Hedge Trading #1 - EUR & CHF

[reza_oscar]

Re: Hedge Trading #1 - EUR & CHF

 

 

I'm going to try this tactics now. Tomorrow will post first results.

 

tnx, impatiently wating for the results :)>-

[cbot]

Re: Hedge Trading #1 - EUR & CHF

 

hi

 

i give here spieler pivots with history and script on which you can manualy measure divergence in pips eur/usd,eur/ch and usch chf http://www.mediafire.com/?vwuzv1zx2uy

 

 

http://www.mediafire.com/?00gwkiynjhz

[Don]

Re: Hedge Trading #1 - EUR & CHF

 

Wow! Thanks for the codes Starting and cbot!

 

Last night I have started an EURAUD/AUDCHF, but this time with balanced lots. EURAUD was 0.10 and AUDCHF was 0.19 . This balanced out the difference in prices of the both pairs.

However it was a mistake, too, since this way the pair which brought the negative swap is went by almost the doubled lots! So my swap-loss on that pair was also almost doubled. +3.17 swap against the -4.09 . It's a loss.

I don't know, but it seems you have to decide if you want to go after the scalping thing or the swap thing.

 

Another thing is that these pairs (EURAUD/AUDCHF) are not so scalpable. The biggest loss was -37.78 and the biggest "profit" was -4.47 so far. Maybe it still figths with the spread? It seems it can't get out of the negative territory.

 

Btw I have used this formula for calculating the lotsize for the AUDCHF pair:

 

I have used the "standard" lotsize (0.1) for the pair which has the bigger price. Let's say it's 1.65432 .

The other pair has 0.87654 price. It seems if I want to get the same dollar amount then I have to raise the lotsize for this pair.

1.65432 / 0.87654 * 0.1 = 0.1887 = ~ 0.19 lot for the pair with the smaller price.

 

Again: big_price / small_price * base_lotsize = lotsize_for_small_priced_pair

 

However, I have reached nice results at the EURUSD/USDCHF test when I left the lotsizes alone and egal. Was it pure luck?

[ryaz]

Re: Hedge Trading #1 - EUR & CHF

 

Here's an EA I have for Spieler hedging

regards

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

Wow! Thanks for the codes Starting and cbot!

 

Last night I have started an EURAUD/AUDCHF, but this time with balanced lots. EURAUD was 0.10 and AUDCHF was 0.19 . This balanced out the difference in prices of the both pairs.

However it was a mistake, too, since this way the pair which brought the negative swap is went by almost the doubled lots! So my swap-loss on that pair was also almost doubled. +3.17 swap against the -4.09 . It's a loss.

I don't know, but it seems you have to decide if you want to go after the scalping thing or the swap thing.

 

Another thing is that these pairs (EURAUD/AUDCHF) are not so scalpable. The biggest loss was -37.78 and the biggest "profit" was -4.47 so far. Maybe it still figths with the spread? It seems it can't get out of the negative territory.

 

Btw I have used this formula for calculating the lotsize for the AUDCHF pair:

 

I have used the "standard" lotsize (0.1) for the pair which has the bigger price. Let's say it's 1.65432 .

The other pair has 0.87654 price. It seems if I want to get the same dollar amount then I have to raise the lotsize for this pair.

1.65432 / 0.87654 * 0.1 = 0.1887 = ~ 0.19 lot for the pair with the smaller price.

 

Again: big_price / small_price * base_lotsize = lotsize_for_small_priced_pair

 

However, I have reached nice results at the EURUSD/USDCHF test when I left the lotsizes alone and egal. Was it pure luck?

 

 

Yes, mate, I think you chose exact moment of when both pairs were uncorrelated and with time correlation moved them on their position thus created you some green pips.

 

Yesterday I made simple test, I used nothing indicating to enter, but pure button-click strategy.

So I entered long 0.1 EURUSD and 0.1 USDCHF. Biggest difference I observed was -8-12 dollars and this morning I observed the difference of -1.2 dollars.

 

So my conclusion is that if we make a snipershot with indi and open our trades at exact divergence of both pairs, we can get this positive difference.

 

Here I placed simple indicators for checking correlation:

http://www.4shared.com/file/130482559/4e99fce6/_Correlation_IND_CHARTlite.html

 

Its use should be: enter when both charts have biggest difference between them.

Close the trade when charts are again aligned or even created a positive divergence, which is even more good for green pips.

 

So my yesterday trade is still open. Trigger to close both positions at 10 dollars profit was not successfull yet. I leave this trade for today until the time I opened them, I'll change my trigger to 2 dollars of profit only.

 

Next time I'll use correlation indi for opening the trade. However I suppose there are also should be tricks at what time better to check the divergence, what are the ranges starting from which trade will be positive, so we need to observe and make our experience sharing on the topic if we are to be successful in this. And even news - different news on different currencies move the correlation.

 

Was not a great fan of hedging, but now I see myself that it works and interested in this line of trading. Let's continue posting our experience on this.

 

 

 

Don, Ryaz, other coding gurus

can you have a look on indi

http://www.4shared.com/file/130482559/4e99fce6/_Correlation_IND_CHARTlite.html

and check if you can use it in your small EA for triggering entry?

 

Or even perhaps to reconstruct this one

http://www.4shared.com/file/131473750/a85a6b2c/_FXRM_Open_trade_History.html

so it can use input from correlation indi.

 

I think there are also should be other more robust indis for hedging, would highly encourage all here to share them and your experience with them here. Thank you, guys.

[⭐ birt]

Re: Hedge Trading #1 - EUR & CHF

 

So my swap-loss on that pair was also almost doubled. +3.17 swap against the -4.09 . It's a loss.

I don't know, but it seems you have to decide if you want to go after the scalping thing or the swap thing.

Spreads are going to kill you if you open right before swap time and close right after, otherwise currency movement is going to give you a margin call in the long run if you keep open positions long enough and you aim for sensible swap gains.

 

Btw I have used this formula for calculating the lotsize for the AUDCHF pair:

 

I have used the "standard" lotsize (0.1) for the pair which has the bigger price. Let's say it's 1.65432 .

The other pair has 0.87654 price. It seems if I want to get the same dollar amount then I have to raise the lotsize for this pair.

1.65432 / 0.87654 * 0.1 = 0.1887 = ~ 0.19 lot for the pair with the smaller price.

 

Again: big_price / small_price * base_lotsize = lotsize_for_small_priced_pair

 

Imo, that's wrong. The report between EURAUD and AUDCHF is expressed by none other than EURCHF, which is where you should get the lot sizes from.

We have the following relationship:

EURAUD * AUDCHF = EURCHF

Putting the current values into it:

1.6990 * 0.8916 = 1.5148

This means that, assuming EURCHF remains constant, if EURAUD is moving up by 10 pips (to 1.7000), AUDCHF will move down by approximately 10 / (1.5148 / 1.7000) = ~6 pips. In other words, 1 pip AUDCHF is "worth" X pips EURAUD, where X is the EURCHF exchange rate divided by the EURAUD exchange.

 

To sum up, EURAUD will move by a factor of EURCHF_rate/EURAUD_rate faster than AUDCHF, which in our current market conditions is about 1.6989. Finally, for every ~169 pips in EURAUD, the market will move 100 pips in AUDCHF, assuming EURCHF remains constant.

 

In order to properly hedge, one other very important thing that you have to calculate when setting the lot size is the tick value. It will most likely be different for the two pairs, depending on your base currency. Just make sure you take into account MarketInfo(Symbol(), MODE_TICKVALUE) when calculating lot size.

 

One last thing: when hedge trading like this, you're aware that it's exactly the same as trading EURCHF, right? The only difference is that you have a higher spread and a bit higher swap to pay.

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

All right, guys.

 

My trade opened yesterday has been closed with total profit of 4 dollars (initially I set it to 10 and in the end it could trigger sometimes, but I preferred here and now).

 

Biggest DD I observed was 25-36 dollars.

Here is the deal:

7057826 2009.09.09 21:44 buy 0.10 usdchf_fx 1.04061 0.00000 0.00000 2009.09.10 13:52 1.03756 0.00 0.00 0.02 -29.40

7057832 2009.09.09 21:44 buy 0.10 eurusd_fx 1.45688 0.00000 0.00000 2009.09.10 13:52 1.46025 0.00 0.00 0.00 33.70

 

So indeed this is nice example that hedging works.

Lessons learnt:

- I opened the trade w/o looking on correlation indi. If I would use correlation indi, profit could be triggered earlier and in more pips.

- Profit triggered during news on USD Unemployment Claims. So the impact was not the same of EURUSD and USDCHF, thus enabled EURUSD move up faster than USFCHF was moving down.

- Indeed we need to use lot sizes adjusted to currencies value. In my example it was not that critical, but with other pairs this can well be a key issue.

 

Look forward to Don and other guys work on automatization and further thoughts of this. :shand:

I also think there are seasoned hedging guys amongst us, so their feedback and experience sharing is most welcomed here. :shand:

 

And I remember news trading strategy when EURUSD and USDCHF are opened before news time, so profit was triggered by different impact on CHF and EUR, while we have pretty secured position.

[ryaz]

Re: Hedge Trading #1 - EUR & CHF

 

...can you have a look on indi

http://[email protected]/file/130482559/4e99fce6/_Correlation_IND_CHARTlite.html

and check if you can use it in your small EA for triggering entry?...

Do you mean an EA that trades the divergence on correlated pairs?

regards

[⭐ birt]

Re: Hedge Trading #1 - EUR & CHF

 

All right, guys.

 

My trade opened yesterday has been closed with total profit of 4 dollars (initially I set it to 10 and in the end it could trigger sometimes, but I preferred here and now).

 

Biggest DD I observed was 25-36 dollars.

Here is the deal:

7057826 2009.09.09 21:44 buy 0.10 usdchf_fx 1.04061 0.00000 0.00000 2009.09.10 13:52 1.03756 0.00 0.00 0.02 -29.40

7057832 2009.09.09 21:44 buy 0.10 eurusd_fx 1.45688 0.00000 0.00000 2009.09.10 13:52 1.46025 0.00 0.00 0.00 33.70

 

So indeed this is nice example that hedging works.

Lessons learnt:

- I opened the trade w/o looking on correlation indi. If I would use correlation indi, profit could be triggered earlier and in more pips.

- Profit triggered during news on USD Unemployment Claims. So the impact was not the same of EURUSD and USDCHF, thus enabled EURUSD move up faster than USFCHF was moving down.

- Indeed we need to use lot sizes adjusted to currencies value. In my example it was not that critical, but with other pairs this can well be a key issue.

 

Look forward to Don and other guys work on automatization and further thoughts of this. :shand:

I also think there are seasoned hedging guys amongst us, so their feedback and experience sharing is most welcomed here. :shand:

 

And I remember news trading strategy when EURUSD and USDCHF are opened before news time, so profit was triggered by different impact on CHF and EUR, while we have pretty secured position.

 

Sorry to burst your bubble, but you used an incorrect number of lots. Due to the things I explained above, an USD impulse (such as US news) will move the EURUSD pair more than it will move USDCHF and if you use the same number of lots, you will end up with differences in the two trades, which is how you got the drawdown & profit. Had you calculated your lots correctly, the sum of your trades profit would've been unaffected by the US news impact and only affected by the EURCHF exchange rate.

 

So, if you calculate the lots correctly, trading this model on EURUSD and USDCHF is identical to trading EURCHF (with worse spreads and worse swaps). If you calculate the lots incorrectly, it's equivalent to trading EURCHF with a slight influence from the USD strength.

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

Do you mean an EA that trades the divergence on correlated pairs?

regards

 

Exactly, mate. This is the point - check if there is a devergence between two graphs (EURUSD and USDCHF) and place trades accordingly.

 

Not aware if you were working on such an EA, but Don said he has started to work on and he has made a simple EA which opens two positions (EURUSD and USDCHF), so we just need to put trading decision check before Ordersend function, so that EA will only open trades when there is a divergence between both pairs.

And as a temporary solution we can use the EA I posted before. It triggers closing both positions when predefined profit on account is reached.

 

So, if you calculate the lots correctly, trading this model on EURUSD and USDCHF is identical to trading EURCHF (with worse spreads and worse swaps). If you calculate the lots incorrectly, it's equivalent to trading EURCHF with a slight influence from the USD strength.

Indeed, margin for EURUSD is 2.91 dollars on 1:500 account and on USDCHF it is 2.0 dollars

 

So when I traded 0.1 EURSD and 0.1 USDCHF indeed I traded almost 50% more EURUSD than USDCHF. But I think we should check if we can earn profit entering at the moment of divergence between two pairs, with correct lots, e.g. EURUSD 0.1 USDCHF 0.15.

So far we haven't checked if this works or not, so our bubble is not bursted yet :)

[Don]

Re: Hedge Trading #1 - EUR & CHF

 

If we are using improper lotsizes, then it's like if we were causing an "artifical divergence". Am I right on this? A very little, non-tradeable natural divergence could be "magnified" by intentionally improper lotsizes. We just have to find out which pair's lotsize must be "mussed" and by what amount to get a positive result within a reasonable time. Like if WE were tell the prices... ;))

Am I on something or am I wrong again? :-?

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

If we are using improper lotsizes, then it's like if we were causing an "artifical divergence". Am I right on this? A very little, non-tradeable natural divergence could be "magnified" by intentionally improper lotsizes. We just have to find out which pair's lotsize must be "mussed" and by what amount to get a positive result within a reasonable time. Like if WE were tell the prices... ;))

Am I on something or am I wrong again? :-?

 

In our case we were betting more on EURSD, and indeed EURSD is in uptrend now.

But similarly USDCHF is in downtrend, so Iwould not be surpriced if we would place more lots on USDCHF, but in SELL direction, so both trades were SELL.

 

So our LONGs with more EURUSD was logical.

 

Anyways, mate, let's proceed our investigation until we invent holy grail or clearly see this is not the right direction towards it :shand:

 

Only those are winners, who eager to try and check, and not those who don't even bother to try smth new :)

[Don]

Re: Hedge Trading #1 - EUR & CHF

 

I understand birt's reasoning when he writes it's like if we were trading EURCHF alone. Yes, it's LIKE. But I have a feeling that this kind of hedge trading is in a more calm range, no big breakouts etc. Of course we must pay for this "extra service" by paying the double spread and swap (however, if we are buying these pairs, WE get the more swap).

 

Ok, you know what? I'll put on my little EA again on both EURUSD and USDCHF, but this time I'll attach it on EURCHF, too. If birt is right, then both results (EU/UC and EC) should show the same drawdown and profit.

 

But if I'm right, then EC will be full of "jumps" (or at least bigger swings) and EU/UC trading will have a more "ironed out" shape.

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

I understand birt's reasoning when he writes it's like if we were trading EURCHF alone. Yes, it's LIKE. But I have a feeling that this kind of hedge trading is in a more calm range, no big breakouts etc. Of course we must pay for this "extra service" by paying the double spread and swap (however, if we are buying these pairs, WE get the more swap).

 

Ok, you know what? I'll put on my little EA again on both EURUSD and USDCHF, but this time I'll attach it on EURCHF, too. If birt is right, then both results (EU/UC and EC) should show the same drawdown and profit.

 

But if I'm right, then EC will be full of "jumps" (or at least bigger swings) and EU/UC trading will have a more "ironed out" shape.

 

Great! Agree hedged trading should be less drawdowny than pure EURCHF trading. That is that simple so I even don't bother to check this out. In case of hedged trade we only have DD up to a level both pairs become uncorrelated and after that stance both pairs come back to their equilibrium correlation level.

 

Pls if you have time, look at the indi I posted if you can develop trading rules using it, so your EA can be re-programmed to open trades only when certain level of divergence is achieved.

 

In the meantime I'll observe it's (indi) behavior and share my observations later.

[Don]

Re: Hedge Trading #1 - EUR & CHF

 

I have checked out the Correlation indi.

http://img22.imageshack.us/img22/5099/correlation.gif

It looks like a slow+fast moving average indi WITHOUT the lag. Is it?

We should set up limit orders around the crosses (I have marked them with a yellow circle). If the correlation is at the zero point then we just set up those pending orders and wait. This way we could reduce DD even more.

 

(I just want to make it clear that I'm not an mql guru, I'm just using my 20 years programming experience when I messing with mql. :) So, if someone can make it, then don't wait for me, because maybe I'll fail.)

[cbot]

Re: Hedge Trading #1 - EUR & CHF

 

this system make very well,but intervention SNB can your account crash,some people hedge dax and eur usd, Ftse and usd jpy ,aud and nzd,if you want testing it,

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

I have checked out the Correlation indi.

http://img22.imageshack.us/img22/5099/correlation.gif

It looks like a slow+fast moving average indi WITHOUT the lag. Is it?

We should set up limit orders around the crosses (I have marked them with a yellow circle). If the correlation is at the zero point then we just set up those pending orders and wait. This way we could reduce DD even more.

 

(I just want to make it clear that I'm not an mql guru, I'm just using my 20 years programming experience when I messing with mql. :) So, if someone can make it, then don't wait for me, because maybe I'll fail.)

 

Mate,

I made a simple pic. Check this out:

http://i037.radikal.ru/0909/37/5fc2bf1af9fc.jpg

I think it's not about traps around yellow circles.

I think we just need to open trades when we have indi signal (bottom indi line makes its low) and close when bottom indi line makes its high.

 

this system make very well,but intervention SNB can your account crash,some people hedge dax and eur usd, Ftse and usd jpy ,aud and nzd,if you want testing it,

 

Mate, if we know the nature of interventions (they move currency in one way only, not like SNB decided to lock it in close corridor so it moves it up and down, absolutely not), we can decide which way to go:

both Buy or both Sell. And we can even get our trade closed faster from interventions.

In this way we need to go that side of trade, which provides profit in case on intervention on CHF pair, so considering EURUSD as a floating pair only and betting on USDCHF.

 

We also need to learn which pair makes divergence in correlation most of the time, so a pile of factors to consider, nobody said it's easy money.

[cbot]

Re: Hedge Trading #1 - EUR & CHF

 

is posible in indicator have longer history?? thanks

[Don]

Re: Hedge Trading #1 - EUR & CHF

 

(Just a little note, between parentheses: there was a thread already about the interest earning thing on II. Here it is: http://www.indo-investasi.com/viewtopic.php?f=6&t=3605&hilit=trio+hedge )

[Starting]

Re: Hedge Trading #1 - EUR & CHF

 

is posible in indicator have longer history?? thanks

 

Sure, mate.

 

You just need to untick the button "Auto scrolling" and scroll your chart back to the period you want.

Then click Ctrl-I and select one indi, go to its settings, click ok. Then repeat the same with second indi.

This is to let them refresh current graphs.

 

So key point is that these indis consider current most left bar on your chart as a zero point from which they start to draw lines.

[deadsoul]

Re: Hedge Trading #1 - EUR & CHF

 

hello all...

thank you so much for your efforts here ...

last night simply i open tow positions buy eurusd and buy usdchf regardless of the time ..

i checked it today around noon that's 11 GTM and it was 36 dollar positive ...

simply it works but you have to be in the right time to close the trades...

[matka]

Re: Hedge Trading #1 - EUR & CHF

 

One last thing: when hedge trading like this, you're aware that it's exactly the same as trading EURCHF, right? The only difference is that you have a higher spread and a bit higher swap to pay.

 

By trading one pair only you can also avoid differences in time of opening/closing trades because of requotes and time of tick differences (I don't know how to put the last one properly.. hope you'll understand) :">

 

Starting, Don, if you have doubts about Birt's statement do simple test. Open two trades on majors (with proper lots calculation) and one on EURCHF and monitor/log profit/loss for some time.

 

And one more thing.. trading doesn't mean analysing. EURUSD & USDCHF creates EURCHF not vice versa ;)

 

BTW can you please point me to the indicator which puts two pairs on the chart, both as candles ?

[Don]

Re: Hedge Trading #1 - EUR & CHF

 

Both of you, matka and birt, want to prove to me that trading EURUSD/USDCHF is actually like trading EURCHF. It's not necessary. Yes, that's true, I understand that, quite simple, no problem.

But a temporary off-hedge situation at trading two correlated pairs draws less down than a breakout to the totally opposite direction on a single pair. That's why I feel hedge-trading safer, smoother. Is it a false sense of safety?

 

By trading one pair only you can also avoid differences in time of opening/closing trades because of requotes and time of tick differences

The positions can be opened by an EA with only 1-2 ticks difference. And since these pairs are never perfectly correlated, it's not a big problem if the two opened positions are slipping a bit here and there, I guess.

[matka]

Re: Hedge Trading #1 - EUR & CHF

 

Both of you, matka and birt, want to prove to me that trading EURUSD/USDCHF is actually like trading EURCHF. It's not necessary. Yes, that's true, I understand that, quite simple, no problem.

But a temporary off-hedge situation at trading two correlated pairs draws less down than a breakout to the totally opposite direction on a single pair. That's why I feel hedge-trading safer, smoother. Is it a false sense of safety?

 

Don please do not feel offended. It wasn't my intention. I am sorry. I am not trying to prove anything, I am just trying to share my experience. Of course you can benefit from very short time differences/bearkouts but it is totally different story, not necessary correlated to hedge strategy ;-)

 

btw, do you know the name of the indicator I asked about ?

 

The positions can be opened by an EA with only 1-2 ticks difference. And since these pairs are never perfectly correlated, it's not a big problem if the two opened positions are slipping a bit here and there, I guess.

 

yes, I think you are right

[⭐ birt]

Re: Hedge Trading #1 - EUR & CHF

 

That's why I feel hedge-trading safer, smoother. Is it a false sense of safety?

 

Afraid so. What is actually happening is that due to miscalculations in lot sizes and/or due to the "slowness" of EURCHF which you are actually trading, it's similar to trading a very small lot size. It feels safe because the profit/drawdown numbers range at most in the double digits. EURCHF typically moves less than 50 pips daily as of late and trades sideways for ages, just check the daily chart.

 

I'll give you a manual test example: open a trade using your setup at 07.09.2009, around 20 GMT, long EURUSD and long USDCHF. Close it the next day at 05 GMT. See what would have happened, then check out EURCHF in that period.