HedgeEA - page 49

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Hedge Indicator

Stevensign,

I was finally able to spend some time working with your latest version of the hedge indicator, and it is quite impressive. That being said, it kind of scared me too, as it would appear that there are often LONG LONG times that two pairs are in negative territory in a carry trade (months). Is this your finding as well? I was looking specifically at the EURUSD/USDCHF first, and then the EURUSD/USDJPY in the second look.

It is my understanding that this indicator works best if one waits for a pair to come into positive (or near positive) territory after being deep in the negative. Is this correct?

This experience has cast some doubt in me regarding this type of trading, yet I've found my actual (live) trades to be nothing but profitable in the past few weeks, and generally profitable long before that. I'm starting to think I may have simply been lucky, and luck isn't something one can plan for.

I would appreciate any comments you might have. Maybe I'm not using the indicator properly, or am not interpreting the results correctly.

Any thoughts would be much appreciated.

Doug

 
dcraig:
Stevensign,

I was finally able to spend some time working with your latest version of the hedge indicator, and it is quite impressive. That being said, it kind of scared me too, as it would appear that there are often LONG LONG times that two pairs are in negative territory in a carry trade (months). Is this your finding as well? I was looking specifically at the EURUSD/USDCHF first, and then the EURUSD/USDJPY in the second look.

It is my understanding that this indicator works best if one waits for a pair to come into positive (or near positive) territory after being deep in the negative. Is this correct?

This experience has cast some doubt in me regarding this type of trading, yet I've found my actual (live) trades to be nothing but profitable in the past few weeks, and generally profitable long before that. I'm starting to think I may have simply been lucky, and luck isn't something one can plan for.

I would appreciate any comments you might have. Maybe I'm not using the indicator properly, or am not interpreting the results correctly.

Any thoughts would be much appreciated.

Doug

I've spent more time writing the hedge indicator than any EA I written, it still has some bugs but it is truly amazing if I do say so.

It sounds like you understand it. Yes, there can be very long periods of drawdown. Most of the FR pairs have basically been going up for the past six months, so it's hard to lose, but watch out when the currencies reverse. Two things to understand 1) make sure you're using a broker with great interest so the swap will help you recover from a downtrend and 2) find a good entry point and pay attention to where you are regarding the high and low range for the past 10 days or so. Looking back a year or two is too scary! Switch it to display as line and you may see cash grab opportunities.

My reccommendations: avoid the EURUSD because interest paid is too high. Avoid USDJPY because drawdown is too great and can last for weeks. Use GBPUSD and USDCHF, good correlation, good interest, can use more lots and better opportunity for daily cash grabs.

 

i agree with you this indicator help me a lot to developed my strategy (i never place new order when i tack profit , i wait for a DD and then get in)

it to bad that we don't get to check other pairs with this indicator.

I've spent more time writing the hedge indicator than any EA I written

 
Stevensign:
I've spent more time writing the hedge indicator than any EA I written, it still has some bugs but it is truly amazing if I do say so.

It sounds like you understand it. Yes, there can be very long periods of drawdown. Most of the FR pairs have basically been going up for the past six months, so it's hard to lose, but watch out when the currencies reverse. Two things to understand 1) make sure you're using a broker with great interest so the swap will help you recover from a downtrend and 2) find a good entry point and pay attention to where you are regarding the high and low range for the past 10 days or so. Looking back a year or two is too scary! Switch it to display as line and you may see cash grab opportunities.

My reccommendations: avoid the EURUSD because interest paid is too high. Avoid USDJPY because drawdown is too great and can last for weeks. Use GBPUSD and USDCHF, good correlation, good interest, can use more lots and better opportunity for daily cash grabs.

Thanks for your reply. What do you mean by a 'currency reverse'? I assume that relates to some point where the monetary policy of one of the countries' currencies changes, and the balance goes out the window, only to re-establish as something different than in the recent past. In such instances, we would have a 50% chance of being on the losing side. When you suggest that we pick a good entry by looking at the range for the preceding 10 days, are you simply refering to the trading range (pips) of the currency pairs in question, or are you referring to the hedge indicator? I suppose both would give the same indication, but just wanted more info

Last, I have two more questions pertaining to the indicator.

1) What is the horizontal yellow line at the right side of the chart signify?

2) What does "use global variables" mean?

Thanks a LOT for your input!

Doug

 
dcraig:

Last, I have two more questions pertaining to the indicator.

1) What is the horizontal yellow line at the right side of the chart signify?

2) What does "use global variables" mean?

Thanks a LOT for your input!

Doug

Forget those last two questions.

Thanks.

Doug

 

Currency reversals

I would like to investigate currency reversals a lot further. Certainly, as Stevensign has suggested, the currency pairs used in FR have been going up for the past several months. I suspect this is the same case for FFS pairs. Does anyone know off-hand what the average duration of such a 'trend' is? If the reversal gradual, or could it be considered a severe, sudden change? I kind of hesitate getting into this trend business, as I was drawn to the Hedge style due to my personal conclusion that we, as traders, will never really be able to predict trend ... I guess we just have to be careful.

Ceertainly, the BB filter for trades certainly has taken on much more importance in my mind. I'd like to figure out what the best time period to apply it would be ... 20 days, 100 days, 200 days ??

Once again, another very good lesson to keep the margin% low, and set small, daily cash grabs.

Doug

 

doug, are you using the hedgeEA with EURUSD and USDCHF? correlation settings on or your own ratio?

 
cgldsmth:
doug, are you using the hedgeEA with EURUSD and USDCHF? correlation settings on or your own ratio?

I'm using the hedgeEA with EURUSD/USDCHF on a demo at the moment with correlation and autoratio on, but have used several other pairs with different combinations of correlation on/off and my own ratios. I'm also using a system similar to the FFS which I'm trading live. All of the above use/depend on correlation between the pairs.

When I first started looking at this type of strategy, I figured that two pairs that had a -97 correlation would move in tandem (but opposite directions), and the carry trade would come into and out of profitability. I've been closing my postions (in both strategies) when I hit 5% profit, which can be as much as twice a day, or once a week. I rarely hold a carry trade for more than a week.

After looking at Stevensign's indicator, it is apparent that one CAN hold a combined position (i.e. carry trade) for quite a while. This is both a good thing, and a worrisome thing. At some point in the not to distant future, there will be 'currency reversals' in whatever pairs we're currently trading, and we may have a spell of losing trades, which is currently very rare for this strategy. Many of the pairs we currently discuss on this thread are near their year, or multiyear high (yen, franc, euro, etc.), so this reversal may be sooner than later. I'm just wondering how to avoid getting caught in it, or if there is even anything to worry about. Once it happens, we will simply go short on the trades instead of long. And I suppose during the sideways market that will precede any reversal, we may have lots of opportunity for cash grabs on a regular basis.

I don't mean to rant, but I just wanted to open the discussion up a bit. In addition to correlation, we might also consider looking at the ratio between any two pairs we're trading as an indicator. I'm still figuring out how to best do this, but I think it's part of the larger puzzle. Each currency has a range in which it trades over a set period of time (quarters, years, etc), and the ratio between two pairs might provide information on when we should be going long or short in our opening trades.

Doug

 
dcraig:
I'm using the hedgeEA with EURUSD/USDCHF on a demo at the moment with correlation and autoratio on, but have used several other pairs with different combinations of correlation on/off and my own ratios. I'm also using a system similar to the FFS which I'm trading live. All of the above use/depend on correlation between the pairs.

When I first started looking at this type of strategy, I figured that two pairs that had a -97 correlation would move in tandem (but opposite directions), and the carry trade would come into and out of profitability. I've been closing my postions (in both strategies) when I hit 5% profit, which can be as much as twice a day, or once a week. I rarely hold a carry trade for more than a week.

After looking at Stevensign's indicator, it is apparent that one CAN hold a combined position (i.e. carry trade) for quite a while. This is both a good thing, and a worrisome thing. At some point in the not to distant future, there will be 'currency reversals' in whatever pairs we're currently trading, and we may have a spell of losing trades, which is currently very rare for this strategy. Many of the pairs we currently discuss on this thread are near their year, or multiyear high (yen, franc, euro, etc.), so this reversal may be sooner than later. I'm just wondering how to avoid getting caught in it, or if there is even anything to worry about. Once it happens, we will simply go short on the trades instead of long. And I suppose during the sideways market that will precede any reversal, we may have lots of opportunity for cash grabs on a regular basis.

I don't mean to rant, but I just wanted to open the discussion up a bit. In addition to correlation, we might also consider looking at the ratio between any two pairs we're trading as an indicator. I'm still figuring out how to best do this, but I think it's part of the larger puzzle. Each currency has a range in which it trades over a set period of time (quarters, years, etc), and the ratio between two pairs might provide information on when we should be going long or short in our opening trades.

Doug

I've attached my latest version, mostly some polish and minor code changes to make it compatible with more platforms. I mostly use it on a 15 minute chart, if it doesn't display correctly try clicking on 5 minute then back to 15 minute. It will autoratio on whatever chart it is put on, try it on a daily weekly or monthly chart, you can also change the 200 SMA it uses to auto ratio, try 14(days).

Have fun, give me some feedback. Sorry it's still limited to FR "buy" currencies, I hope to update it in the next week to be more universal.

I've figured out a way around the missing candles on Metatrader, mainly on one minute charts that version 12 has incorporated. it shows that during non-farm payroll announcements of the first Friday, that it has little impact on the hedge, at least with the GBPCHF with the USD in the middle.

Files:
hedge_indicator_v12.ex4  39 kb
 
Stevensign:
By doing buys on USD based currencies just before 2200 GMT you gain interest and delaying your buys on non-USD based currencies until after 2200 GMT you don't pay interest THAT DAY. With a platform that gives high interest, that is significant. (As I write this I have heard that IBFX is the largest Metatrader platform, gives the highest interest, 400:1 for FreedomRocks members, and has a free cash grab advisor based on FR).

If you do a cash grab within 24 hours, you never pay interest. The small amount you save is not significant but every little bit helps. The first day's interest almost covered my spread.

On a different subject-

Geez, my girlfriend that has been steadily losing money doing regular trading for two years and losing all the while, now has made 10% manual trading in my live account in the past three days using this strategy without knowing anything about this strategy and it's almost stress free trading.

Steven,

thats great!

Anyway.. just to confrim the strategy cos I will be writing this EA later.

Broker Used: NorthFianance

BUY GBPUSD, BUY USDCHF

Ratio Used: 1.8

Buy 1 Lot of GBPUSD at 2155Hrs

Buy 1.8Lots of USDCHF at 2205Hrs

When profit hit certain profit level, auto close.

Hope you can comment or add more information. :P

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