So, what are your definite rules for trading this system?
I was right about last weekās wierd movements in market, why Euro wasnāt crashing but the pound was:
the ECB was āsecretlyā printing up to 100 billion to lend to Greek banks to prop them upā¦see story here
100 billion, nima, i wish iām a greek citizen.
Iām not!
That money is for the banks, not for the citizen hehehe. Here in Mexico had about 16 years ago one issue like Greece. After the big money injection program finished, no person became rich. The bank were saved and safe from problems of liquidity, but all the Mexicans finished with an economic burden to pay for generations :(. At least the problem is in a comfortable multi-year deferred plan instead of an explosive problem, but it didnāt make us rich hehehe.
do you support keltons original system using the overlay and buying and selling eurusd and gbpusd against each other?
Hey Christina, I donāt use that specific method because Iām purely automated in my trading. However, there are some important aspects of that system that can be generalized for manual traders. Keltonās method is essentially a shorter term strategy or intraday/day trade. If youāve overlayed charts and analyzed the crossovers on shorter time frames you can see lots of opportunity. This can be viable as long as the big risk of prolonged divergence is dealt with in a systematic manner. One way to do this is to not allow martingale sizing. This means that even if a larger stop loss is hit occasionally, it isnāt on large lots and so the overall risk profile stays intact. It comes down to a balance between taking lots of smaller profits and an occasional larger loss.
The overlay method by its very nature resets the trading on each session. After looking at this mechanically, the principle seems sound. If you reset while after youāve banked profits, the method works out with net profits. If you reset after a larger loss, the method loses, so the key to the reset is to do it after / while you are in the money or before a large loss has been allowed to accumulate.
Then there is the longer term variation. This strategy looks at longer term charts (hour-daily) and takes advantage of the bigger swings but there are fewer opportunities. Jedsterās method of dealing with larger drawdowns is to close out positions not at mean reversion but after a 1-2 deviations have been traversed. So if he bought EG at -4 deviations then he might take profits at -2 deviations. This will increase the odds of not getting caught in a larger losing position, but does cut down on the profits somewhat. But I think for most investors / traders the consistency factor of a smaller drawdown is worth taking a smaller payoff and reducing risk of ruin.
Fxez, could you explain what you mean by āresetā? Do you mean closing and reopening charts?
And do you have a thread or site or info about your automated system?
I think he referrs to readjust the charts. I mean, you should fix the charts once you are starting your trading session, to see a divergence without resizing of the charts.
After you close your charts or finish your trading session, you should reset the adjustment to the chart and readjust again if you are going to trade again.
Yes, medisoft got it. The reset is to realign the two currency pairs so that they have an equal starting point. This is the manual method described by Kelton when you start trading for the day. If no reset is done, the pairs tend to drift apart so far over time that there are no short term crossovers. With a martingale position sizing strategy that would mean a drawdown. When there are no crossovers, the profit opportunity is lost and instead you are at the mercy of the markets to determine your fate.
Crossovers are good and so the natural drifting of the pairs needs to be balanced with risk management and the desire to make profits from a stable system. The theory of pairs trading is that you achieve stationarity, or something that looks like a sine wave curve - a stable and deterministic system. The markets have drift or trend so measures must be taken to deal with this reality. I donāt have an answer to the optimal time to reset, but from my backtests I can say that periodic resets after profit taking helps the overall profitability of the system.
FXEZ have you had any success with automating any of previously mentioned trading ideas? I have really got to learn to write MT4 EAs!
Iām working in R.
FXEZ thanks for the thorough response.
with the whole reset thing
so basically when youāre in a trade turn the scale fix ON
when you close your trade with a profit turn the scale fix OFF so you can look for the next trade?
I dont know how to backtest 2 charts overlapping each otherā¦
I want to backtest the eurusd and gbpusd 1min or 5min charts
I know I can just use the D1 or higher timeframes but that would rescale the charts
On the 1min or 5min has the prices ever diverged by 150 pips? What about 200 pips? And if this happens itās very very rarely. No?
thanks anyone
I donāt have all the answers on this topic and since I donāt implement these trades manually someone else might be better to tell you how they manage their window settings. The drift happens over time typically so every trade might be too much if it interferes with your trading. But after a few hours or after closing a longer term position it might be wise to reset to bring the pairs back into alignment.
On your other question I saw a link on that subject a short while ago. I was leaving that page open but had to close it recently - too many pages in the browser! Now that I closed it and just saw your question I had to search through my web history to find it - but I did find it! So here it is - it looks quite involved so gl with the implementation! 
How to backtest multiple forex currency pairs using MT4 MQL4 code
How is it going people?
Iām good, going to kickboxing tonight,
Then prob get some cold beers and sit outside
And enjoy the evening,
You?
Quick updateā¦
Just got the beer! 6 bottles of desperado!
Thanks a lot FXEZ
yes it does
reading and learning
Medisoft howās your 100 SL 5 TP coming along?
I finally read the entire thread. Iāve just been using the system for 2 days but so far so good.I am using the 1 minute chart. Positive 58 pips. :35: Will continue to test. I would love to hear about the results of others too.
Hey guys,
I might have found an indie that gives the exact same results as Vit. Iāll attach it on the next post as I need 5 posts in order to post links/attachmentsā¦ sighsā¦
Anyhow, Iāve tested this for 2 days now and the results are quite literally identical - well as far as I can see anyway.
Please give it a try and let me know. This isnāt my indie - I found it on FF.
If it does indeed do the job, maybe sum slickrick coder here could give a shot at doing an EA for us?