Hedge, hedge! (Hedging THE HEDGE!) | Forex indicator download- MT4/MT5 resources
The time series EURUSD is divided by USDCHF to get<br> The time series GBPUSD is divided by AUDUSD to get RATIO2 (download indicators are as follows)
Time series divided by ratio 2 gives RATIO (download the metric below)
Compare EUR USD/USD CHF TO GBP/USD/AUD/USD ratio 2 . Perform relevant analysis VS. Ratio 2 gives a negative or positive correlation. +/- Correlation is one of the requirements for hedging!
Reasons for this strategy: After pair trading for a while, I noticed that sometimes you enter with negative profits between two separate instruments, and eliminating that risk is hedging, so one ratio is negative and the other is positive.
For example, typically you would hedge EUR/USD with GBP/USD, buy EUR/USD and sell GBP/USD! Vice versa, depending on the ratio.
Now let's say the hedge goes against you and your profit is negative...that's how the other hedges will be positive.
To hedge, I noticed that VS. Ratio 2 has a negative/positive correlation, meaning that when Ratio OF / Ratio 2 deviates 2 standard deviations from the mean, you get:
[Sell and sell ratio 2 ] (negative correlation, ratio hits upper Bollinger band, overbought)
-or-
[Buy and Buy Ratio 2 ] (negative correlation, ratio is touching the lowest Bollinger Band, oversold)
-or-
[Buy and Sell Ratio 2 ] (positive correlation, ratio is touching the lowest Bollinger Band, oversold)
-or-
[ Sell and Buy Ratio 2 ] (positive correlation, ratio is touching upper Bollinger Bands, overbought)
For example if Ratio OF / Ratio 2 were inversely related to overbought, you would sell Ratio 2 which would be equivalent to, sell EURUSD, sell USDCHF, sell GBP/USD, and buy AUD/USD . No stop loss is set because two instruments will have positive values and two instruments will have negative values. Also, before jumping in, analyze the correlation between:
EUR/USD USDCHF EUR/USD AUD/USD GBP/USD AUD/USD USD/CHF GBP/USD AUD/USD USDCHF EURUSD GBP/USD
Note: The relevant analysis of the above items should be carried out on 15M, 30M, 1H, 4H, 1D for 30, 90, 180 cycles
Exit Time Ratio Returns Mean
I have been testing this and when you do a general hedging the returns are less and with this hedging concept the returns are smaller but you are protected from negative profits on a simple hedge selling EURUSD and buying GBP/USD . Because of this: when is negative, the other ratio 2 is positively correlated...................... Because there is a negative correlation between and ratio 2 ... Of course, if all correlations start collapsing and all currency pairs start moving wildly, then that is the risk, but I assume that the correlations on different time frames are high...
Note: When you enter the four currency pairs of eurusd, usdchf, gbpusd, and audusd, please note that there is a correlation between all currency pairs. ie. EURUSD can be hedged with USDCHF, EURUSD can be hedged with GBP/USD, EURUSD can be hedged with AUD/USD, GBP/USD can be hedged with USDCHF, and AUD/USD can be hedged with USDCHF. So overall, depending on the correlation between ratio1 and ratio2, you can set up a hedge between 4 currency pairs.
Here are the indicators for this strategy:
2. EURUSDCHF Ratio 1 Indicator
3. GBP/AUD ratio2 indicator
4.ratio1/ratio2 ratio indicator. ([EUR/USD CHF] / [GBP/AUD])
5. Indicator setting template,
There is a bug in the correlation indicator: three different correlation indicators are set up, one for 30 periods, 90 periods, and 180 periods, in order to show different correlation timeframes!
Ratio 1 indicator:
Type Pair 1, Type Pair 2 2. There is nothing wrong with this, but to apply Bollinger Bands to this ratio you must find the Bollinger Bands indicator in the left window of METATRADER and drag the BB indicator onto the ratio window and when the options appear, select the appropriate period value and BB Bands to display you must "". Only then will the band appear.
Ratio 2 Indicator
type pair 1, type pair 2
3. You must apply the same BB banding process as the previous process.
Hedging indicator
Enter pair1, pair2, pair3, pair4 4. To apply Bollinger Bands on this indicator, apply the steps above, find the BB indicator, drag it to the ratio, select: Apply to the first indicator data in the window.
Please post your thoughts and feedback on the best rules for using this system.
Time series divided by ratio 2 gives RATIO (download the metric below)
Compare EUR USD/USD CHF TO GBP/USD/AUD/USD ratio 2 . Perform relevant analysis VS. Ratio 2 gives a negative or positive correlation. +/- Correlation is one of the requirements for hedging!
Reasons for this strategy: After pair trading for a while, I noticed that sometimes you enter with negative profits between two separate instruments, and eliminating that risk is hedging, so one ratio is negative and the other is positive.
For example, typically you would hedge EUR/USD with GBP/USD, buy EUR/USD and sell GBP/USD! Vice versa, depending on the ratio.
Now let's say the hedge goes against you and your profit is negative...that's how the other hedges will be positive.
To hedge, I noticed that VS. Ratio 2 has a negative/positive correlation, meaning that when Ratio OF / Ratio 2 deviates 2 standard deviations from the mean, you get:
[Sell and sell ratio 2 ] (negative correlation, ratio hits upper Bollinger band, overbought)
-or-
[Buy and Buy Ratio 2 ] (negative correlation, ratio is touching the lowest Bollinger Band, oversold)
-or-
[Buy and Sell Ratio 2 ] (positive correlation, ratio is touching the lowest Bollinger Band, oversold)
-or-
[ Sell and Buy Ratio 2 ] (positive correlation, ratio is touching upper Bollinger Bands, overbought)
For example if Ratio OF / Ratio 2 were inversely related to overbought, you would sell Ratio 2 which would be equivalent to, sell EURUSD, sell USDCHF, sell GBP/USD, and buy AUD/USD . No stop loss is set because two instruments will have positive values and two instruments will have negative values. Also, before jumping in, analyze the correlation between:
EUR/USD USDCHF EUR/USD AUD/USD GBP/USD AUD/USD USD/CHF GBP/USD AUD/USD USDCHF EURUSD GBP/USD
Note: The relevant analysis of the above items should be carried out on 15M, 30M, 1H, 4H, 1D for 30, 90, 180 cycles
Exit Time Ratio Returns Mean
I have been testing this and when you do a general hedging the returns are less and with this hedging concept the returns are smaller but you are protected from negative profits on a simple hedge selling EURUSD and buying GBP/USD . Because of this: when is negative, the other ratio 2 is positively correlated...................... Because there is a negative correlation between and ratio 2 ... Of course, if all correlations start collapsing and all currency pairs start moving wildly, then that is the risk, but I assume that the correlations on different time frames are high...
Note: When you enter the four currency pairs of eurusd, usdchf, gbpusd, and audusd, please note that there is a correlation between all currency pairs. ie. EURUSD can be hedged with USDCHF, EURUSD can be hedged with GBP/USD, EURUSD can be hedged with AUD/USD, GBP/USD can be hedged with USDCHF, and AUD/USD can be hedged with USDCHF. So overall, depending on the correlation between ratio1 and ratio2, you can set up a hedge between 4 currency pairs.
Here are the indicators for this strategy:
2. EURUSDCHF Ratio 1 Indicator
3. GBP/AUD ratio2 indicator
4.ratio1/ratio2 ratio indicator. ([EUR/USD CHF] / [GBP/AUD])
5. Indicator setting template,
There is a bug in the correlation indicator: three different correlation indicators are set up, one for 30 periods, 90 periods, and 180 periods, in order to show different correlation timeframes!
Ratio 1 indicator:
Type Pair 1, Type Pair 2 2. There is nothing wrong with this, but to apply Bollinger Bands to this ratio you must find the Bollinger Bands indicator in the left window of METATRADER and drag the BB indicator onto the ratio window and when the options appear, select the appropriate period value and BB Bands to display you must "". Only then will the band appear.
Ratio 2 Indicator
type pair 1, type pair 2
3. You must apply the same BB banding process as the previous process.
Hedging indicator
Enter pair1, pair2, pair3, pair4 4. To apply Bollinger Bands on this indicator, apply the steps above, find the BB indicator, drag it to the ratio, select: Apply to the first indicator data in the window.
Please post your thoughts and feedback on the best rules for using this system.
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