Hedge and Correlation Strategy - MT4/MT5 Resources
Go home trading method!
You can skip the first 99 pages of this thread, as we have changed over time, improved our entry and exit, and developed better methods. Start reading on page 100 (or even pages 95-96 if you need some background) here.
Just 5 simple steps to implement the new "Go Home Trading Method" , formerly known as the "Hedge and Correlate" method. We are still hedging and correlating, just the new names will help us visualize what we want to achieve in this trading system, and after practicing for a long time, we modify our entries and exits.
Most pairs with a positive correlation of over 75% "live" below the 20-25% "divergence" line of one of the indicators we use (see below - thanks to SMJones for developing it!). This is their home. Sometimes they travel a short distance from home (approximately 50%) and occasionally make longer journeys (more than 80%). But of course " there's no place like home " so they ended up back below 20%, which is where they lived most of their lives. When the trading pair travels, we will trade to help them get home and we will make a profit on the way back.
Just 5 steps to successful trading:
1. Go to http://www.mataf.net/en/tools/01-01-correlation and click on “FX Correlation” under “Tools & Charts”. Check all pairs.
2. Scroll down to "Daily" and note down every currency pair that has a positive correlation of 75% or higher (I am currently monitoring 25 currency pairs and this is easy to do using the indicators mentioned below).
3. Open the 5M chart on your MT4 platform for all currency pairs selected in the above steps. Place the Stochastic Different Currency Pairs 1.4b indicator on each chart.
4. When the 5M bar (candle, whatever) closes above 80% of the difference, sell the high pair and buy the low pair.
5. Close at 50% or less, depending on your risk tolerance.
This particular method is a short-term strategy that gets you in and out quickly.
benefit:
1. No monitoring chart required. You can set up "Random Different Pairs 1b" to alert you via a pop-up on your computer or an email to your phone.
2. “Built-in” stop loss. This means that since we exit at 50% we will either make a profit or a loss, so we do not need to place a stop loss on the trade. When the difference reaches 50%, we will simply close the position.
3. "Built-in" trending/lateral movement market protection. When nothing big happens, the "difference" percentage drops below 20 and we do nothing.
4. There are many trading opportunities throughout the day. You can trade using this method at any time of the day or night. No more "first hour of meeting only," although there's certainly more activity during the "meeting" period.
This approach will no doubt work on longer timeframes as well, and in this thread you can feel free to test different timeframes, different entry/exit criteria, different whatever. It would be great if you could report your findings (even for trading negatively correlated currency pairs, if you are in good health). There are also EAs developed for this method.
enjoy!
Dreamliner PS: I can't seem to attach a metric we use, but if you start reading on page 100 you'll see it. It's called "Randomly Different Pairs 1.4b".
PPSS. Many thanks to "Roundrock" for developing EA!
You can skip the first 99 pages of this thread, as we have changed over time, improved our entry and exit, and developed better methods. Start reading on page 100 (or even pages 95-96 if you need some background) here.
Just 5 simple steps to implement the new "Go Home Trading Method" , formerly known as the "Hedge and Correlate" method. We are still hedging and correlating, just the new names will help us visualize what we want to achieve in this trading system, and after practicing for a long time, we modify our entries and exits.
Most pairs with a positive correlation of over 75% "live" below the 20-25% "divergence" line of one of the indicators we use (see below - thanks to SMJones for developing it!). This is their home. Sometimes they travel a short distance from home (approximately 50%) and occasionally make longer journeys (more than 80%). But of course " there's no place like home " so they ended up back below 20%, which is where they lived most of their lives. When the trading pair travels, we will trade to help them get home and we will make a profit on the way back.
Just 5 steps to successful trading:
1. Go to http://www.mataf.net/en/tools/01-01-correlation and click on “FX Correlation” under “Tools & Charts”. Check all pairs.
2. Scroll down to "Daily" and note down every currency pair that has a positive correlation of 75% or higher (I am currently monitoring 25 currency pairs and this is easy to do using the indicators mentioned below).
3. Open the 5M chart on your MT4 platform for all currency pairs selected in the above steps. Place the Stochastic Different Currency Pairs 1.4b indicator on each chart.
4. When the 5M bar (candle, whatever) closes above 80% of the difference, sell the high pair and buy the low pair.
5. Close at 50% or less, depending on your risk tolerance.
This particular method is a short-term strategy that gets you in and out quickly.
benefit:
1. No monitoring chart required. You can set up "Random Different Pairs 1b" to alert you via a pop-up on your computer or an email to your phone.
2. “Built-in” stop loss. This means that since we exit at 50% we will either make a profit or a loss, so we do not need to place a stop loss on the trade. When the difference reaches 50%, we will simply close the position.
3. "Built-in" trending/lateral movement market protection. When nothing big happens, the "difference" percentage drops below 20 and we do nothing.
4. There are many trading opportunities throughout the day. You can trade using this method at any time of the day or night. No more "first hour of meeting only," although there's certainly more activity during the "meeting" period.
This approach will no doubt work on longer timeframes as well, and in this thread you can feel free to test different timeframes, different entry/exit criteria, different whatever. It would be great if you could report your findings (even for trading negatively correlated currency pairs, if you are in good health). There are also EAs developed for this method.
enjoy!
Dreamliner PS: I can't seem to attach a metric we use, but if you start reading on page 100 you'll see it. It's called "Randomly Different Pairs 1.4b".
PPSS. Many thanks to "Roundrock" for developing EA!
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