Hedge and Correlation Strategy

The http://luku.cz/fx/2012/01/23/ediff/ indicators and EA from Luke. Edited by any one of the indicators so that they can invert the two couples in the same way as an indicator for v12? I need to adjust the opening positions of both pairs in opposite directions.

Hi Pierre,
Yes, visually the deviation "appears" to change but in this particular overlay the price is shown and current price remains constant regardless the chart time. My biggest present problem is how best to utilise those prices.

My best effort so far was to use the Hybrid Stoch Diff indi on a 5 min time frame and pushed my demo acc. 52 % in 10 trading days, with very casual effort, selecting the "de-coupled" pairs early in the Asian session and basket closing with an EA, usually when I was asleep. (I'm in Australia) That was fine but rather hit and miss and uncontrolled. I am looking for a way to control, which I guess really means "hedge" every trade, or to establish valid stop levels for each doublet. I guess that means bail out with a stop or hedge thru' the DD and I haven't really figured the best way yet. I am retired so a bit casual about this.

I know this thread kinda digressed to EA's for a period but I really would like to see it swing back to its original intention as DreamLiner outlined or some clever blighter develop a really good indicator. There is such work going on in another EA forum but it is based on advanced statistical analyses. A nice easily understood indi similar to the Stoch Diff but without some of the Stoch non linearity would be very welcome.

Any clever blighters around who could solve this ?

AltosT.

POSTIVELY CORRELATED PAIR (EURUSD GBPUSD)

Overlay chart: If trade a 5 m chart and you look at the difference of price (real diff price) you will see the difference in pips between the 2 pairs can go to a big figure in the daily chart;
i.e. to day the difference between EURUSD and GBPUSD is between 1.3310 and 1.5716;at 28-10 2011 it was 1.4200 - 1.600; then big DD if on the wrong side
I have traded with diff stochastic 1.7 (dreamliner) setting 100 1 1
I have traded with luku diff v 1.4 using the 3 options (deviation , MA, stoch 14 3 3)
I have traded with Overlay chart
I concluded the deviation in price (luku , Overlay Chart)is very dangerous and the best is the stoch diff setted at 100 1 1 (dreamliner setting)

But how utilise those differences in prices is the goal; I have found EA doing the job (Fx algotrader) but it is no cheap

NEGATIVELY CORRELATED PAIRS (EURUSD USDCHF)

Here I had the best results:

Dreamliner indi 1.7 and Overlaychart- Mirroring false (very important) I will see the true gap between the 2 pairs- only manual - only a close-all EA. When stoch diff is 80 and overlay show a gap in the same direction I enter the trade. I close when stoch diff is 0.

Spielers on his thread buy or sell the 2 pairs based on a daily gap; I buy one pair and sell the other-

Hi Dreamliner,

Thanks so much for sharing your system. Do you have any suggestions on money management for this strategy? How many pairs and lots should be used at once? During my testing, it did not seem uncommon for there to be 10 or so eligible pairs at a given time. Any pairs that you have seen to be notoriously bad?

Thanks again.

P.S. Any others please feel free to share your advice also.

I guess many people have many methods of MM and trading, I will share mine.

I have 2 x Profiles utilising what is essentially Stoch Diff v 1.4b. It has been changed slightly and I use a stoch setting of 350,1,1 and an alarm of 75% to get in and 2% to get out. The first Profile looks at 80 + pairings. With this I piled on 52%, which was $ 5,200 (demo) in ten trading days by spending maybe 15 minutes a day to enter trades when the alarm went off and using a basket closure EA set at my, conservative, guesstimate of potential profit. This appeared to work well but I realised I had not much control of it if something went wrong and I was overexposed to one particular currency.

So, I went looking for something which suited me, my risk profile, my available time for the market and my capability to understand and, hopefully, control a bad situation. Such as a Greek failure or something even more catastrophic.

I have ended up using another system in parallel which I believe gives me that control and in fact increases my profit potential by also being in the market with directional trades (trend if you prefer). This method has two forums located at http://www.forexfactory.com/showthread.php?t=317893 which is the original and http://www.forexfactory.com/showthread.php?t=336094 which is more recent. These two use slightly different but similar methods. They are both based on utilising the currency indices of 8 country's and as such, present a clearer view of the base instruments. Taking that one step further I have incorporated the additional methods employed at Trading Made Simple both for intra and for daily charts. These forums are here on FF. I also follow every other Hedging, Correlation, Carry and pair trading forum I can find because there is always another idea. I have Spieler Profiles and ZeusJoes ad infinitum which I can turn to immediately should I feel the need.

These primaries above are best used with the Sig 4 platform at LiteForex who are, to my knowledge, the only MT4 broker to carry the indices.

My reason for adopting the CICR approach is to be best able to see clear data allowing me to hedge anything that goes amiss with my pairs entries. I am currently developng a new profile based on just the 8 currency indices available on Sig 4. to have this all contained. There are various indicators around which will present line graphs of indices in MT4 and there are correlation tables both free and commercial but neither of these compare to seeing a real chart of an index if you are going to get into hedging or want to see trending markets most clearly. The correlation indicators tend to be redundant if you have set up a good Profile that covers all pairs. The Stoch Diff alert will let you know when an opportunity presents.

As for MM. I try to use 500:1 to keep margin right down but I trade that more as if I was on 50:1. Being over committed is a folley.

If you are a lazy trader, you can use a conservative basket closure approach or search for an EA "Close Pairs v1.1" in this forum which allows you to set targets for individual pairs and you can keep your exposure right down in safe numbers.

If you want to be aggressive, and you have the time, you can add positions as you accumulate profit, this particularly in trend trades. Once a trade has moved into breakeven, and your stop is in place, you are essentially at the start line again and so can take another trade and repeat. If your earlier trades are moving higher, and protected, you can add more positions using your new higher balance figure but still within your original risk figure. Doing this, it is possible to double your account in just a few days, if the market favours you BUT, it is going to be very demanding and has a downside risk of brokers slipping your stops if another world catastrophe occurs, and some brokers will rob you even without a catastrophe. Even if I had Stops and Pending Hedge orders in place to cover it is possible an MT4 broker (refered to as criminals in some forums) will slip them to worst advantage for me and best advantage for him. So with the best MM in place a bad broker can still take you out. Best is to use MT4 charts and a major Bank or high class broker who utilises Currenex - but there are no stops on Currenex. I believe PFG are very good but they are a US broker so are severely restrictive. Can't help with the broker. There are many good ones but I have heard harsh words about nearly every single one.

Your MM is a very personal and unique situation that depends on you entirely. Time, psychology, funding, broker ethics etc etc. Do not scalp, the broker will eat you if you look like being profitable. Do not think live gets the same treatment as demo. I don't recall platform freezing or slippage of stops or entries on demo but with the wrong broker they are constant on real and especially so on MT4 brokers.

Sorry this does not give you a step by step MM system but I do that pretty much on the fly, I am retired and lazy. There are some very good forums around for such discussion though. Try a google search.
Cheers,
AltosT

Hi Guys,

Much works there was made here.
All we got here - stable very small profit and huge DD.
Such is reality.
This trade continue to be more art than science.
Positive results are seldom, 9% per month maximum capability of this method.
Correlation is more safe than trend trading but probably is not what seek most of us.
I do not got any stable long term results with this method after using most was published here.

Please try correlation indicator attached.

I have a correlation of EA from Luke, who is in manual trading profitable. I will send it along with an indicator to those who adapt them in MetaEditor. If it will work, so I send him my setup. jozef.vyskocil @ seznam.cz

Correlation EA from Luku downloaded from his website was placed to live account week ago where created +$20 profit and $300 losses !!!

After such trade EA was sent to garbage !!!!

After slight modification, it may be the best correlations for EA. Proper adjustment should patiently seek to demo.

EA adjustment is not enough. Must be made very deep scientific investigation to have good results with this strategy. I do not sure the solution can be found by hard work only.

Such investigation will consume much time and efforts, and that is why nobody will share with them. Such reality of market based economic system and people relations in such economical environment.

can anyone here help me pls i wana know which currency is not positive or negative correlated to eurusd pls or can you give me the website where i can find my answer pls...:d

Use this great tool that i found somewhere in the net.

The point is clear and free scientific inquiry. I would like to adjust the indicator and EA in order to work together, as described by Alberto FX. For manual trade have quite interesting results, but there may be something down my mood.

Hi - I don't wish to appear insulting but if you know so little that that is not patently obvious then you should start at an excellent website which will give lots of the basics. Start at www.babypips.com - it is a very good site to start. You are trying to get into a very complex area in this forum. Much too difficult a place to start.

For improve comfort of manual trading I made for himself indicator, which help me to visualize correlation, zero point, etc.

Indicator created based on MACD shell and 2 pairs stochastic code.

Maybe for somebody will be useful too. Attached.

I am not programmer.

thnx for reply im not new in forex , but mb somebody know alot than me i know usdjpy is not positive or negative correlated to eurusd anyone else know which currency not positive or negative correlated to eurusd???

Hi again,
www.mataf.net had a central site which showed many things including 5 min, 60 min and 1 day correlations of nearly whatever pairs you select. You can still get to it using this url but, it will redirect you to a site where you can choose your own country and, presumably, then present the data maybe in the selected countries language. I have not tried that as En is my first language. Also if you go the the paper clip icon at the top right of this present FF page, just to the right of the page numbers, and click, you will see all the attachments. Amongst the many hundred you will find a few indicators that will show correlation tables in MT4. One is "Tradeable Correlations.mq4 Pair correlations is another. There are many there. Also, do a Google search and you will find heaps of data relating.
Cheers,
Altos.

May be my idea is stupid, but I try eliminate DD by the way of extrapolation Stochastic curve in nearest future to see if price movement is in right direction.

I try to use several methods of stochastic curve approximation.

I know this approach is not good enough because stochastic has some limitation, but may be will be something useful.

I'll will inform if will be some good results.

This is improved version of indicator published in post 3755 with using No Lag Moving Averages.

Indicator provide more clear data representation (look attached image with comparison of two indicators).

I made it for himself, maybe for somebody will be useful too.