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Three Pairs Hedging

  • #741
  • May 16, 2013 5:06pm May 16, 2013 5:06pm
Quoting azizk20
I'm glad to find this thread with so many experienced contributors. I've been trading this method for some time and think that the best basket pairs for this strategy are EC,EU,UC ; BBS or SSB. The reason is minimum drawdown compared to other baskets because in the long term spread chart for this basket has smoothest shift. I've an indicator which tells me price spread of the basket. In my view, the best strategy could be a grid trade with this basket because the price variations are not huge and long term shifts in basket price value is minimum...
Can you please post your indicator?
  • #742
  • May 17, 2013 1:59am May 17, 2013 1:59am
Quoting txfxtrader
{quote} Can you please post your indicator?
Here it is. I'm not a programmer but somehow managed to tweak an indicator which I found somewhere to give price spread for three pairs.
Attached File(s)
File Type: ex4 PriceDiff3Pairs.ex4   3 KB | 1,301 downloads
  • #743
  • May 31, 2013 6:18am May 31, 2013 6:18am
actually, it's more profitable if use 2 pairs, although 3-pair is more stable and less risky.
get nearly 110%profit in very short days
Attached Image (click to enlarge)
Click to Enlarge Name: QQ截图20130531191609.png Size: 49 KB
  • #744
  • May 31, 2013 7:03am May 31, 2013 7:03am
Quoting satfish
actually, it's more profitable if use 2 pairs, although 3-pair is more stable and less risky. get nearly 110%profit in very short days {image}

Normal EURCHF is in down trend since the 21 May ...
  • #745
  • Edited 9:17am Jun 5, 2013 8:44am | Edited 9:17am
Hi Im new here ! I mean 1st time I check this 3ad .
Very interesting ! for me could be good EURJPY , EURUSD , USDJPY coz the best spread couples
I just want to ask some question if possivle :
- which moment is it better to open the positions ?
-when is it beter the combination SSB instead of BBS ?
-in which case this sistem could have failure ?
-any special tips , advice or ahything else to pay attention for the sistem ?

Thanks for your time
  • #746
  • Jun 5, 2013 9:57am Jun 5, 2013 9:57am
Quoting azizk20
{quote} Here it is. I'm not a programmer but somehow managed to tweak an indicator which I found somewhere to give price spread for three pairs. {file}
how do you use this indi?
  • #747
  • Edited 1:28pm Jun 5, 2013 12:56pm | Edited 1:28pm
Quoting satfish
actually, it's more profitable if use 2 pairs, although 3-pair is more stable and less risky. get nearly 110%profit in very short days {image}
Interesting also with 2 pairs but which couple currencies do you suggest ?
1 couple must be sort of linked right ? like USDHKD and ..... any idea ??? hehehehe

It is also possible to use both strategies , 3+2 pairs , just respect the buybuysell or sellbuybuy and includes always usdchf and eurusd and what can be matched to create the hedging ( EURUSD+USDJPY or EURGBP+GBPUSD or USDJPY+CHFJPY )
  • #748
  • Jun 6, 2013 11:55am Jun 6, 2013 11:55am
I tried 3+2 yesterday coz I was sure after ECB pres Draghi speech something could happen !
+ I added another 3 hedge currencies ..... this is the results ! Unfortunatly IT IS JUST DEMO ACCOUNT !!! The first trade GBPUSD on June 3rd is not included in the trial !

Totally it is over 600 USD profit in 2 days investing less than 6000 USD . NOT BAD AT ALL !!!
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  • #749
  • Jun 7, 2013 10:37am Jun 7, 2013 10:37am
Quoting marco mp
I tried 3+2 yesterday coz I was sure after ECB pres Draghi speech something could happen ! + I added another 3 hedge currencies ..... this is the results ! Unfortunatly IT IS JUST DEMO ACCOUNT !!! The first trade GBPUSD on June 3rd is not included in the trial ! Totally it is over 600 USD profit in 2 days investing less than 6000 USD . NOT BAD AT ALL !!! {image}
Hello,

I was almost give up this thread, but I can see light at the horizon.

Can you explain how does it works?

Y.
  • #750
  • Jun 8, 2013 7:19am Jun 8, 2013 7:19am
I am looking at this thread and wondering how do you go about trading, taking real money and not bothering to spend any time to educate your selves? The 3 pair hedge is designed to leave you flat in the market. It is simple math. However by using the same size for all the legs of the hedge you create an inefficiency in the model. This is what allows you to profit !!!, using correlation alone will leave you exposed to correlation curve breakdown. Correlation deviates around a base point. http://www.forexticket.us/en/tools/01-01-correlation - is a good site that shows how this happens. You can see the curve on the right and you can see how correlation deviates on each time frame. Using 3 pairs you reduce or eliminate this effect. The terms that you should look at are: Triangular Hedge, 3 pairs hedge, and circular hedge. You can look at investopaedia or wikipedia and find complete reference. Many years ago strategies have been developed to use pricing inefficiencies and basically create risk free arbitrage models. Now there is no such gravy train available for you. What is in this thread is good, but do not think that you can let this be run by a robot, you still need to learn how to trade. Yet this method will let you learn quicker and fuller, that is if you study the reasons why this works. Lastly if you think that you can just take 10K and throw it in the most complex and volatile market in the world, turn on a robot and go to sleep expecting to make money continuously or keep using demo accounts for that matter should simply go to a casino. Its better entertainment, and free drinks.

Ciao
  • #751
  • Jun 8, 2013 12:19pm Jun 8, 2013 12:19pm
i think the math let you think that basically this 3hedge is only trading the pair where you are more exposed , but if you plot the result on the screen of the eurusd usdchf eurchf bbs , you can see that the profit is totally dipendent on the eur usd .
just try with the indicator posted .

if you adjust the lot size like this : Eur usd 1lot , usdchf 1.5 lot , eurchf 1.5 lot ( bbs ) , you can see that the curve is more stable ...
that depends on their atr , eur usd is roughly 100 pips per day , usdchf and eurchf is 50-60 pips per day .
Attached File(s)
File Type: mq4 Basket Profit sq.mq4   15 KB | 1,269 downloads
  • #752
  • Jun 10, 2013 7:20pm Jun 10, 2013 7:20pm
alrite, plz bear with me. i'm usually a scalper and trade shorter time frames, but couldn't hurt to learn a new strategy for longer time frames when the markets are unfavorable for such short term trading.

so i have a few questions:

1. so i guess the idea is basically to use three separate pairs and basically create a long and short position for each of the three currencies? so i can really just start off with any pair so i would choose the eurusd. now, if i buy the eurusd, then i'm essentially longing the euro and shorting the usd. now with the usd shorted, i would have to create a long position for the usd so in this case i pick another pair such as the usdjpy. and so with this, i would buy the usdjpy so now the usd is both longed and shorted with the jpy now shorted. and finally, the jpy has to be longed and so i would pick a currency pair including both the euro and jpy. in this case, it is the eurjpy. now as i originally longed the euro, the eurjpy has to be shorted to satisfy the shorted euro and longed jpy.

so can some1 just confirm if my 'logic' is correct? and yeah, i would much rather do the interpretation above rather than just memorize which pairs and combinations work.

2. could this "strategy" be optimized through a good broker?

i should probably clarify on the word "good". so basically i'm thinking that this system probably works better with a market maker that offers swap free accounts. most brokers charge swaps routinely, maybe daily or even weekly. don't get me wrong, i don't mean they charge it once a week, but rather they keep track of it in the background. what i mean is they credit it to your account at a certain time. Oanda seems to be the only broker that goes overboard and does some kind of hourly interest crediting or debiting. now, if you are going long term, swaps can really kill your account. so are we better off with a market maker that offers swap free accounts?
  • #753
  • Jun 11, 2013 2:18am Jun 11, 2013 2:18am
Quoting surfeur
{quote} Normal EURCHF is in down trend since the 21 May ...
totally right. The point is from the pair I know Eurchf was in down trend at that period.
  • #754
  • Jun 11, 2013 2:24am Jun 11, 2013 2:24am
Quoting marco mp
{quote} Interesting also with 2 pairs but which couple currencies do you suggest ? 1 couple must be sort of linked right ? like USDHKD and ..... any idea ??? hehehehe It is also possible to use both strategies , 3+2 pairs , just respect the buybuysell or sellbuybuy and includes always usdchf and eurusd and what can be matched to create the hedging ( EURUSD+USDJPY or EURGBP+GBPUSD or USDJPY+CHFJPY )
For 2 pairs, the best are eurusd and usdchf coz they have high realtion.
For 3-pair, ej-eu-echf is ok
  • #755
  • Jun 11, 2013 2:34am Jun 11, 2013 2:34am
Quoting esprit
I am looking at this thread and wondering how do you go about trading, taking real money and not bothering to spend any time to educate your selves? The 3 pair hedge is designed to leave you flat in the market. It is simple math. However by using the same size for all the legs of the hedge you create an inefficiency in the model. This is what allows you to profit !!!, using correlation alone will leave you exposed to correlation curve breakdown. Correlation deviates around a base point. http://www.forexticket.us/en/tools/01-01-correlation...
I agree with you. Things are changing every minutes, you must learn and know how to trade. Never dream of making money by robot.
  • #756
  • Jun 11, 2013 12:04pm Jun 11, 2013 12:04pm
can any1 give me any insights on my post earlier? am i on the right track?
  • #757
  • Jun 12, 2013 8:29am Jun 12, 2013 8:29am
Quoting crossy
{quote} Hello, I was almost give up this thread, but I can see light at the horizon. Can you explain how does it works? Y.
Check the post of the friend satfish about eurusd+usdchf hedging . click http://www.forexfactory.com/showthread.php?t=279648

that's his 2 pairs hedging trade . Coz in the 2pairs there is eurusd , you can add the 3 pairs hedging trade which includes eurusd pair .

The 3 pairs hedging trade is explained in this 3ad , in the 1st post by the user cash4u . click http://www.forexfactory.com/showthre...279648&page=38

Clear ?
  • #758
  • Jun 16, 2013 6:04am Jun 16, 2013 6:04am
Hi everybody, i'm following this thread since some days with increasing interest.
I have a dubt working in my mind about all this: is this strategy based on correlations or on relative strength?
  • #759
  • Jun 16, 2013 6:51am Jun 16, 2013 6:51am
Quoting strongtrader
Hi everybody, i'm following this thread since some days with increasing interest. I have a dubt working in my mind about all this: is this strategy based on correlations or on relative strength?
It's based on Currency Ring theory where the 3 currencies form a closed loop ring that will oscillate from high P/L to low P/L and back in a circular, albeit somewhat irregular (no, very.. no.... extremely irregular and unpredictable) circular-ish pattern (such as figure 8 or worse, a cloverleaf, at times).

the trick is to make sure you enter at the low P/L otherwise if you enter at the high P/L what will happen? P/L only falls. Also if you dont get in with low spreads you lose either way.

and either way you need huge account balance to bring tiny profit (or you can increase your risk....)
  • #760
  • Jun 16, 2013 9:08am Jun 16, 2013 9:08am
Quoting c3p0
{quote} It's based on Currency Ring theory where the 3 currencies form a closed loop ring that will oscillate from high P/L to low P/L and back in a circular, albeit somewhat irregular (no, very.. no.... extremely irregular and unpredictable) circular-ish pattern (such as figure 8 or worse, a cloverleaf, at times). the trick is to make sure you enter at the low P/L otherwise if you enter at the high P/L what will happen? P/L only falls. Also if you dont get in with low spreads you lose either way. and either way you need huge account balance to...

Thks for your reply, it seems to me that ring theory assumes there is a constant behaviour between the pairs enjoying the ring, i.e. if the ring is formed by eur/usd, usd/chf and eur/chf - buy, buy, sell - we well know that those pairs are usually correlated: eur/usd and usd/chf are inversely correlated and eur/usd and eur/chf are directly correlated; thus somehow we are back again into correlations concept.
As well as correlations are not stable in long term, the same will be for this system.
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