TimeFreedom

RMyers/Rick,

I would like to start a new thread regarding a carry trade concept with hedging capabilities. I will try and explain my idea the best I can to help you code this EA. Your HedgeDCA_v1 addresses Tom Staufer's strategy, which is a great strategy, but I think what Ross and I have in mind is somewhat different. Take a look at Ross's post here: MultiHedgeEA

I would like an EA that places trades on a daily bases using micro lots at around 3:55 EST or 20:55 GMT+2/IBFX time. The reason for 3:55PM EST is on Friday the market closes at around 4:00PM EST and I don't want to miss the opportunity to open a trade. I have actually created an EA, or should I rephrase and say I took chunks of code from HedgeEA, to trade on a daily basis. I think my EA needs to be streamlined and coded by a pro.

An important addition to my EA is I would like to test EURGBP as a hedge pair once GBPJPY starts to tank. What we need to figure out/test is:

1. Which pair is best to hedge with GBPJPY
   
2. Ratio
   
3. Number of pips to wait before hedging. Somewhat like a Hedge Stop (HS)
   
4. MM: Once the account has doubled we start to enter 2 micro lots. Close one with +50 pips Take Profit and let the other lot run.

Keep in mind that once the carry trade is hedged we continue to gain interest on a daily basis instead of just closing out the trade all together. One more thing to consider is can we close out the hedge and continue the carry trade once GBPJPY starts to pick up momentum again? I hope we can all come together to help with this EA.


Thanks in advance,

TimeFreedom

Attached Files

CHedgeEA_v1.mq4 (9.9 KB, 58 views)

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kokas

this seems a very good idea... just a sugestion, if we get Samuray running smoothly, we can add one hedge trade instead of stoploss and continue with the logic from samuray... keep acumulating positions, and lock them in profit.

I have to think about this...

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rmyers

Hi TF,

The EA I put together can be made to do this. I am a fan of the EURGBP, but it's daily ATR is usually very small.

I will think about your algorithm a bit so that I fully understand it before. Could be that as Kokas says we can borrow from Samuray, my EA and your EA to put together the strategy you are looking for.

Rick

TimeFreedom

Rick,

I agree EURGBP has low volatility and your HedgeDCA already has alot of the functionalities I described on the first post. The biggest obstacle I believe is to find a hedgable pair. Maybe we can look into CHFJPY short which pays small negative swap or maybe EURUSD short which pays a decent swap?

TimeFreedom

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TimeFreedom

Looks like the banks and institutions are closing portions of their carry trade which is causing GBPJPY to drop. GBPJPY has dropped approximately +400 pips. This type of drop is what I would like to address with my carry hedge concept. If GBPJPY moves down +200 pips then open CHFJPY as a hedge stop. You will earn negative swap with CHFJPY, but its minimal in relation to the positive swap you get with GBPJPY. Currently I have 102 micro lots long, which equates to 1.20 mini lots. I would then open 2.78 mini lots of CHFJPY shorts as a Hedge Stop. Current GBPJPY to CHFJPY Ratio = 2.32.

Edit: I guess the GBPJPY decline is due to the negative BOE Meeting minutes which voted to raise rates 5-4.

TimeFreedom

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ross

The Yen will start strengthening long before rates rise dramatically in Japan. The big guys just have to catch wind that the bias is towards raising rates. When the BOJ raised rates 25bps 6 months ago or so, it was pretty well known that there was maybe one more rate hike in the works with the current economic environment. At 25bps or even 50bps, there is still enough of a spread in many currencies that the carry trade would continue. It’s when the market thinks the BOJ could raise rates a full point or more that everyone will run for the hills and the Yen will gain significant strength with all the short covering that will take place. My point is that rates don’t have to move up dramatically for the Yen to strengthen significantly, but rather the perception of where the BOJ is going with rates has to change for the unwrapping of these carry trades. Like any other short squeeze, this will happen very quickly (probably even quicker than the GBP/USD move from 2 months ago). BEWARE and look for the signals to go long the Yen to profit from this phenomenon.

ross

You are correct about the low volatility of the EURGBP. That is why I suggested that IF we use this pair we would probably need to make lot size partially based on this fact - and also take into consideration the pip value which is quite high. But it is certainly not necessary to use this pair. I just have been noticing that when the GBPJPY is making a big move up USUALLY the EURGBP is moving down.

ross

Is this an EA that we need to test?
Also - I think if we can work out the hedge part of this EA then we don't care if the carry trade unwinds because we would be making money either way. Another thing we are trying to do is keep a GBPJPY open at all times (as long as the carry trade lasts) - we are just making new entries at cheaper and cheaper prices if the GBPJPY keeps going down.

Just looking at a GBPJPY Monthly chart and see a high of 570+ back in 1980 and a low of 125 back in 1995 - that is a lot of pips! It looks like the pair could be making a double or tripple top at this 240 area. All I am saying is be prepared!

TimeFreedom

I posted the EA for Rick to take a look and help with coding the hedge option, but you can test the EA if you like. Again, the EA will place a GBPJPY buy trade at 3:55PM EST everyday except on Wednesday it will open three (3) trades. The reason for opening three trades on Wednesday is to compensate for the closed market on weekends.

The way we can prepare for GBPJPY weakness is to implement a hedge option into the carry trade. I will test CHFJPY and EURUSD as a hedge pair.

TimeFreedom

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deeforex

I think it would be great if we could hedge our carry trades when things aren't going in the correct direction. Here are some possiblities and how correlated the currency is to GBPJPY. Let's see how screwed up the columns will get The Ratio will represent how many lots relative to our GBPJPY position (for example if GBPJPY has a cummulative of 1 lot, we would need ~2.82 lots of CHFJPY to hedge it)