Three Pairs Hedging

I think the idea with the martingale system is just to add x pips when you reach Y drawdown. Y would be exponential.

eurusd
eurgbp
gbpusd

You want to be careful you are not trading 2*EUR & GBP.


Why not add another currency pair. make it more even?
eurchf Buy
audgbp Buy
nzdjpy Buy
usdcad Buy

This system is a good one. It is not a perfect arb, because the lot are fixed (1, 0.1 for all three pairs) but hedging SSB with BBS you override the problem.

I you arb perfectly with balanced lots the winner is the broker
When I speak about balanced lot I mean:

EURUSD 1 lot (I but 1 lot EUR and I sell 1.31 lot USD)
EURCHF 1 lot
USDCHF 1.31 lot

Above the 3 pairs are perfectly balanced but the spread is the winner

Opening fixed lot (1 lot for all pair) SSB and BBS in the same time, you are protected from DD and in the same time you have a little difference between pair and then create the profit.

Not important when you enter in the 6 trades, important is when a trade close
to reopen soon.

The system need patience; you can close a trade in 1 hour or some days

Thank you Cash and all have helped to understand better the system

Hello, I just joined the community.
Wishing you all a prosperous 2012 .

I read the thread and I am guessing that most realize by now that Lonestar and zznbrm were right regarding the original idea posted by cash4u2.

Nevertheless I am somewhat an addict for hedging in any type of shape or form.
Correlated pairs, Perfect market rings/inefficiency , arbitrages etc. Therefore, I have been testing
a similar concept to the original posted by cash4u2 but with some twists.

My results look promising in forward test, and would like to backtest the strategy to minimize risk. ( no risk, no profit, no matter what anybody say) but I am stuck in finding how to test the 3 pairs simultaneously. Not only because the strategy is multi-pair, but because we use an EA and because is in renko chart.

In a nutshell the strategy consider bits of correlation theory, 3-pair hedging theory and Averaging down theory, etc.

We use our own EA (as a tool) that execute trades at close of bar (forward or reverse to the direction of closed bar, with lot, tp, sl , global tp, etc.)


Example using EUR/USD, USD/CHF , EUR/CHF.

These 3 pairs would make an impeccable (perfect) hedge "IF" mt4 or mt4 broker would allow decimal lots size
like 0.21025451. but they don’t, therefore we can use a fix equal lot for all 3 pairs, say 0.30 and here is were we use the renko chart to compensate for the UN-impeccable hedge and take advantage of the fact that EUR/USD and USD/CHF are negative correlated (not always) and that
EUR/USD*USD/CHF=EUR/CHF (always, but between a small inefficiency factor)


To set the EA we “assume” that EUR/USD and USD/CHF are perfect negative correlated. Example:
say the current prices are EUR/USD= 1.2985 and USD/CHF=0.9385 … then EUR/CHF=1.2186 (1.2985*0.9385)


If we are assuming perfect correlation, this means if EUR/USD moves 20 pips up, then USD/CHF would move 20 pips down and we would have 1.3005, 0.9365 and (1.3005*0.9365)1.2179. In other words EUR/CHF moved only 7 pips down.


Therefore I would set the EA for EUR/USD and USD/CHF in a 20 pips renko charts and EUR/CHF in a 7 pips renko chart. EUR/USD buy only, USD/CHF buy only and EUR/CHF sell only. ..no TP, no SL but set to CloseALL when in X profits.


To get a better picture, the EA would buy EUR/USD at close of the 20 pips renko bar (if the bar is up bar). If the closed bar is a down bar, EA does nothing. For USD/UCH would do the same and for EUR/CHF would do the opposite (sells only in the 7 pips renko chart)


I think this approach has potential, but long and tedious without back testing to fine tune or find the weak spots.


I am sharing the idea with the hope that someone would be able to help with the back test issues.
Or with the math. We are able to code anything for mt4, but for lack of time we can not get involve in rewriting our tool EA and a renko indicator for platforms that can back test multi-pairs.

The idea is quite simple and easy to grasp with a little imagination.
I do not want to get involve in much discussion/explanation about renko charts or if the strategy is good or bad.

I mention that this has “potential” , perhaps in the 10-15% per month if used with the proper leverage.
I am aware system is a spread eater, but in the other hand could be good to use in brokers that give bonuses for deposits for traded lots. Back test definitely would provide better clues about profitable and any ideas are welcome.

I will consider sharing the tool EA will those that first contribute to the concept. But I am sure
a similar can we found in here or other sources . I will post some stats from my ongoing forward demos
when allowed or when I figure how to do it.

I would start a new thread under 3 Pair hedging/renko to start fresh only with people interested in the twist but I read I can start a new one as a junior new member. If any of the seniors want to start one I could re-post there. System does not need any indicators. No need to suggest nor discuss them.

Interesting.
OK for a new thread.

In the last paragraph of my first post I meant to say that I would like to start a new thread but I can not.
Because I am a junior member. Any one that want and can, please do.

Here is 1 month of forward testing with 1 setting. Started Dec 5 and ended
Jan 5 (I used peppertone demo. They are good for 1 month only).

I used 0.30 lot in all 3 pairs. It made 781 trades for a total of 234 full round lots traded. $5000 account made $2761.56/55.23% . Total DD was 7.83%.

I hope you see the need to get into a good backtest for the strategy. I mean if these stats would be similar every month, it would be wise to place a 10% safety global SL for the account and even if get triggered twice per month , the account still would in the profit at the end.

Which set of 3 pairs did you trade?

As the example in my first post:

EUR/USD, USD/CHF and EUR/CHF.

sounds very interesting!
my only concern to this strategy is...time.
we have no clue how long it would take to end up +$
during that time, our swap will prbly be -$
but your new approach sounds reasonable and steady
thank you for sharing, and keep us all updated!

regards,
J

Hello JhFx.
I agree, idle time in dd is always an important factor to consider in this type of systems. For this specific set it was OK for the 30 days and sort of cost of doing the business (-45.29 interest). The stats show 2day 17hrs for the longest trade held.

I am sure that was a EUR/CHF entry because EUR/USD and USD/CHF is set to 15 pips TP and 15 pips SL (1/1 risk/reward ratio) and these as you can imagine are closed very quick...and ClosingAll trades when system achieve $20 of equity gain.

I started a new thread "Three pairs hedging / Renko" for those interested.
Thanks.

waiting excitingly, thank for your share.

Hi,
What negative direction you are talking about can you show on chart preview
what time frame U use to look direction
please explain
thanks

I‘m sorry to say this but i see no meaning in trying this kind of system.
say
GBPUSD = Buy
USDCHF = Buy
GBPCHF = Sell
all 1 lot,use the price now
frist,you buy 1 lot GBPUSD means you buy 100K gbp spend 162K usd
than,you buy 1 lot usdchf means you buy 100K usd spend 91K chf
finally,you sell 1 lot gbpchf means you sell 100K gbp and get 147K chf

you see you buy 100K gbp and than sell 100K gbp,(so actually you has nothing to do with gbp);you buy 100K and you spend 162K usd;you spend 91K chf and you get 147K chf.

so if you add this all,you actually buy 56K chf and spend 62K usd,which is equal to sell about 0.67 lot usdchf.

so,why don't you sell this this much usdchf directly?and do you think you will always make pips just by sell this or buy this random without any thing else?

Hi every one,
I read all thread and pierre, cash4u,and jeuro they tried to explain but i donot think every one understood what they talk about only they are telling about hedging pairs even though you have good system and for further test every one may be curious about

what time frame m5 m15 m30 1h should we?
what is entry and exit style need some screen shots?
what is better session?
sorry for english
thanks

For SSB and BBS (the pair have to be perfectly balanced)

Time frame is indifferent
entry style indifferent
exit when you are in profit; use Close All
Session is indifferent

hi,
this is what we donot understand "the pair have to be balanced"
What is this mean and how do we check to see balanced?
any indicator can you explain in detail or show us some screen shots
thanks very much sir

Balanced means the trades are neutral

BUY EURUSD
BUY USDCHF
SELL EURCHF

(buy eur, sell usd)
(buy usd, sell chf)
(sell eur, buy chf)

OR

SELL EURUSD
SELL USDCHF
BUY EURCHF

So you are perfectly balanced; only one problem ; the spread.
when for market inefficiency you are in profit you close all trades.
you have to use closeall EA setting the profit you wish

If you use the EA posted the 27th april, they reopen the 3 trade automatically as 3 trades close

Hi,
Ok
IS this balanced
Sell EURUSD
Buy EURGBP
Buy GBPUSD
If this is balanced Then
I did SSB and BBS same time and both basket are in negative
May be these pairs not in balanced
Thanks

Sell EURUSD
Sell EURGBP

= you sell twice euro, you buy usd and you buy gbp

balanced = you buy and sell the same foreign currency

1)Buy eurusd
2)Buy usdchf
3)Sell usdchf

1) buy eur you sell usd
2)you buy usd you sell chf
3)you sell usd you buy chf