hedge Pairs".
  3. I'm assuming that "correlation" is the same as a statistical correlation (I've got an indicator for that I wrote some time ago) based on Close prices.


Yes, I've read the entire thread too.

Let me know if there's any interest; besides those PM'ing me. I'm willing to write if y'all willing to test.

  • #413
  • Apr 27, 2011 1:49am Apr 27, 2011 1:49am
Ok Guys,

finally I got an EA that works and that we can use at least for a forward test in a demo. The EA is a mod of the NewHedge EA of LazyForexTrading. The settings are 0.1 lots and the TP is set to 10 pips, virtually no stop loss. Put the two EAs in the same time on two different charts.
Sure every hedge has an exposure, thats means that everytime we close a trade in profit the opposite trade is in loss. The problem here is try to figure how can be the BIGGEST drawdown (this is the case if the specular hedges works as an oscillator between two max-min values). In this case the loss should be stabilized while we take the profits from the movements of market, folllowing more or less the movement of EC (as correctly stated Zznbrm). In the case that the losses not go at any stabilization the strategy of course cannot work on the "long run". I'm not so strong in mathematics...but if exists a way to get money from the forex market (as per my limited experience) will be only through the "basket hedging strategies". Maybe someone can disagree, but we must forget about indicators, timeframes and so on, they are only a big waste of time and money. We must only find a way to stand the drawdowns while keeping (small) profits on the way WHATEVER the market do, WHEREVER the market go. So I call all the traders to work around this project here or, if you want, in a new thread.
At this purpose, as soon I checked the new EA I'm working on, I will propose another "variation on the theme" of Basket 101 trading.
So, let's go work togheter.
Attached File(s)
File Type: mq4 newHedgingEA EU UC EC BBS.mq4   3 KB | 2,008 downloads
File Type: mq4 newHedgingEA EU UC EC SSB.mq4   3 KB | 1,642 downloads
"If you want something go down, let it go up first" Lao-Tzu
  • #414
  • Apr 27, 2011 4:52pm Apr 27, 2011 4:52pm
So, these EA's open orders providing there aren't any currently open? It doesn't look for possible trend / convergence / divergence / correlation / etc.?

That's this strategy?

Quoting Simihouse
Ok Guys,

finally I got an EA that works and that we can use at least for a forward test in a demo. The EA is a mod of the NewHedge EA of LazyForexTrading. The settings are 0.1 lots and the TP is set to 10 pips, virtually no stop loss. Put the two EAs in the same time on two different charts.
Sure every hedge has an exposure, thats means that everytime we close a trade in profit the opposite trade is in loss. The problem here is try to figure how can be the BIGGEST drawdown (this is the case if the specular hedges works as an oscillator between...
  • #415
  • Apr 27, 2011 9:43pm Apr 27, 2011 9:43pm
Hi Nondisclosure00,

Yes, the ultimate goal of every basket/hedging strategy is try to get money letting balanced pairs play togheter, let them freely flow the markets naturals waves. The challenge of these strategies is STAND THE DRAWDOWN that is the risk linked to every trade. As another trader in this forum stated (sorry I not remember the name) in the Forex game is not important how much money you can get...but how much money you risk for get it. The hedging strategies try to copes this terrible "Hydra", the DD, while the traditional simple indicator-following strategies are unable to do it. If you let a well balanced basket (with a small exposure) run, you will have a profit, soon or late, with a limited or virtually 0 risk. If we are able to find a strategy like this...well we can call it the "Grail".
"If you want something go down, let it go up first" Lao-Tzu
  • #416
  • Apr 28, 2011 12:08am Apr 28, 2011 12:08am
Thanks Sim.

Then this doesn't fit my strategy all that well. I don't want to open positions at random and hold on to them until they get a profit. That's just asking for margin calls eventually.

I'll stick to my convergence/divergence of prices between actual pairs and synthetics created through other currencies (Tri arb for short).

Quoting Simihouse
Hi Nondisclosure00,

Yes, the ultimate goal of every basket/hedging strategy is try to get money letting balanced pairs play togheter, let them freely flow the markets naturals waves. The challenge of these strategies is STAND THE DRAWDOWN that is the risk linked to every trade. As another trader in this forum stated (sorry I not remember the name) in the Forex game is not important how much money you can get...but how much money you risk for get it. The hedging strategies try to copes this terrible "Hydra", the DD, while the traditional simple...
  • #417
  • May 24, 2011 3:04pm May 24, 2011 3:04pm
how can know open buy or sell ?
  • #418
  • Jun 28, 2011 6:20am Jun 28, 2011 6:20am
hello I am new to this forum and I was reading dreamliner thread and came on this, I am interesting how the sistem goes, is it positiv or not in this period, thx.

p.s. sorry for my eng.
  • #419
  • Jul 5, 2011 2:32pm Jul 5, 2011 2:32pm
I think the system is profitable. Patience required to win through it. It is very important in what position will start every time. I trade her for about a month and a half now and I have not made ​​a loss.
If you want give me an email or skype to share experiences.

uspješne trgovine
  • #420
  • Jul 5, 2011 5:14pm Jul 5, 2011 5:14pm
Quoting vladirich
I think the system is profitable. Patience required to win through it. It is very important in what position will start every time. I trade her for about a month and a half now and I have not made ​​a loss.
If you want give me an email or skype to share experiences.

uspješne trgovine
What sort of % growth rate are you achiieving on your account please?
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