Pair trading and multicurrency arbitrage. The showdown. - page 323

[Renat Akhtyamov]

Vitaly Muzichenko #:
I reckon this week I need to add a couple more indicators, and then remove the unnecessary ones from the system, leaving just three.

So, testing your strategy for a crash

Let’s look at the white equity line and say unequivocally:

ultimately, the strategy is a losing one, regardless of the currency pairs used!

Now that’s a different story altogether!

[Roman Shiredchenko]

Renat Akhtyamov #:

So, testing your strategy for a crash

Let’s look at the white equity line and say unequivocally:

Ultimately, the strategy is a losing one, regardless of the currency pairs used!

Now that’s a different story altogether!

Ha-ha-ha-ha hee-hee-hee-hee )))

[Oganes Nersisian]

Vitaly Muzichenko #:

I opened two positions a month ago to test the‘i-Equity’ indicator’s readings

As can be seen in the screenshot, a very large swap has been charged on AUDCAD, but the indicator has also taken this into account

Current result = -19.33

Current result according to the indicator = -22.18

A difference of 2.85 is quite acceptable over such a long stretch

Why not trade on a swap-free account, so as not to lose that portion of the profit?

[Vitaly Muzichenko]

OGNS #:
Why not trade on a swap-free account, so as not to lose that portion of your profit?

Because not everyone has such accounts, and if there are no swap charges, there are other costs involved – perhaps in the form of a couple of pips’ spread.

[Oganes Nersisian]

Vitaly Muzichenko #:
This is because not everyone has such accounts, and if there is no swap, it means there are other costs, perhaps in the form of a couple of pip spreads.

You can easily set up a swap-free account on many popular exchanges; the absence of swaps doesn’t affect the final spread – that’s determined by the account type. Besides, what difference does a +1/-1 pip spread make to you? It seems you’re not doing HFT or scalping; your trades tend to run for days or weeks

I was wondering how you’re getting on with pair trading? I started looking into it a year ago, tried out loads of indicators, methods and my own strategies, and it all boils down to one thing: there are periods where trades are quick and profitable, but then there comes a point where you get stuck in a trade for a very long time. I don’t like holding trades for a long time (especially for weeks on end).

[Vitaly Muzichenko]

They don’t drag on for weeks; that’s extremely rare.

Usually, you close out the position on the same day and open a position in another pair.

P.S. There was only one person on this forum who traded pairs (Leonid), but he’s long since left. Everyone else has no idea what proper pairs trading is, but they’ve ‘tried it and it doesn’t work’.

[Renat Akhtyamov]

Vitaly Muzichenko #:

They don’t drag on for weeks; that’s extremely rare.

Usually, you close out the position on the same day and open a position in another pair.

P.S. There was only one person on this forum who traded pairs (Leonid), but he’s long since left. Everyone else has no idea what proper pair trading is, but they’ve ‘tried it and it doesn’t work’

That’s how I worked it out

you were essentially trading EURAUD (see the screenshot below)

The crux of the matter is this

if you calculate your lot sizes incorrectly, in your case trading the square and the triangle is practically the same thing (the top two screenshots)

In the third screenshot, you can see the equity for the square and the triangle based on your lot sizes

The equity rising upwards represents your combination of trades (fourth screenshot)

but the lot sizes have been calculated incorrectly, so the difference between the correct and incorrect figures is the EURAUD, i.e. the remainder of the equity from your synthetic position that is not hedged, i.e. what remains open (the bottom one shows the difference in lot sizes, an inverted copy of the EURAUD quote, which is also a copy of the equity from the top three screenshots)

[Renat Akhtyamov]

And here’s another one: logic

https://www.mql5.com/ru/forum/475752/page960#comment_60661390

[Vitaly Muzichenko]

Renat Akhtyamov #:

That’s how I worked it out

You essentially traded EURAUD (see the screenshot below)

The point is this

if you miscalculate your lot sizes, in your case trading a square and a triangle is practically the same thing (the top two screenshots)

In the third screenshot, you can see the equity for the square and the triangle based on your lot sizes

The equity rising upwards represents your combination of trades (fourth screenshot)

but the lot sizes have been calculated incorrectly, so the difference between the correct and incorrect figures is EURAUD, i.e. the remainder of the equity from your synthetic position that is not hedged, i.e. what remains open (the bottom one is the difference in lots, an inverted copy of the EURAUD quote, which is also a copy of the equity from the top three screenshots)

It looks similar, but it’s completely different.

You can see how the second pair offsets it, and if there hadn’t been a reversal and a rise, there would have been a large loss

I changed direction so as not to reverse theEURAUD position

--

So the pair is proving its worth 100 per cent

[Roman Shiredchenko]

Vitaly Muzichenko #:

It looks similar, but it’s completely different.

You can see how the second pair is levelling off, and if there hadn’t been a reversal and a rise, it would have resulted in a significant loss

I changed direction so as not to reverse theEURAUD position

--

So the pair is proving its worth 100 per cent

Thank you for getting to the bottom of this and explaining it here.....