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Three Pairs Hedging

  • #781
  • Sep 20, 2013 12:20pm Sep 20, 2013 12:20pm
Quoting toinou21
{quote} Im not sure but i think this kind of hedge SELL GBPCHF 1 BUY USDCHF 1.56 BUY GBPUSD 1 will sooner or later be unbalanced. on september 9 it was the correct lot size, but 10 days later the correct lot size should have been SELL GBPCHF 1 BUY USDCHF 1.61 BUY GBPUSD 1 thus we have to adjust from time to time the lot size. Am I right ?
No. Even though USDCHF would have moved from 1.56 to 1.61 in your example, GBPCHF and GBPUSD must also have moved, keeping the hedge quite well balanced.

Any profit or loss you get by opening one of these triangle hedges and leaving it alone will be driven by just a couple of things:

1) Swap, which will usually be negative because brokers seldom provide any arrangement where profits can be found via synthetic hedges. If trading with no swaps, this won't be a factor.

2) Big movement of the pairs such that lack of precision in the lot sizes are reflected negatively or positively.
Open to new approaches.
  • #782
  • Sep 20, 2013 12:31pm Sep 20, 2013 12:31pm
Quoting MetaCoder
{quote} No. Even though USDCHF would have moved from 1.56 to 1.61 in your example, GBPCHF and GBPUSD must also have moved, keeping the hedge quite well balanced. Any profit or loss you get by opening one of these triangle hedges and leaving it alone will be driven by just a couple of things: 1) Swap, which will usually be negative because brokers seldom provide any arrangement where profits can be found via synthetic hedges. If trading with no swaps, this won't be a factor. 2) Big movement of the pairs such that lack of precision in the lot sizes...

thank you for your answer, very helpful.
  • #783
  • Sep 22, 2013 2:05pm Sep 22, 2013 2:05pm
Quoting MetaCoder
{quote} No. Even though USDCHF would have moved from 1.56 to 1.61 in your example, GBPCHF and GBPUSD must also have moved, keeping the hedge quite well balanced. Any profit or loss you get by opening one of these triangle hedges and leaving it alone will be driven by just a couple of things: 1) Swap, which will usually be negative because brokers seldom provide any arrangement where profits can be found via synthetic hedges. If trading with no swaps, this won't be a factor. 2) Big movement of the pairs such that lack of precision in the lot sizes...
Good evening MetaCoder,
I sent you a PM.
Thank you in advance.
Toinou
  • #784
  • Oct 2, 2013 8:24am Oct 2, 2013 8:24am
Just saw my trade results from Monday. +60 pips profit. I traded all the pairs on the 1st page to see what the outcomes would be.
  • #785
  • Oct 2, 2013 11:43am Oct 2, 2013 11:43am
Oh no..hedging always scared me
  • #786
  • Nov 3, 2013 8:58pm Nov 3, 2013 8:58pm
Is there anybody still using this system? or this system not working anymore???
  • #787
  • Edited 3:50pm Jan 25, 2014 3:36pm | Edited 3:50pm
Yes i am testing this system now and every things is fine so far,
I trade all those pairs in the first post with 2 the kind BBS & SSB in the same time with different Magic Numbers .
DD is stable and the floating lose is stable too and mad 4% profit from the balance so far .
  • #788
  • Jan 26, 2014 5:40pm Jan 26, 2014 5:40pm
Went over the math of this system and can conclude that the system does not work, as some others in the beginning of the thread have stated

For example (quotes are simplified to better understand the crux of the matter:
Long EUR/USD @ 1.37 1lot (+100000EUR, -137000USD exposure)
Long USD/JPY @ 102.2 now you need to cover the first dollar position of -137000USD so you need to buy 137000USD which is 1.37ot of USD/JPY, the result:
: (0USD exposure, -14001400JPY exposure and still +100000EUR exposure from the first trade)
Short EUR/JPY @ 139.89 NOW THE FUN PART, as you can see, you need to cover the exposures from the previous trades, so you need to short 100000EUR and buy 14001400JPY to have a perfect hedge with market exposure. But the going rate for this kind of EUR/JPY transaction is 139.89, which means if you go short 100000 units or 1 lot of EUR/JPY, you cancel out the EUR exposure, but are still left with 14001400-(100000*139.89)=12400JPY exposure (theoretically)
Ofcourse I didn´t factor in the carry costs and spreads, which would make it even worse.

So in conclusion, stop wasting your time people.
Every bar tells a tale
  • #789
  • May 2, 2014 7:10am May 2, 2014 7:10am
Quoting Qw3rty
Just saw my trade results from Monday. +60 pips profit. I traded all the pairs on the 1st page to see what the outcomes would be.
do you still trading this strategy? thanks
  • #790
  • Oct 27, 2014 7:38am Oct 27, 2014 7:38am
any one still working in this system and has success? any new ideas/concepts which can work better?
My Pips Stolen By The Broker
  • #791
  • Nov 11, 2014 8:54am Nov 11, 2014 8:54am
Playing around with the idea, seems like fun

This EA is for back testing an idea.

inputs

1. ArbRing =-1 default . .0-12 twelve rings default will auto detect first suitable ring
2.Start index=? where you would like to start trade
3.End Index=? where you would like to end
4. LotSize=? whatever
5. Spread=0 will get latest spread and any other value will set that spread
6.TradeType=-1

you can set 0 for sell and 1 for buy

you can have all combinations as in

000
001
010
011===== These two are the system ones
100===== but its fun to have a look at the others
101
110
111

Bring a dead thread to life . .I was enjoying the subject
Attached File(s)
File Type: mq4 TriangleSpot.mq4   18 KB | 989 downloads
  • #792
  • Nov 12, 2014 1:27am Nov 12, 2014 1:27am
CN YOU explain a little better this ea ?
  • #793
  • Nov 12, 2014 8:29am Nov 12, 2014 8:29am
@tarrini65

It is a proof of concept tool which will allow you to test your ideas historically.

The system is example ring

EUR/USD=EUR/GBP x GBP/USD

for Buy Sell Sell you would set input 100

and for Sell Buy Buy 011

You can set any combination as in Buy Buy Buy =111 and Sell Sell Sell = 000 for experimentation

You must set a start index for example bar 200 to end index 50 as the trade duration

It will calculate the out come and the profit breakup .

Attached Image (click to enlarge)
Click to Enlarge Name: TriangleShot.png Size: 61 KB


The chart you select must be in one of the predefined rings.

The Purpose of this is simply to test backwards to get an idea of how this works
  • #794
  • Nov 13, 2014 12:43am Nov 13, 2014 12:43am
Quoting whitearrow
@tarrini65 It is a proof of concept tool which will allow you to test your ideas historically. The system is example ring EUR/USD=EUR/GBP x GBP/USD for Buy Sell Sell you would set input 100 and for Sell Buy Buy 011 You can set any combination as in Buy Buy Buy =111 and Sell Sell Sell = 000 for experimentation You must set a start index for example bar 200 to end index 50 as the trade duration It will calculate the out come and the profit breakup . {image} The chart you select must be in one of the predefined rings. The Purpose of this is simply...
Hello Whitearrow,
I follow this thread for years, and I believe the model, but we stiil did not find the correct way to trade with it.
I see your indi and I saw the shot you attached, but I didn't understand it (how you have conclusions from the graph)? If
you can wide it...

Thanks,
  • #795
  • Nov 13, 2014 2:26am Nov 13, 2014 2:26am
Hi crossy,
I am new to this thread and was really intrigued by the concept. I noticed how difficult it was to back test this idea and what a big disadvantage it was while trying to come up with how to trade this thing, as many people have commented.

So I threw this tool together as a rough idea of how to back test a trade based on whatever criteria, as yet not defined, one may have selected.

The tool its self simply calculates the net movement and profit generated from the individual pairs between the start index and end index that you input and will compute the result. It will draw a line from start to finish so you can see where the trade started and ended and print the profit and info in the labels.

As to how to trade this system and if it can become that, is why I would like this thread to continue, all the major players from this thread seem to have disappeared.

The search for how to generate the right signal continues, I was hoping that people with more experience in this stratagey would suggest some entry signals.
  • #796
  • Nov 13, 2014 3:34am Nov 13, 2014 3:34am
it should be as an indi, to collect the history data of 3 pairs, then plot the result as a histogram or a graph , nice inputs could be . lot size for each pair , accounting swap interest , ecc
  • #797
  • Nov 13, 2014 6:30am Nov 13, 2014 6:30am
Well I did do some quick rough mashup and I got these two

Attached Image (click to enlarge)
Click to Enlarge Name: Indis.png Size: 67 KB


The first one tracks the movement of the entire ring for all the various trade types. you can turn the color off to shut off a type. (PropMovement)
Its three trades with their reciprocals. Theoretically if you enter a trade at max negative it will end up in positive by the time it crosses zero. THEORETICALLY!!


The second one is the absolute movement of each pair in the ring (Individual Movement)

They get a little sticky because of the three pairs but they should be ok
Attached File(s)
File Type: mq4 IndividualMoveArb.mq4   9 KB | 994 downloads
File Type: mq4 PropMovement.mq4   10 KB | 940 downloads
  • #798
  • Nov 16, 2014 2:58am Nov 16, 2014 2:58am
good job...altough i have to admit that there is really no way to have profits from the simple currency ring unless you put a twist in the recipe...
i mean , you have to risk something to gain something .
Now this risk in the ring is controlled , because of the relation between the 3 pairs. If one is up, the other is down and the third can be stuck, the day after the third moves, the firts one was up now is down and the second is stuck, and so on ...but they are all tied each other .
So if you increase risk on one side , you can hedge later on the other if you don't go to profit.

what do you think a twist can be ?
  • #799
  • Nov 16, 2014 3:38am Nov 16, 2014 3:38am
Just thinking about this is giving me a headache, so I am sorry if the code might have a couple of bugs in it. Its just to get a handle on this thing.

One might have a look at the absolute difference or divergence from a Moving average.

Attached Image (click to enlarge)
Click to Enlarge Name: CombineMAs.png Size: 58 KB


In the end, there will have to be a directional bias, as the divergence could continue with out a mean reversion to the relationship values in any meaningful way.

There is some nugget of truth hidden in here
Attached File(s)
File Type: mq4 combinedMA.mq4   8 KB | 789 downloads
  • #800
  • Nov 17, 2014 10:11pm Nov 17, 2014 10:11pm
Hi all my friends, sorry I was away from the forum for a while.

So what's the point now? This indicator Arbpropmovement show exactly what we stated long time ago...IS NOT ANY DIRECTIONAL BIAS in ring (or hedge) trades! If you select the yellow and red lines (BBS,SSB) of rings you will see two elements on the long run: 1) CYCLIC MOVES and 2) NARROWEST discostment from the 0 line. Ther first factor means: soon or late you'll get profits (over the 0 line). The second factor means: you can stand the obvious drawdown as long as you want. That's all about trading these markets. Don't be foolished to dream about directional indicators...simply no way to get money. Get the money when the market give you and stand when the market is against you.

So what we should do now? I found these two old EAs from Master Hopwood, are classical BBS and SSB rings trades with a fixed take profit and different magic. The problem is that I'm not able to run the two EAs TOGHETER on the same account, we should fix this bug. So when a ring is down 0 the other provide you profits and viceversa. Another things that we need is a Money Manager autoadjustments of lots and related take profit that should follow the progressive growth of the equity mantaining a fix percent.

If some programmer can fix these points we can start to prove the strategy

All the best
Attached File(s)
File Type: mq4 Hedge EU UC EC BBS.mq4   24 KB | 633 downloads
Attached File(s)
File Type: mq4 Hedge EU UC EC SSB.mq4   24 KB | 595 downloads
"If you want something go down, let it go up first" Lao-Tzu
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