HedgeEA - page 54

BigJoe
1285
BigJoe  

you are right , buying gbpjpy and selling chfjpy is equal to buy gbpchf

so, in order to protect the drawdown, we need to hedge also the gbpchf

bodshyipmonitor
138
bodshyipmonitor  

Hows your performace?

Recently,

haven't been see the regulars posting in the forum.. wonder how you all are doing?

kokas, live statements are updated anymore.

stevensign, hows your cost averaging method working? I have been manually opening trades at 2350 and 0010 for the past week and my current drawndown around 10%, largest I seen was 15%.

bodshyipmonitor
138
bodshyipmonitor  
Big Joe:
you are right , buying gbpjpy and selling chfjpy is equal to buy gbpchf so, in order to protect the drawdown, we need to hedge also the gbpchf

how u suggest we should include GBPCHF?

Stevensign
52
Stevensign  

Is this a Hedge? No!

bodshyipmonitor:
Recently,

haven't been see the regulars posting in the forum.. wonder how you all are doing?

kokas, live statements are updated anymore.

stevensign, hows your cost averaging method working? I have been manually opening trades at 2350 and 0010 for the past week and my current drawndown around 10%, largest I seen was 15%.

I’m only referring to the “hedge” created by two pairs of currencies; in this example I’m using the GBPUSD and USDCHF.

Refer to the attached graph “gbpusd hedge”

The top graph is the cross-pair (GBPCHF) shown as a line chart (not candlestick for clarity)

The middle (blue) chart is the hedge showing actual dollars of profit or loss buying 1.37 lots of GBPUSD and 2.63 lots of the USDCHF.

The bottom (red) chart is showing actual dollars of profit or loss just by buying 1.46 lots GBPCHF.

So it makes sense that the top and bottom graphs should agree since they are both showing the GBPCHF, the top is just PIPs and the bottom is profit or loss in dollars from a specific entry point.

GEE, does anyone see any similarity between the middle chart and the bottom chart???!!! By using 1.46 lots of the GBPCHF I get EXACTLY the same interest as 1.37 lots of GBPUSD and 2.63 lots of the USDCHF.

(If I used 1.32 lots of the GBPCHF I would have exactly the same range as the “Hedge”).

Analysis:

1) The opportunities for a cash grab are the same.

2) On a $10,000 standard account ($100,000 lotsize) and 400:1 leverage each lot uses $250 of margin so for the “hedge’ you use (1.37+2.63) * $250 = $1,000 or 10% for the GBPCHF buy position you use 1.46 * $250 = $365 or only 3.65%.

3) The cost to re-enter (spread cost and adjusting for the cost of a pip with the USDCHF at 1.2500) = 1.37*4+2.63*4/1.25=$139.0 for the hedge and 1.46*12/1.25 = $140.2 for the GBPCHF. Virtually identical within the precision of my calculations.

Conclusions:

If you’re you just hedging using two pair of currencies, it is safer to just buy the crosspair. Only one –third as much margin is required to enter the trade and this leaves more usable margin to cover any drawdown.

Is all this correct? Please correct me if I’ve made a mistake.

I’ve also attached a chart showing a “perfect” hedge, Buying 1.00 lot of GBPUSD, buying 1.96 lots of USDCHF and selling 1.00 lot of the GBPCHF. The top three lines are the different currencies. The bottom line is the profit indicator. The big spike in the middle of the chart is an error in the historical data (not my fault.) If you notice the range between the red and yellow lines is $70 which is 7PIPs!! This is just to show that it can be done, unfortunately all combinations lose interest, and there is no opportunity for a cash grab.

I'm about ready to abandon this 2/3 hedge that FR and FFS uses, I'm looking into three pairs as in the perfect hedge but unbalancing the lots to give allow cash grabs...

Stevensign
52
Stevensign  

I've attached the compiled version of my indicator. It does have a help file that will print to a file. I'm still working on it, it's still a little quirky, you may need to "rock" it back and forth between let's say the M15 and M30 settings to get it to display correctly. It sometimes takes a while since it's pulling in data from other curency pairs. It doesn't matter what chart you attach it to.

cv71co
45
cv71co  

Using Mutiple Small Hedge Pairs

Hello,

I've been reading and researching on ways to improve hedge trading, and I believe the idea is diversification. First of all, I think its not a good idea to place large trade on a single hedge pair alone, particularly on risky ones such as GBPUSD/USDCHF.

To minimize the effects of a large drawdown, yet being able to generate loads of trading traffics, I think the better way is to place small trades across several hedge pairs at a single go. To demonstrate this idea, I've created a simple Excel spreadsheet calculating lot size for a number of hedge pairs, ranging from the ones with strongest correlations to the ones with weakest correlations.

I've also rated them by appraising each hedge pair with stars. Those with more stars are generally safer than those with less stars. My idea of safe hedging is to trade perhaps 3% on the ones with 6 stars, 2% on the ones with 5 stars, and 1% on the ones with 4 stars. With the number of hedge trades available for use on the calculator, we can gather around 10 trades collectively for the ones rated 4 stars and above. Of course, one may choose to be even more conservative by trading only with the ones rated 5 stars and above.

Now, placing multiple small trades is not a perfect way of hedging. Its only a partial hedge much like that preached by FR or FFS. However, by spreading the margin over a number of currency pairs, thereby allowing one to place several small trades, its generally safer than placing everything only one or two hedge pairs alone. The idea is not to create a risk-free situation, but one where nice profits can be made at lower risks.

I'm thinking of incorporating this concept on an MT4 indicator, and perhaps an EA in the future. I would appreciate any inputs and help on realizing the idea.

BTW, I use the Stochastic indicator to tell me when to place a trade. I would look at the indications on a hedge pair before I does. It has to be lower than 80 and higher than 20 on a 4 hr time frame, and the hedge pairs must be moving in opposing directions if they are negatively correlated, and in the same direction if they are positively correlated. This is so that I'm more or less assured that the currency pairs within the hedge pair is not over-priced or under-priced.

Have a nice weekend.

bodshyipmonitor
138
bodshyipmonitor  
bodshyipmonitor
138
bodshyipmonitor  
cv71co:
Hello,

I've been reading and researching on ways to improve hedge trading, and I believe the idea is diversification. First of all, I think its not a good idea to place large trade on a single hedge pair alone, particularly on risky ones such as GBPUSD/USDCHF.

To minimize the effects of a large drawdown, yet being able to generate loads of trading traffics, I think the better way is to place small trades across several hedge pairs at a single go. To demonstrate this idea, I've created a simple Excel spreadsheet calculating lot size for a number of hedge pairs, ranging from the ones with strongest correlations to the ones with weakest correlations.

I've also rated them by appraising each hedge pair with stars. Those with more stars are generally safer than those with less stars. My idea of safe hedging is to trade perhaps 3% on the ones with 6 stars, 2% on the ones with 5 stars, and 1% on the ones with 4 stars. With the number of hedge trades available for use on the calculator, we can gather around 10 trades collectively for the ones rated 4 stars and above. Of course, one may choose to be even more conservative by trading only with the ones rated 5 stars and above.

Now, placing multiple small trades is not a perfect way of hedging. Its only a partial hedge much like that preached by FR or FFS. However, by spreading the margin over a number of currency pairs, thereby allowing one to place several small trades, its generally safer than placing everything only one or two hedge pairs alone. The idea is not to create a risk-free situation, but one where nice profits can be made at lower risks.

I'm thinking of incorporating this concept on an MT4 indicator, and perhaps an EA in the future. I would appreciate any inputs and help on realizing the idea.

BTW, I use the Stochastic indicator to tell me when to place a trade. I would look at the indications on a hedge pair before I does. It has to be lower than 80 and higher than 20 on a 4 hr time frame, and the hedge pairs must be moving in opposing directions if they are negatively correlated, and in the same direction if they are positively correlated. This is so that I'm more or less assured that the currency pairs within the hedge pair is not over-priced or under-priced.

Have a nice weekend.

hi cv71co,

glad to see you in this forum. I saw you in FFS forum but didn't reply there because I think its wasn't too good to bring such things in there. Digs actually bring out very good points in there, just abit sad that people there doesn't care too much about facts.

It would be good if we can invite him over. He really have some stuff which we could look into.

cv71co, diversification is a good suggestion. maybe we could look more into it.

I am using Bollinger Bands for my entry, maybe I should look into using Stochastic way as well.

The point you made on grabbing opportunities when they are negatively related as supposed to be positively correlated is true but I try out a few times and it wasn't everytime come out to be profitable. Lot sizes must be very precise to take advantage of this situation I guess.

my 2 pips.

bodshyipmonitor
138
bodshyipmonitor  

cv71co,

did you know you can feed in real time rates into excel sheet?

you can just activate DDE Server to do such things.

cv71co
45
cv71co  
bodshyipmonitor:
cv71co,

did you know you can feed in real time rates into excel sheet?

you can just activate DDE Server to do such things.

Hey man,

Its really nice to see you here! The world is really small huh? Do you still do egold exchanges?

I was looking into that possibility too - to feed real time rates into excel. But I'm not an expert at such things so I don't know how to do that. I may need some advice on how to do that. can you help me out? No obligations there.

Thanks!