HedgeEA - page 13

New comment
 

Ok, I can't take the ignorance any longer. And I'm referring to my own!!

I've done some research into this in the past, but seeing as how I can't find it, I'm going to have to duplicate my work. So here's the first part.

First, I'm creating a synthetic chart of GBP/CHF. If we take the data for USD/CHF and GBP/USD and then manipulate it, we can create a chart that looks just like GBP/CHF. To do so we must first take the inverse of the values of USD/CHF. So for example, if we are doing the close, we will take 1 and divide it by yesterday's close. This will give us a small decimal number. The value for yesterday is .804117. (I think that this is our hedge ratio, but I'm going to investigate first.) To continue our example, we would then take yesterday's GBP/USD close and divide it by the ratio we derived yesterday, this will give us our synthetic value. Yesterday's value was 2.372664. Compare this to yesterday's GBP/CHF close of 2.3729 and you will see that we are very close. By the way, I'm using InterbankFX data here. If you duplicate this process with other data you should get similar results.

I'm attaching a jpeg of a graph comparing the dealer provided rates on the close and the synthetic rate. You will notice that the two lines almost look like one. This is over the last two months of data only so that the chart could be clearly seen.

Now, I'm pretty sure that the value of .804117 is the correct hedge ratio, but I need to make sure. I initially figured this all out because I wanted to arbitrage the three pairs...but I didn't see enough opportunity there.

p.s. I can provide the spreadsheet and also further explanation if needed.

 

lol,

ok we are on the right track...

as I told many times in the past we have the tools but we still need to know how to deal with them.

Ratio, correlation, and Bollinger will increase a lot the profitability of the expert, but for each combination of pairs we need to construct a set of parametres that will optimize the performance of the EA. But I must notice that everytime you use it, even with correlation and bb turned off, this is a profitable system as long as you do not have your account over leveraged and you do not trade big ammounts for you account size.

Thats why I'm asking a lot for someone to check the MM part of the script, I'm not an expert, and I surely will be much more rested if someone look at it and tell is ok

Regarding BB bands. It is not fully implemented on the script, as fas as I know it will only work good with default pairs.

 

.804117 is also the pip value for USD/CHF for 1 lot. if you have .8 GBP/USD and 1.0 USD/CHF you are trading almost identical equal dollar amounts per pip move.

if you have .85 GBP/USD and 1.0 USD/JPY you are also trading almost equal dollar amount per pip move.

 
kokas:
lol,

Thats why I'm asking a lot for someone to check the MM part of the script, I'm not an expert, and I surely will be much more rested if someone look at it and tell is ok

here is a suggestion: for GBP/USD, EUR/USD, USD/CHF and USD/JPY combinations trade 1 mini per 1K for each hedged pair and add 1 micro per $100 equity gain.

 
BluePearl:
.804117 is also the pip value for USD/CHF for 1 lot. if you have .8 GBP/USD and 1.0 USD/CHF you are trading almost identical equal dollar amounts per pip move. if you have .85 GBP/USD and 1.0 USD/JPY you are also trading almost equal dollar amount per pip move.

So does that mean it will work?

I set up a demo trade to see if I'm right...meanwhile I'm working my way through some nice theory, which can be found here:

http://kreslik.com/forums/viewtopic.php?t=307

 
bwilhite:
So does that mean it will work?

yes it will work. you can also use 1:1 and it will work also.

i've been watching this ea trade for about 2 weeks and one thing to keep in mind is volatility of the currency pair. this changes. looking at the GBP/USD and USD/JPY hedge for a period of time the GBP/USD will be more volatile and at another time it could be the USD/JPY is more volatile like this past friday. if you are long GBP/USD and long USD/JPY and GBP/USD is more volatile going up than USD/JPY going down the hedge pair can close at a profit. if GPB/USD is moving up but the long USD/JPY is more volatile going down the hedged pair will show a loss.

what makes money is when the hedged pair is on the right side of the volatility.

 
kokas:
This is another profitable pair acording to some users:

Pair 1 : eurchf (Short)

Pair 2 : gbpchf (Long)

Ratio: 1.5

Correlation = ???

Bollinger = (N/A)

The correlation between these two pairs is very interesting:

5 days = 29-

20 days = 05-

100 days = 91+

[Source: mataf.net correlation analysis]

 
BluePearl:
yes it will work. you can also use 1:1 and it will work also.

I'm trying to be exact myself...which is it, 1:0.8 or 1:1. I teach math as my profession and to me these are not the same!

 
bwilhite:
I'm trying to be exact myself...which is it, 1:0.8 or 1:1. I teach math as my profession and to me these are not the same!

right now it really won't make that much difference because tbere is .2 difference and because of the volatility differences between the two currencies. sometimes having 1:0.8 would work better and other times 1:1 would work better.

BUT let's say that the USD/CHF is at 2.9100 which it was in march 1985. the pip value of the USD/CHF at that time was $3.44. then it would make a big difference. here to keep the pip value equal you would need a ratio of USD/CHF 1.0 to GBP/USD 0.35.

so to be precise and consistent it is 1:0.8 for now.

there are some hedges like sell EUR/USD and buy GBP/USD that even though the pip value is the same i have seen ratios of 1:1; or 1.5 euro to 1 gbp; or 2 euro to 1 gbp. the difference is made due to the euro being less volatile than the gbp, generally.

 
kokas:
This is another profitable pair acording to some users:

Pair 1 : eurchf (Short)

Pair 2 : gbpchf (Long)

Ratio: 1.5

Correlation = ???

Bollinger = (N/A)

I keep wondering about swaps directions..

http://www.alpari-idc.com/en/faq/swaps.php ... that broker has

different that you have...may be it is only for Alpari..?

1...67891011121314151617181920...66
New comment