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System to hedge every major dollar pair for profit / low DD

  • #401
  • May 27, 2012 4:04pm May 27, 2012 4:04pm
Yes, this basket seems to be in a decent deviation level below mean so may be a good entry point. Since below mean, you could take the hedge ratio directions as listed in arbomat.

Need to verify cointegration.


Quoting Indrek
Do you suggest to include EURUSD, GBPUSD, AUDUSD, USDCAD and USDJPY in the basket? And trading it with intercept set to "true"?
Skype: heliosphan187
  • #402
  • May 27, 2012 4:11pm May 27, 2012 4:11pm
Quoting Dirtybrown
Need to verify cointegration.
And how do you suggest to do that? For people who are not good in math?
  • #403
  • May 27, 2012 4:16pm May 27, 2012 4:16pm
Hard to say for sure. Need to see how things open up, but it does seem like a decent entry zone. Just try it on demo it's free.

Quoting Indrek
And how do you suggest to do that? For people who are not good in math?
Skype: heliosphan187
  • #404
  • May 27, 2012 5:21pm May 27, 2012 5:21pm
Please can someone tell me what I am doing wrong, my chart never shown any number. Thanks
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  • #405
  • May 27, 2012 5:26pm May 27, 2012 5:26pm
Emma, did you verify the location of the R exe file is defined correctly in arbomat then compiled?

Quoting emmy01
Please can someone tell me what I am doing wrong, my chart never shown any number. Thanks
Skype: heliosphan187
  • #406
  • May 27, 2012 6:37pm May 27, 2012 6:37pm
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Getting the expected retrace from the 1st deviation on nzdusd / usdcad, looking for further retracement before re-entry. Not sure where yet let's watch the hedges tell their story.
Skype: heliosphan187
  • #407
  • May 27, 2012 7:01pm May 27, 2012 7:01pm
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  • #408
  • May 27, 2012 7:54pm May 27, 2012 7:54pm
1st deviation looks to be taken out, I have re-entered this hedge
Quoting Dirtybrown
Attachment

Getting the expected retrace from the 1st deviation on nzdusd / usdcad, looking for further retracement before re-entry. Not sure where yet let's watch the hedges tell their story.
Skype: heliosphan187
  • #409
  • May 27, 2012 10:30pm May 27, 2012 10:30pm
Do we expect retracement from here
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  • #410
  • May 27, 2012 10:49pm May 27, 2012 10:49pm
Added this code, it compiles but I don't see output:

Inserted Code
Rx("ht <- adf.test(pred, alternative='stationary', k=0)");
      Rx("cat(ht$p.value)");
      Rx("if (ht$p.value < 0.05) { cat('The spread is likely mean-reverting')} else {cat('The spread is not mean-reverting.n')}");

Maybe someone can figure this out.

Quoting stevegee58
I just posted a reply to 7bit's old thread thinking I was posting to this one.
Anyway here it is again.



I realized after reading that web page how close arbomat is to this; the one thing lacking in arbomat is the cointegration test. Arbomat calculates the spread correctly but never verifies cointegration. It looks like it'd be easy to add by just using the adf.test function and checking it against a threshold:

[code]
ht <- adf.test(sprd, alternative="stationary", k=0)

cat("ADF p-value is", ht$p.value, "n")

if (ht$p.value < 0.05)...
Attached File(s)
File Type: mq4 arbomat_ADF_demo.mq4   14 KB | 506 downloads
Skype: heliosphan187
  • #411
  • May 28, 2012 6:18am May 28, 2012 6:18am
Quoting xlitang
Do we expect retracement from here
Your using this on the 1 minute charts?? I don't think this is meant to be a scalping strategy, the spread cost of opening any basket is waaay to high to be used on such a short timeframe, the deviation that your seeing here is just a tiny fluctuation, you might get back to break even on your spread costs if your lucky.
  • #412
  • May 28, 2012 6:34am May 28, 2012 6:34am
I got it working but I don't trust the results yet. Right now it prints a probability of about 22% and I believe we're looking for something less than 5% to prove it stationary.

First you have to install the tseries package with the R console menu "Packages/Install Package(s)..."

Next you have to load the tseries library. So in the function init() add the following lines after Rx("options(device='windows')");

Inserted Code
Rx("library(zoo)");
Rx("library(tseries)");

In the plot() function add the following lines after label("spread_cur", 10, 70, 1, DoubleToStr(pred[0] / Point / 10, 1), Lime);

Inserted Code
Rx("ht <- adf.test(pred, alternative="stationary", k=0)");
label("ht",10,90,1,DoubleToStr(Rgd("ht$p.value"),4),Lime);

This prints a result in the upper right of the Metatrader screen under the spread value.
You are in a maze of twisty little passages, all alike.
  • #413
  • May 28, 2012 6:52am May 28, 2012 6:52am
DB,
Quoting Dirtybrown
Added this code, it compiles but I don't see output:

Inserted Code
Rx("ht <- adf.test(pred, alternative='stationary', k=0)");
      Rx("cat(ht$p.value)");
      Rx("if (ht$p.value < 0.05) { cat('The spread is likely mean-reverting')} else {cat('The spread is not mean-reverting.n')}");

Maybe someone can figure this out.
To see R output you need to run DebugView.exe... (read THIS POST)

The easiest way is to simply return the value to MT4 rather than trying to print it.

so simply something like (off the top of my head and not error checked) :
Inserted Code
Rgd("cat(ht$p.value)",ADFVariable);
// then just do the comparison in MT4
if (ADFVariable < 0.05) Print ("The spread is likely mean reverting. PValue: " + ADFVariable);

if (ADFVariable >= 0.05) Print("Nice try but no cigar... PValue: " +ADFVariable);

By the way, I'm not commenting on the validity of statistical analysis or assumptions, just assisting with the code.
  • #414
  • May 28, 2012 8:09am May 28, 2012 8:09am
Correct as FXEZ mentioned cointegration is not generally a short term phenom. But I have made a few pips off one min charts like this. Probably less of a probability of true mean reversion taking place

No other way to know if its not profitable than trying it out it out tho.

Quoting Aldente
Your using this on the 1 minute charts?? I don't think this is meant to be a scalping strategy, the spread cost of opening any basket is waaay to high to be used on such a short timeframe, the deviation that your seeing here is just a tiny fluctuation, you might get back to break even on your spread costs if your lucky.
Skype: heliosphan187
  • #415
  • May 28, 2012 8:17am May 28, 2012 8:17am
http://en.wikipedia.org/wiki/Cointegration

Read only the last paragraph.
  • #416
  • May 28, 2012 8:27am May 28, 2012 8:27am
Thanks Steve and FXEZ.

This gives me an opportunity to get my feet wet with the arbomat coding more than anything. If I can get this to work, I'll look to your more complete R codes FXEZ and get those working in the same manner.

Quoting FXEZ
DB,


To see R output you need to run DebugView.exe... (read THIS POST)

The easiest way is to simply return the value to MT4 rather than trying to print it.

so simply something like (off the top of my head and not error checked) :
[code]
Rgd("cat(ht$p.value)",ADFVariable);
// then just do the comparison in MT4
if (ADFVariable < 0.05) Print ("The spread is likely mean reverting. PValue: " + ADFVariable);

if (ADFVariable >= 0.05) Print("Nice try but no cigar......
Skype: heliosphan187
  • #417
  • May 28, 2012 8:34am May 28, 2012 8:34am
Quoting Dirtybrown

No other way to know if its not profitable than trying it out it out tho.
Good point, pips are pips. If you are using a small basket of low spread pairs I suppose, the tough part would be getting the basket open quick enough after you see a deviation, a negative spike of 5-10 pips while opening the basket would probably make it tough to get back in profit.
  • #418
  • May 28, 2012 9:53am May 28, 2012 9:53am
Guys, maybe is stupid question but is it possible to draw deviation levels from R on MT4 chart?
  • #419
  • May 28, 2012 10:00am May 28, 2012 10:00am
don't see how that's possible, you'd have to graph 2 or more pairs on the same chart.

The people who made MT don't want you to do this sorta thing. Ninjatrader may be a better bet for setting up spread charts, but you'd need a custom dll to connect R to it of course.

Quoting altoronto
Guys, maybe is stupid question but is it possible to draw deviation levels from R on MT4 chart?
Skype: heliosphan187
  • #420
  • May 28, 2012 10:02am May 28, 2012 10:02am
Thank you for reply, but is not a big deal let say to make offline chart with in my case EURUSD/GBPUSD basket and then apply deviations from R on it.
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