Question: When the EUR/USD goes back up......then the USD/CHF goes down. If it can only go to zero would the anti-correlation change or have we defined infinity?... I just had a nightmare....Coinzy is Sympatico nahhh, I am going back to sleep now
In this example you have 11 points realized profit at the end of the price series. By my calculations you would also be long 4 contracts & short 2 with an unrealized loss of -7. You can check my math in the attached spreadsheet if you disagree. In a choppy market I can see how this works. The positions would naturally adjust to the size of the choppy range where at either end of the range you have a position with an unrealized loss. The number of contracts in this position would be equal to the range divided by the trade interval. Somewhere in the middle of the range you should be able to close out all your positions with a healthy profit. Now for another example take a look atthe EUR/USD chart from January 2002 until today. The price moved .40, from .89 to approx. 1.29. You were talking about trading every 20 pips so in this movement you would have 200 short entries at an average price of 1.09. Over the long term currencies tend to trend more than they chop so this system inevitably blows up or your return on margin approaches money market rates as margin grows.
This is a longer term system than that. With proper money management and pivot point entries that are not necesaarily 20 pips always, reflecting the natural flow of the market combined with a percentage type of trade size, it nets a higher realized than unrealized. As the pool boundries grow wider the ability for the realized to grow faster than the unrealized expands. Michael B. Now for another example take a look atthe EUR/USD chart from January 2002 until today. The price moved .40, from .89 to approx. 1.29. You were talking about trading every 20 pips so in this movement you would have 200 short entries at an average price of 1.09.
From that same website: Currencies Correlation The following tables represents the currencies correlation.The correlation coefficient show the moves similarity between pairs. If the correlation is high (above 80) and positive then the currencies move in the same way. If the correlation is high (above 80) and negative then the currencies move in the opposite way. If the correlation is low (below 60) then the currencies don't move in the same way.
Trading multiple pair achives the ability to capture the flow 24hrs a day. I will be putting on perfect hedges going long and short in the same pairs. 15 of them. As far as money management the trade ticket will be small, but the yield is about 100% per year capital growth plus 100% per year in ROI. In the beginning with a small account under 5k ITS THE LABOR that does not pay....that will be an investment. Michael B.
I thought that you said that you couldn't backtest this system. How did you arrive at 100% ROI? Also it seems as though the system is 100% mechanical based on prior data so it should be easy to backtest. Time consuming but not difficult.
futures: i have been looking at this idea for months, and i dont see how it survives the massive one way moves look at the data, one particularly bad move is AUG 2003 until Feb 2004 GBPUSD moved almost one way 4500 pips EURUSD 2300 pips AUDUSD, USDCAD, USDCHF - very similar system would be so far underwater in just 4 short months that its scary
and here: http://www.moneytec.com/forums/showthread.php?t=13155 and here http://www.moneytec.com/forums/showthread.php?t=13566 and here: http://www.moneytec.com/forums/showthread.php?t=13565 and of course here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=47844