Spot Forex Spread/Hedge

H

hermittrader

Hi

I am wondering anyone here care to discuss more about spot forex spread/hedge strategies.

Currently, I am looking at 3 pairs, GBP/USD, EUR/USD and USD/CHF. This 3 pairs has a correlation of more than 0.9, which made it good for pairs trading.

However, it is important to take note in spot forex, 1 pip of USD/CHF is around USD8.00 while GBP/USD and EUR/USD is USD10.00.

The other factor to take into consideration is the swaps. Also, the movement (range) of GBP/USD is usually about 20-30% more than EUR/USD and USD/CHF.

Currently, I am looking at 1.0 USD/CHF to 0.6 GBP/USD, 1.0USD/CHF to 0.8 EUR/USD, and 1.0 EUR/USD to 0.7GBP/USD.

It would be glad to hear from forumers who have done it and still doing it. Also, discussion is most welcome.

By the way, any other forums made to discuss spread trading specifically beside elitetrader

Regards,
HT

I have attached a trade log of the transaction. It is only a demo account for illustration and discussion purpose
 

Attachments

At Oanda you can size the positions to anything, so there isn't any of this lots, mini-lots, micro-lots, etc nonsense.

Getting the positions so that they're exactly the same pip weight is very easy at Oanda.

BTW, I have done some experimenting with EURUSD/USDCHF spreading techniques. But I haven't quite figured it all out yet.
 
Quote from stevegee58:

At Oanda you can size the positions to anything, so there isn't any of this lots, mini-lots, micro-lots, etc nonsense.

Getting the positions so that they're exactly the same pip weight is very easy at Oanda.

BTW, I have done some experimenting with EURUSD/USDCHF spreading techniques. But I haven't quite figured it all out yet.
More...

thanks stevegee58,

i suppose u mean the sizing is easily done at onada?

so you have been trying out some spreading techniques too, that's cool. care to share breifly any set up u using?

all the trades seen in the demo transaction were done in random. there wasnt any specific set up.

currently i am testing out trades entered at random with some ratio, but gradually i be testing out with some setup .

i have attached another updated demo transaction.
 

Attachments

this is an update of the hedge trading. almost 1.3k so far based on 50k, using almost 20% of equity for margin (8 pair, 4 hedges). 2.6% return. will continue to monitor
 

Attachments

Hi hermittrader,

Your results look interesting. Normally hedging causes one end of the currency to be positive while the other is negative. But the results show that both can be positive, especially the last few. Can you explain a bit more of your system behind this? I am currently running my system for Buy/Buy on the EURUSD and USDCHF pairs.

Thanks!!!

Paul
 
hi,

I'm starting my demo account with FR. Its a trading system based on hedging. I'm currently in demo mode with various trading currencies. The portfolio allocator suggests a number of allocation and trading strategies to keep your account within a range. As the range widens or pulls back, the system loads up at the bottom and sell at the top.

Hedging helps to manage risks of a crash...although you still need to size your margin properly (under 5-10% of account max).

The interesting thing is that you can get enough interests from currency pairs to pay for the drawdown in 50-90 days, depending your account configuration.

If you can just hold your account within +/- 10%, interests alone will pay you from 20-50% of account over time... of course you can make more from the fluctuations.
 
Quote from mrhello:

Hi hermittrader,

Your results look interesting. Normally hedging causes one end of the currency to be positive while the other is negative. But the results show that both can be positive, especially the last few. Can you explain a bit more of your system behind this? I am currently running my system for Buy/Buy on the EURUSD and USDCHF pairs.

Thanks!!!

Paul
More...

Hi Paul,

Most of the trades were entered at random, the last few were entered with some simple setup in place, if i am not wrong, should be the last 2 hedge. Basically it make use of the high corerelation factor and the deviation of the pair from its average mean technique.

Regards
HT
 
Hello all,

I am also looking to see the advantages of hedging and am using the Freedom Rocks software; in the past couple of days my account (demo)has swung into an extreme negative balance (doing the GBP/USD and USD/CHF hedge); initially I took a significant profit due to the swing in my favour, but now has gone from $13000 (from start of $10 000 since the beginning of September 2006) to about $$8000. I am waiting to see if the corrections will try and even it out.

I came accross another website goldenmoneytree that takes advantage of the high interest rates of some pairs. So, what they do is open 2 separate accounts-one with FXDD who has the highest interest rates and the other with a broker who does not charge interest. They then hedge as follows with FXDD:
Buy 1 GBP/JPY and sell 2 CHF/JPY

and the exact opposite with the other broker. In essence these trades cancel each other out, but they earn an interest of app $38 per day per lot. Double your lots, include the triple interest on WEdnesday and you have about $2000 interest per month.

In case of emergencies if there is a major swing and the accounts are approaching margin call levels, app $5000 is kept aside for this, which you can then retransfer from the winning account back to your own bank account.
 
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