HedgeEA - page 47
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It was recently pointed out to me by several of my team members just how important the microtrades are. One person ran a demo for a month, made $1700, $400 from interest and the rest from micro-orders. Another team member came up with the following info: use about 2% of your original order for each currency (if you bought 1 lot of GBPUSD, then use .02 lot for the micro-order on the GBPUSD) place the Buylimit below by about the daily range (120 PIPs for the GBPUSD.) and the sell limit (actually a close) for 0.02 lots about 120 PIPs above the entry price. I'm still evaluating this info. You are relying on the currency reversing. Since the micro-orders are so small, the interest on the main order may compensate if the currency continues a down or up trend.
Can we have some examples here?
BUY 0.8 Lots GBPUSD @ 1.9671
BUY 1.45 Lots USDCHF @ 1.2445
Current Price
GBPUSD @ 1.9629
USDCHF @ 1.2499
The Orders should be set according to the current price right?
GBPUSD Range is 140
USDCHF Range is 90
GBPUSD Sell Limit @ 1.9769
GBPUSD Buy Limit @ 1.9489
USDCHF Sell Limit @ 1.2589
USDCHF Buy Limit @ 1.2409
Once the Order has been executed, New limit orders are being calculated again.
Calculating Lot Ratio
Hi all,
Does anyone know how to calculate the exact lot ratio for the GBP/JPY to the CHF/JPY & the GBP/JPY to the EUR/JPY.
If we wanted to find out the correlation for any currency pairs we can go to www.mataf.net, but what about trying to find the exact ratio of lot so when we hedge, it can be balance. ie, the GBP/JPY to the CHF/JPY.
Thanks
troy
you've benefitted from a very large uptrend though. Haven't really been any sizeable drawdowns. Are you hedging your carry trade? Have you traded in/out or just had an inital long from October which you've just left?
Stevensign,
What we are talking about here is leverage and money management. I started a GBPJPY carry trade with $1,000.00 and micro lots (.10 cents per pip) since 10/26/06 and my account is currently up 754% with swap profit of 71%. At the end of the day it's all about risk and reward. I try to keep my exposure to 10% max which allows me to ride out decent size drawdowns.
TimeFreedomLot Ratios
Hi all,
Does anyone know how to calculate the exact lot ratio for the GBP/JPY to the CHF/JPY & the GBP/JPY to the EUR/JPY.
If we wanted to find out the correlation for any currency pairs we can go to www.mataf.net, but what about trying to find the exact ratio of lot so when we hedge, it can be balance. ie, the GBP/JPY to the CHF/JPY.
Thanks
troyI still believe the optimum lot ratio is what I've stated in the past, normalize for $1/PIP and normalize for range (for range you can use average 15 minute, 1 hour, 1 day, or 1 week ranges depending on strategy).
IMHO, I believe long term correlation is best used to determine risk, i.e. total lots not lot ratio.
Leverage and Lots
I think we're calculating totals lots incorrectly and putting too much emphasis on leverage.
Example: I'll use FreedomRocks nomenclature. Standard account ($100,000 per lot, $10 per PIP) account balance= $10,000, leverage 100:1. Margin Percentage= 10% = $10,000*0.1= $1,000. At 100:1 leverage, one lot uses $1,000 of margin so for this example we can use one total lot for the trade. Roughly using my ratios lets us use 0.37 lot of GBPUSD and 0.63 lot of USDCHF. That leaves us with $9,000 to cover loses at $10 per PIP, so we can weather a 9,000/10 = 900 PIP drawdown. For the same example with a400:1 Leverage our $1,000 will buy 4 lots. now each PIP is $40 and the maximum drawdown we can survive is $9,000/$40 per PIP= 225 PIPs. Most brokers will margin you out around 50-75% of your account, not 90% as in my example.
I think a better way to calculate total lots is to evaluate maximum drawdown.
Since most brokers don't view "correlated trading" as hedges, they look at total drawdown for the account, not paying attention to trades that are in profit. If the total drawdown of open positions exceeds their limit, they will close losing trades until they are back within their margin ratio. THIS IS IMPORTANT! When closing trades, it is important to close trades in profit first and then close losing trades. Of course if you're closing all trades it may not matter if you or you broker closes them.
As a subject for another post, it may be prudent to place an entry sell order just before you get margined out for each currency pair. This may also trigger a positive cash grab if the currency continues against you!
Can we have some examples here?
BUY 0.8 Lots GBPUSD @ 1.9671
BUY 1.45 Lots USDCHF @ 1.2445
Current Price
GBPUSD @ 1.9629
USDCHF @ 1.2499
The Orders should be set according to the current price right?
GBPUSD Range is 140
USDCHF Range is 90
GBPUSD Sell Limit @ 1.9769
GBPUSD Buy Limit @ 1.9489
USDCHF Sell Limit @ 1.2589
USDCHF Buy Limit @ 1.2409
Once the Order has been executed, New limit orders are being calculated again.No Reply?
CgldSmth,
At this point I have not hedged my carry trade and don't plan in hedging. I open 1 micro lot everyday 1 hour before swap/interest payment. On Wednesday's I open three lots. I have watched my account go from +400% to +27% and now +770%. Current swap is +71%. The name of this game is time and money management. My average fill price is 228.36 with 86 micro lots or 8.6 mini lots and current margin $430.00.
What I am trying to explain here is if an account is properly leveraged you can withstand a decent drawdown, and with the help of swap even more. I believe that at the end of the day withstanding a significant amount of drawdown is the key to being successful in trading.
TimeFreedom
you've benefitted from a very large uptrend though. Haven't really been any sizeable drawdowns. Are you hedging your carry trade? Have you traded in/out or just had an inital long from October which you've just left?
so you pay no attention to the price of GBPJPY, effectively just accumulating a large holding, adding each day the amount your margin goes up with the swap?
When close ?
When you close trade, after day or when x % profit ?
Thanks
Strategy Seen In Goldenmoneytree.com
CgldSmth,
At this point I have not hedged my carry trade and don't plan in hedging. I open 1 micro lot everyday 1 hour before swap/interest payment. On Wednesday's I open three lots. I have watched my account go from +400% to +27% and now +770%. Current swap is +71%. The name of this game is time and money management. My average fill price is 228.36 with 86 micro lots or 8.6 mini lots and current margin $430.00.
What I am trying to explain here is if an account is properly leveraged you can withstand a decent drawdown, and with the help of swap even more. I believe that at the end of the day withstanding a significant amount of drawdown is the key to being successful in trading.
TimeFreedomIt's one of the strategy i saw on goldenMoneyTree.com.