3A. IF one price does an upward break out while the other stays about the same or lags on its downward movement you will have a seperation in the hedge. If you are happy with the seperation and it equals a positive overall return, I suggest closing all positions and starting again.
3B. IF one price does a downward break out, while the other stays about the same or lags behind, find a comfortable place to open another long position on your loosing pair (I like 200 pips, but its up to you) then average the losing position w/ your new position to determine a break even point.
I see now. Thanks, I will try a few on demo to see how it goes.
TalonD
I used GIMP to put the charts together. GIMP is an open source image editor similar to photoshop.
I had to try it to understand whats going on. I managed my trades today before I closed them down I closed eur/usd first and waited for usd/chf to come up some I was at the computer and watching the whole time as the trade had no hedge or stop. Risky move if an internet problem occurred.
This method will fail at some point with margin call because of de-correlation, divergence, spread, swap interest, ranging markets
basically because of de-corellation it happens rarely and suddenly and you’ll find the pairs just keep going in the opposite direction on and on and your dd will go on increasing
If you attempt to average down it may work a few times but at one point the market will suddenly reverse and your hedge will end up being a mess.
i don’t mean to be rude but this will just not work. Please do try if you like but for heaven’s sake dont use a live account people.
tip ------> If you like go to matlaf check the hourly corelation table and enter when the negative corelation is near 100%
even then it will not work.
I know you dont believe me that ok, time will tell … just remember dont use a live account
This is my first post on Babypips after 1yr of using it. I came across this thread 2 days ago and find it to be the missing piece in something I had shelved away. There are questions I would like to ask, but I don’t think anyone is looking.
I have placed a small ebook outlining the original strategy in detail. I hope it will be of great help to the thread, though it misses a few key aspects we will need to fill in. I did it in a hurry, so it wouldn’t surprise me much if the true pioneer(s) of the method disqualifies the model entirely, but I’d be up for the challenge.
I will later post a few numbers on how to calculate lot sizes, how to increase risk/return safely as Phil or Babypipschool would, and other variation of the strategy. Wd love it if someone did it before me? With that, I cant understand why everyone shouldn’t start trading this method ASAP, now that the logics behind it will be so clearer now. Admin ought to up Pipchaser’s stripes further for his pioneering this method.
One thing is for certain, no matter how many times it is shown that something works, someone will come along, tell you it doesn’t work and will not have any concrete proof. :mad: Meanwhile, some people learn what they can and make money.
I made some pips and lost some pips I stopped when I started to think about what could happen in a long trend. I think this would be very easy to back test with a spread sheet as it involves no indicators just price changes.
Some sort of limit would have to put on the floating loss. using a margin call and high leverage as a stop loss is not a very good idea in my opinion.(thats experience talking:p) 10:1 leverage could make me revisit that idea.
Members have brought up valid reasons not to trade the original plan. You would need to figure out a better way around the position averaging for the losing pair if you have any hopes of making it work.
Actually the method will work but the target needs to be reduced. The chart clearly shows how price oscillates between the pairs. The profit is there for the taking. I apologize for the oversize chart but it was necessary to show as much as possible. The orange/green is the usdchf and the scale is one the left.
This seems to me a perfect EA candidate.
If you knew on average for a certain length of time how much the pairs correlation deviated you could fine tune the targets. You would also know when your loss was getting to big to recover at that point all trades would be closed and the whole thin would start over. And we would all get rich because the author of this EA would share it with all Baby Pips members for free:D
You are getting warmer. Try not to think so hard. Instead of being analytical, try the intuitive path. For starters, a loss should never get too big because of the negative correlation. The net p/l will ebb and flow between profit and loss. You already know what to do when you see a profit. The timing of the entry should hit you like a ton of bricks. Just stare at the chart until the “aha” moment. Observe the velocity of each pair - distance traveled over time. That is another clue. What is the fascination with EAs? Do you really believe there is an EA that actually makes money that you can buy for a mere pittance? If you had one would you share it in a public forum or would you run it until the brokers stopped accepting your offers and placed you on the “black list”?
to program an EA you need clearly defined objective rules because computers can’t think, they have to be told what to do. I know, I’m a programmer. If it can’t be programmed into an EA then the rules are subjective and open to personal interpretation.
Try it on demo you will see how it goes.
