Hi Medisoft,
where did you get this information about FOMC? :o
Hello medisoft,
Can i ask you what is your SL for this system, how much are you risking, when you are entering a position and how are you taking profit.
For now im risking on 10% of my account, 200 pips for GBPUSD and 200 Pips for EURUSD (10% risk / 400 pips whole, 200 pips each pair), i make my entry when i see a gap of 20 pips and i reenter when i see a gap of 40 pips.
I close when im +10 pips example: i open a trade and GBPUSD is +45 pips and EUR is -35 = +10 pips then i take out my position, i dont know if there is a way of doing this better.
Is a very slowly method, and i dont know if i making this right, thanks for the help and btw i speak spanish 
Have a great weekend
My own account. I had positions open while the FED was saying about the QE3, while the monthly job report and various weekends, and my positions stayed in control all the time, no big drops, no huge drawdowns.
It is a little complicated the method I trade. I think the best is to follow original Keltonās method.
But Iām using 400 pip stop loss, trying to limit that to be at most 5 % of my account per trade.
I enter the trade dynamically, based on statistics collected from the divergence, at 2 standard deviations, after that I enter every 20-25 pips of divergence IF pairs are correlated on D1 or W1, if not, I double that to 40-50 pips.
The profit target is the half of the divergence I entered, if I place the trade when Iām at 60 pip divergence, my target is to win 30 pip divergence, if the divergence is 200, i look for 100 pip take profit and so on.
I think the method you are using is good, because it is well tested by Kelton and our partners here in the thread. The method Iām using is still testing, only 2 months running.
Hello Medisoft,
When you talk about your stop loss of 400 pips per trade, is like this, example: GU is -300 and EU is -100 pips then your out.
Sorry give you all this questions.
Te lo agradezco mucho
Nop. If the divergence grows up to 400 pip plus my entry (let say i entered at 40 pip divergence) then i close that basket. My measuring shows me that the average divergence donāt exceeds 300 pips for eugu in long time, so i have chosen 400 to have a good extra to reduce the risk of loss.
I added euraud/eurnzd to my measuring system. I will let it run until december to have a good measures for the median divergence and itās standard deviations.
Please take a look at this chart:
It shows the number of pips of change from one minute to the next minute on EU, GU and EG.
I think I found why EU/GU works better than EG (at least on my tests, and it is the original method proposed by Kelton).
First, suppose you have EUR and GBP, and that both have 100 % correlation. We know that correlation measures the change from one period to the next period in percent. So with 100 % correlation if EUR is up 1 % then GBP will be up that 1 % also.
If you agree with this, continue
Now we know that the price of EUR/USD is about 1.3100 and GBP/USD is 1.6100 AND EUR/GBP 0.8136
If we have a 100 % correlation then 1 % change on EURUSD will be 131 PIPS and on GBPUSD will be 161 PIPS. Same percent move, 100 % correlation, but different pip move.
Now let suppose that we are looking at the charts with vitrite technique of overlaying, we have EU below GU for about 20 āvisibleā pips, so we buy EU and sell GU. Because we are comparing with EG, and we are buying EUR and selling GBP, then we buy EG.
Both move a -1 % , and our divergence increases a factor of 1.61/1.31. In fact we now have EU at 1.2969 and GU at 1.5939, because we bought EU it will have a loss of about 131 pips, while a GU will have a profit of 161 pips, with a net profit of 30 pips.
At the same time you will see that EG new value is 0.8136ā¦ well, we are having 100 % correlation, so we expect that, isnāt it? so while with EU/GU we are profiting with 30 pips, on EG we are not profiting at all, we still have our original position, without any profit, well, not only it is not in profit, it is in a loss because the spread.
So based on this observation, I can declare that for this method it is not the same to trade EU/GU and EG.
Also, because the correlation isnāt 100 %, but about 80 %, we are going to have situations in which EG is going to have some profit or some more loss.
So what I think this method uses to win is precisely the difference in pip change of both pairs, because if we are on a trend (let suppose a downtrend) sometime in the future it will have a correction, we all know that market never moves straight down or up, but have some type of corrections or retracements. That retracement makes that the faster currency in PIPS crosses the slower currency in PIPS generating a profit.
If the prices were equal, then the moves will be parallel lines, but because we have some difference in the price of the currencies, we have lot of crosses. On the chart I provided the crosses are small, about 3 pips, not really useful, but on bigger time frame like 15M or 1H the crosses are 10-50 pips.
What do you think about my observation?
Thank you for the detailed explanation, I am still digesting it. It seems you consider both absolute and relative changes in the currency pairs to determine tradesā¦?
Okay so (as has been mentioned before I believe) the portfolio doesnāt reflect the cross because you trade equal weights of EUR, GBP. Had you gone long 1 lot of EUR and short 0.8136 lots of GBP, the final pnl would have been zero.
Alternatively we could say that the portfolio of 1 EUR/USD, 1 GBP/USD is equivalent to trading a portfolio of 1 EUR/GBP and short 0.1864 lot of GBP/USD. Except this second portfolio would require frequent rebalancing.
Yes, I think you are describing well how to reflect the same with EG.
Someone says that it is cheaper to trade EG insteado of EU/GU, but with my analysis I think it is different. And also, if you try AU/NU, the AN pair has greater spread than the AU/NU combination, so is cheaper to trade both pairs.
Hey Medi, so you still trade the original strategy, 1 min bars zoomed all the way out?
Doing this would mean the price levels are scaled by their maximum and minimum values over the visible range, which should be fine since the pairs are correlated. Iāve been attempting to investigate this strategy, but so far have been trying to use a correlation threshold to trigger a rescaling.
I worry though that it seems youāre trading a mean reversion strategy with a large stop loss. Everything should be great until the stops get hit. Can you comment on how often your stops get hit?
Hey!
I am reading though this post but I havenāt finished reading all through yet.
Just a question: Is anyone in a trade now? And if so, what direction?
Because I am E/U short and G/U long, and did this because the āOverLay Chart Indicator by S.B.Tā shows a divergence, where the E/U is above the G/U.
But when I overlay the charts manually by Keltons method (vitrite) it appears that there is no divergence.
I know that this happens because of the chartshift, but has anyone ideas how to solve this problem?
Or, how are you all, using the method?
Anyone ideas, what I am doing wrong here?
Thanks in advance!
yeah, original strategy, or almost the original. I added some characteristics of my own that Iām testing.
Doing this would mean the price levels are scaled by their maximum and minimum values over the visible range, which should be fine since the pairs are correlated. Iāve been attempting to investigate this strategy, but so far have been trying to use a correlation threshold to trigger a rescaling.
I worry though that it seems youāre trading a mean reversion strategy with a large stop loss. Everything should be great until the stops get hit. Can you comment on how often your stops get hit?
Well, my oldest pair is EU/GU, and at the beginning I had a stop loss of 100 pips and it hit the stop 7 times. I increased the stop a little every time it was hitted, until I realized that I require to measure how long the divergence could grow, so I stopped trading a little, measured the divergence and I found a divergence of 263 pips, since 2 months, that remains the biggest one up to day, so I almost doubled it to 400 pips for lot size calculation and risk limiting number, and that is the stop loss that I use today. I have never hit that stop loss, but only the 100-150 pip stop loss at the beginning.
I have 77 winners, with 7 losers, and if you look at the charts of myfxbook, my winning rate is about 55 % (considering that almost always one side of the trade is loser), but the average win size is bigger than the loser size, so, more than 50 % win/loss ratio, with average win size above the loss makes this strategy a winner. Slow winner, but hey! it is pretty faster than bonds and threasuries hehehehehe.
Same as you, Iām short eu long gu with a drawdown of 57 pips right now.
continue reading, I placed some thoughts about locking the chart to avoid chart shift.
also you can look at the thread, we have at least two links to myfxbook real accounts that shows the performance of the system. Since July 12 Iām up about 19 % and OOPs its up more than 50 % since april 25.
Comparing our stats, we have a 0.26 % daily, you can do your calculations with that numbers
EDITā
Just remember, this is a endurance game, you must play with little positions if you wish to win. If you risk the house, you are going to be margin-called pretty soon.
With a 100 USD accounts Iām using 1-2 nanolots per pair, that is, 1 pip = 1-2 cents.
It sounds little, but hey, with 0.26 % daily you are going to be above the market average in only 50 trading days!
Thanks for your quick reply!
Yes, you are right about the position sizing. I use 0.01 lot, as well, to avoid an early margin call.
Are you using the original Keltonās method or have you customized it?
customized.
I lock charts, I use variable divergence for entry and also use variable take profits.
Iām testing something based on fibonacci retracements to define take profits, but it is testingā¦ I started testing it today hehehehe.
But the basic, original method works wonderful if you trade small, I recommend you to start with that method and then customize to your personal settings
Some dumb ānoobā questions here, I greatly appreciate any help.
I have seemed to have confused myself after reading this thread :26:
I am only going to focus on two currency pairs, the GBP/USD & EUR/USD until I understand what is going on.
Problems:
-
I cannot open two instances of MT4 on my PC for some reason, this causes me to open a FXCM version and OANDA
they both are set to the 1 min time frame per Keltonās instructions. Is it possible to use this system using two different MT4 brokers, obviously I would like to make my orders from the same broker. -
I can see both currency pairs on the same chart clearly due to vitrite, however, I have zoomed both charts out to the max using a line chart, how do you count the pips between the two i.e say EUR/USD is 1.3 and GBP/USD is 1.55, how do we know what the difference is? to get our 20/40/60 etc?
-
If a person finally figured out what they were doing
and had $5000 to devote to this system, what lot size should they be trading? with this currency pair? I have read where med is currently using around a 400pip stop lossā¦
Sorry these are dumb questions, I have read a lot of this thread and plan on re-reading it, but if anyone can help me with these it would be appreciated
Iāll post some charts etc when I get my privileges from babypips, I would of posted what I was talking about but you need at least 5 posts.
Install two times MT4 on different folders
- I can see both currency pairs on the same chart clearly due to vitrite, however, I have zoomed both charts out to the max using a line chart, how do you count the pips between the two i.e say EUR/USD is 1.3 and GBP/USD is 1.55, how do we know what the difference is? to get our 20/40/60 etc?
Use one of them as primary and the other is secondary. Simple measure the pips only on the primary pair, with the CROSS tool of MT4. Ignore the real value of the currencies, only the visual value is important.
- If a person finally figured out what they were doing
That depends on your risk. Ideally you should use 1 or 2 % at most per basket, with a 400 pip stop loss that means you should risk only 50 USD per basket (1 % risk), that is $0.125 USD per pip, or about 1 microlot. In a normal account, where the lot size is 100,000, this should be 0.01 lots. If you are in a mini account where full lot is 10,000 then it could be 0.12 lots.
Sorry these are dumb questions, I have read a lot of this thread and plan on re-reading it, but if anyone can help me with these it would be appreciated
Iāll post some charts etc when I get my privileges from babypips, I would of posted what I was talking about but you need at least 5 posts.
very usefull and interesting information. With these new stratgies help us with the Best Forex Trading Platform.
Sorry Med,
Did a search for āCross toolā for MT4 and couldnāt get anything, just wondering if you could elaborate for a noob
The cross tool is simply a cross, a + symbol
