basket trading

hayseed

Master Trader
Jul 27, 2010
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Andrei Novichkov wrote a pretty good article the other day for the mql5 forum, Working with currency baskets in the Forex market......

that sort of trading has always appealed to me..... his words were well chosen, such as in the title, Working with currency baskets..... it is work.... a lot......

to be effective, it helps to have purpose built indicators and ea's to drill down on the currency of interest ..... you must be in sync with the currency itself but have the flexibility to avoid or trade the opposite way on a particular pair that does not follow the majority direction.....

a perfect example is the eurgbp in the video below..... if you were to sell the eur basket during the time mentioned, you would still have wanted to buy the eurgbp, instead of selling...... or avoid trading it altogether......

usually if the jpy is strong, it's strong against all..... or if the aud is weak, it's weak against all..... and so on...... there will be exceptions and you must be flexible in those cases......

be aware to the combined spread you must overcome..... be aware of the combined margin require..... be aware of the swap impact....... but by all means, be in sync.....

i'll post some examples later...... this video was from awhile back but still applies......h
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hayseed

Master Trader
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hayseedfx.com
Wow! Nice panel. Can you share those indicators/templates here?
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hey enivid..... yes..... but i'll have to whittled them down some..... many of the dots are signals from icustom calls..... so without every supporting indicator, some things might not return the correct result......h
 

hayseed

Master Trader
Jul 27, 2010
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hayseedfx.com
to make easy on me to explain, here again if we focus on the jpy pairs signals.... remember, signals are nothing more than an indicators 'best guess'..... and that indicator was written by someone encoding their 'best guess' view ....

in the first chart below the one with 'diamonds' in the comment, in the blue box, the first dot to the left is todays 'best guess'.... the dot to it's right was yesterdays and so on...

in the second chart, the one with poles in the comment, the entire row is highlighted, focus only on the dots to the left of the arrows..... you can almost see the waves.....

in the third chart, again 'poles', , the approximate length of the signal is displayed by the zigzag lines.... the maximum consistent return is usually near these 'best guess' average length points.... this is due to the almost impossible to avoid lag of 'smoothed' indicators...... in other words, the maximum gain is almost never made by buying on the first green dot, signal, and selling on the last green dot, signal.....

there is nothing wrong with targeting those points as profittargets.... or possibly activating a trailing stop in those areas just in case it runs away.....

it seems best for me to be in sync with those average waves.....h
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hayseed

Master Trader
Jul 27, 2010
444
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usa
hayseedfx.com
you can drill down on the lower timeframes even though quite often the waves will be less clear..... due to fundamental news and events having a much sharper impact on those smaller tf's.....

but someone on their toes with iron clad stoploss rules can still make a good deal on the 60 minute charts.... just know in advance, spread will take a bigger bite and news can whack you around.....

news cuts like a razor on the lower timeframes , but like a butter knife on the uppers.....h
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Enivid

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Here is 3 Pair Basket Trading with an EA of mine. A Very safe system when you have a complete circular hedge trade like this as well. Limits your drawdown in big volatility periods.

https://www.myfxbook.com/members/bestdarngood/fxcm-5000-d1/1822431
3 pair basket trading? Your current 3 positions (Long EUR/USD, Short EUR/AUD, and Short AUD/USD) at 0.4 lots at their open rates is nothing more than a 0.43 Long AUD/USD. It could be fancy, but your are paying extra spreads and swaps to get the same outcome as opening a single position.
 

bestdarntootingood

Active Trader
Oct 2, 2011
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3 pair basket trading? Your current 3 positions (Long EUR/USD, Short EUR/AUD, and Short AUD/USD) at 0.4 lots at their open rates is nothing more than a 0.43 Long AUD/USD. It could be fancy, but your are paying extra spreads and swaps to get the same outcome as opening a single position.
If that were true, then my history would agree with you, but it does not. Look at the history of the trades. AUD/USD usually does not make the money, the other pairs generally do. Most don't truly understand how my EA trades, it takes some time to grasp the strategy.

If that were true, then my history would agree with you, but it does not. Look at the history of the trades. AUD/USD usually does not make the money, the other pairs generally do. Most don't truly understand how my EA trades, it takes some time to grasp the strategy.
You are also missing out on the other HUGE Advantage with this strategy in that it can handle big movements in the market with ease. If one of the pairs all of a sudden jumps or dives, the other pairs will help compensate that move and limit the overall gain/loss of the trade. This is critical to limiting losses, the setback though is that you also limit to small gains, but better to have lots of small wins over having huge losses.
 

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Enivid

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If that were true,
There is no 'if' here. Those trades are just an AUD/USD long of 0.43 lots.

then my history would agree with you, but it does not
I have not said anything about your history and it does not matter a bit here. What matters is your current positions, and any 5-grader can do the math - they are nothing more than a weird way to buy some AUD/USD:

11.14.2016 07:17 AUDUSD Sell 0.40 0.75381 -501.50 498.50 -12.00 -3.00 0.0 -0.21%
11.14.2016 07:17 EURUSD Buy 0.40 1.07867 -500.50 499.50 -197.60 -49.40 0.0 -3.41%
11.14.2016 07:17 EURAUD Sell 0.40 1.43136 -495.30 504.70 224.73 74.50 0.0 +3.88%

AUD/USD usually does not make the money, the other pairs generally do.
But in this case, if AUD/USD goes south, so does the total profit of these 3 positions.

Most don't truly understand how my EA trades, it takes some time to grasp the strategy.
I hope that you DO understand your strategy though.

You are also missing out on the other HUGE Advantage with this strategy in that it can handle big movements in the market with ease.
However, it won't compensate any movement in AUD/USD.
 

bestdarntootingood

Active Trader
Oct 2, 2011
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There is no 'if' here. Those trades are just an AUD/USD long of 0.43 lots.


I have not said anything about your history and it does not matter a bit here. What matters is your current positions, and any 5-grader can do the math - they are nothing more than a weird way to buy some AUD/USD:

11.14.2016 07:17 AUDUSD Sell 0.40 0.75381 -501.50 498.50 -12.00 -3.00 0.0 -0.21%
11.14.2016 07:17 EURUSD Buy 0.40 1.07867 -500.50 499.50 -197.60 -49.40 0.0 -3.41%
11.14.2016 07:17 EURAUD Sell 0.40 1.43136 -495.30 504.70 224.73 74.50 0.0 +3.88%


But in this case, if AUD/USD goes south, so does the total profit of these 3 positions.


I hope that you DO understand your strategy though.


However, it won't compensate any movement in AUD/USD.
The History DOES MATTER, it shows that the system is profitable.
If you can not drop everything that you think you know with how the market works and look at the history which is proof that you are wrong, then it does not matter what I will say. The history is all the proof that someone should require to prove that the system works.

Other things to consider with this system is that 1 pip in each pair is not the same value. Also, each pair does not move equally at all times in relation to the other two pairs. The time at which the 3 pairs are opened is also not random, it is when the 3 pairs are priced slightly out of sync with each other.
 

Enivid

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The History DOES MATTER, it shows that the system is profitable.
If you can not drop everything that you think you know with how the market works and look at the history which is proof that you are wrong, then it does not matter what I will say. The history is all the proof that someone should require to prove that the system works.
As I have said, history does not matter here because I am not discussing it. I am just pointing out how weird your current positions are and what the fancy 3-pair basket is, in fact, just one long position.

Other things to consider with this system is that 1 pip in each pair is not the same value. Also, each pair does not move equally at all times in relation to the other two pairs. The time at which the 3 pairs are opened is also not random, it is when the 3 pairs are priced slightly out of sync with each other.
It was all well considered. If you do the math, you would still see the same fact: you are just long AUD/USD with that setup.
 

bestdarntootingood

Active Trader
Oct 2, 2011
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As I have said, history does not matter here because I am not discussing it. I am just pointing out how weird your current positions are and what the fancy 3-pair basket is, in fact, just one long position.



It was all well considered. If you do the math, you would still see the same fact: you are just long AUD/USD with that setup.
That is the most ridiculous comment ever that "history does not matter here because I am not discussing it". That is like saying the Sun doesn't exist because you live in a cave and won't come out of it...

History does matter as it shows the true performance of the system. The long term and overall performance of any system matters.

If someone were to make one trade and make Huge money and say "See this is a great system", would you want that system or would you want one with long term trading and multiple trades over many market conditions? I choose the latter. Looking only at one trade is just plain childish just because you don't like a system and don't understand it fully...

Thank you for your input, it is appreciated though I don't agree with you fully in your opinions.
 

Enivid

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Are you retarded? If I wanted to discuss your system's history, I would do it. I am telling you and other forum members that your system is definitely faulty because it does one thing inefficiently - it spends triple the size of spreads/swaps/margin where it could be spending a normal size. Calling this inefficiency "3 Pairs Basket Trading" probably with newbie traders who doesn't know math, but it is what it is - a fancy way to incur unnecessary costs.

Otherwise, your system is great! Please take my money!
 

bestdarntootingood

Active Trader
Oct 2, 2011
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Are you retarded? If I wanted to discuss your system's history, I would do it. I am telling you and other forum members that your system is definitely faulty because it does one thing inefficiently - it spends triple the size of spreads/swaps/margin where it could be spending a normal size. Calling this inefficiency "3 Pairs Basket Trading" probably with newbie traders who doesn't know math, but it is what it is - a fancy way to incur unnecessary costs.

Otherwise, your system is great! Please take my money!
Wow, how mature of you calling me retarded. I complimented you for your input and then you just bash me. I never asked you for your money, I simply was showing off a system that I consider basket trading.

I would agree with you that it is trading 1 pair if all 3 pairs moved the same amount of dollars, but they don't as you can see from the history. Some trades have bigger moves than others but the profit per basket is consistent per lot of trading which is key. In all trades, the overall profit per lot is the same target, but the pairs do not see the same profit/loss in ever trade made which is why your argument fails. Your argument is that if I just traded AUDUSD at these points in the opposite direction it was opened in each trade, then I would be in equal profit if you disregarded the spreads/commissions paid by the other two pairs. But that is not true because AUDUSD sometimes will be the pair making profit while the others are not and in that case this system will still come out in profit, but with your method, it would have a losing trade. In the history, I actually would be in a bigger profit as of right now following your method, but having this run on other accounts longer, this will not always be the case.

I do not disagree that paying 3 spreads is painful, but this system is one built to withstand large market moves which trading 1 pair by itself will not protect against. Anyway, I would appreciate some respect as I have given you rather than the rudeness you have displayed. You can disagree that my system is not ideal for you, and that is fine, I was just trying to show results from a basket system that I use. If this is how contributors to this forum are treated, then why would people want to post on it?
 

Enivid

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I would agree with you that it is trading 1 pair if all 3 pairs moved the same amount of dollars
That's why I asked you if you are retarded (asked not called, mind you). You know, having a common sense is a prerequisite to use this forum. You still have a chance to show that you have some by taking some time to think back and explain the following:

How going short AUD/USD @ 0.75381, long EUR/USD @ 1.07867, short EUR/AUD @ 1.43136 with 0.4 lots size each is the same as going long ~0.57 lots of AUD/USD @ ~0.75360 and a short 0.4 lots AUD/USD @ 0.75381, which is the same (excluding the caught 2.1 pip difference) as going long 0.17 lots of AUD/USD (mea culpa! my 0.43 was wrong indeed as I've done the math with 3 x 1 lot positions instead of 3 x 0.4)?

If you cannot do that I will really doubt in your ability to abide common sense.
 

bestdarntootingood

Active Trader
Oct 2, 2011
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That's why I asked you if you are retarded (asked not called, mind you). You know, having a common sense is a prerequisite to use this forum. You still have a chance to show that you have some by taking some time to think back and explain the following:

How going short AUD/USD @ 0.75381, long EUR/USD @ 1.07867, short EUR/AUD @ 1.43136 with 0.4 lots size each is the same as going long ~0.57 lots of AUD/USD @ ~0.75360 and a short 0.4 lots AUD/USD @ 0.75381, which is the same (excluding the caught 2.1 pip difference) as going long 0.17 lots of AUD/USD (mea culpa! my 0.43 was wrong indeed as I've done the math with 3 x 1 lot positions instead of 3 x 0.4)?

If you cannot do that I will really doubt in your ability to abide common sense.
The difference is that you are thinking INSTANTANEOUSLY in your trading of the 3 pairs for this strategy which I would agree, if that was the way the market worked, it would make sense and trading only AUD/USD would be the way to go. BUT the problem with the real world market is that All 3 pairs move a different number of pips and profit over the same time period in relation to each other.

Just to test your idea (which I understand is a very accepted view of this trading) over the year 2015 with my default settings, I found that using the EA as is, you get a profit of $5500 with a starting balance of $2000. Then if I traded only AUDUSD in the opposite direction at the ratio 0.17/0.40 I got a profit of $3650. The max closed DD for my EA as is came out to be 10.6% and for the AUDUSD it came out to 6.2%. So it is not equal. When I look further at the details, I earn 25 pips per winning trade on the 3 pair and from 2 to 60 pips using only AUDUSD.

Just looking at the history that I have provided, you will see the same thing.
 

Enivid

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Sorry, but you have wasted your chance to show any evidence of common sense. I will do the explanation for you then:

Long 0.4 lots of EUR/USD @ 1.07867 = buying 40,000 EUR for 43,146.80 USD.

Short 0.4 lots of EUR/AUD @ 1.43136 = selling 40,000 EUR for 57,254.40 AUD.

At this point, you do not have any EUR exposure. What you have is short exposure to USD (43,146.80) and a long exposure to AUD (57,254.40), which is a long AUD/USD position of 0.572544 lots with an open price of 0.75360 (43146.8 / 57254.4).

Now, you add a Short 0.4 lots of AUD/USD @ 0.75381 to it.

This effectively hedges 0.4 lots part of the Long AUD/USD position (locking 2.1 pips of profit, by the way).

The remaining unhedged part of the long AUD/USD = 0.572544 - 0.4 = 0.172544 lots.

Now, however EUR/USD and EUR/AUD move, the profit and loss depends only on the actual AUD/USD move. Your EUR exposure is completely eliminated by your EUR/USD and EUR/AUD hedge.

So, let's check if the calculations are correct by comparing the current profit of your 3 pairs and the profit from the resulting AUD/USD long.

Unfortunately, I could not find the current prices for your positions on myfxbook, so I looked in FXCM demo platform (FXCM-AUDDemo01 server) for them. Naturally, there might be slight discrepancies due to delay between myfxbook refresh and FXCM MT4 ticks, and due to the different demo servers used (I am not sure that you are running the EA on the same FXCM-AUDDemo01.

At the time of checking AUD/USD Bid was 0.75254, while the cumulative profit of your trades was -13.57 USD.

Calculated profit of Long 0.172544 lots of AUD/USD = (0.75254 - 0.75360) x 0.172544 x 100,000 = -18.289664 USD.

Now, you have 2.1 pips of profit locked with 0.4 lot hedge. Its profit = 0.00021 x 0.4 x 100,000 = 8.4 USD.

In theory, your current profit would be -9.889664, whereas it is shown as -13.57 on myfxbook. The difference is attributed to paying two additional spreads for unwinding this 3-side hedge - the spread on EUR/USD and the spread on EUR/AUD.

Meanwhile, you'll have a week of rest to regain your intellectual capabilities.
 

bestdarntootingood

Active Trader
Oct 2, 2011
9
0
37
Sorry, but you have wasted your chance to show any evidence of common sense. I will do the explanation for you then:

Long 0.4 lots of EUR/USD @ 1.07867 = buying 40,000 EUR for 43,146.80 USD.

Short 0.4 lots of EUR/AUD @ 1.43136 = selling 40,000 EUR for 57,254.40 AUD.

At this point, you do not have any EUR exposure. What you have is short exposure to USD (43,146.80) and a long exposure to AUD (57,254.40), which is a long AUD/USD position of 0.572544 lots with an open price of 0.75360 (43146.8 / 57254.4).

Now, you add a Short 0.4 lots of AUD/USD @ 0.75381 to it.

This effectively hedges 0.4 lots part of the Long AUD/USD position (locking 2.1 pips of profit, by the way).

The remaining unhedged part of the long AUD/USD = 0.572544 - 0.4 = 0.172544 lots.

Now, however EUR/USD and EUR/AUD move, the profit and loss depends only on the actual AUD/USD move. Your EUR exposure is completely eliminated by your EUR/USD and EUR/AUD hedge.

So, let's check if the calculations are correct by comparing the current profit of your 3 pairs and the profit from the resulting AUD/USD long.

Unfortunately, I could not find the current prices for your positions on myfxbook, so I looked in FXCM demo platform (FXCM-AUDDemo01 server) for them. Naturally, there might be slight discrepancies due to delay between myfxbook refresh and FXCM MT4 ticks, and due to the different demo servers used (I am not sure that you are running the EA on the same FXCM-AUDDemo01.

At the time of checking AUD/USD Bid was 0.75254, while the cumulative profit of your trades was -13.57 USD.

Calculated profit of Long 0.172544 lots of AUD/USD = (0.75254 - 0.75360) x 0.172544 x 100,000 = -18.289664 USD.

Now, you have 2.1 pips of profit locked with 0.4 lot hedge. Its profit = 0.00021 x 0.4 x 100,000 = 8.4 USD.

In theory, your current profit would be -9.889664, whereas it is shown as -13.57 on myfxbook. The difference is attributed to paying two additional spreads for unwinding this 3-side hedge - the spread on EUR/USD and the spread on EUR/AUD.

Meanwhile, you'll have a week of rest to regain your intellectual capabilities.
I hate to disagree with you, but you are wrong. This is a VERY good strategy when you understand the method better. I thought that I would add a comment for explaining why this works for those who believe that you can trade 1 pair and get the same result or for those who think the spreads will just eat the trade. This is from a post I made on another site...


If 3 pair triangular trading doesn't work, then explain this account --> https://www.myfxbook.com/members/bestdarngood/fxcm-5000-d1/1822431


You guys are only ever thinking Instantaneous trading (Looking at a snapshot of the market at a specific point in time). What you fail to realize is that you need to look at a longer time period and realize that all pairs don't move equally and cancel each other out.

For example, take whatever the current price of 3 pairs such as AUDUSD, EURUSD, and EURAUD and notice how at the specific instance you look at, there is a relative bias towards one pair. Then think if all pairs were priced at parity 1:1:1, there would be no bias. Or look at a different point in time, I recommend pick a long time period to compare such as 1 year apart. Notice that there is a difference in the relative value and bias of the pairs. That difference in value/bias is how you can make money along with market inefficiencies. The pairs tend to gravitate towards each other so that if you were to trade a full circle, you would end up with what you started (minus fees of course). But if you trade when the market gets off a little, you can safely make profit like I show in the account I posted above.

There is the proof, just look at the history of the trades done.

Also I would just like to state that banning someone from the site for a week just because you don't understand how an EA works since you can't open your mind or look at the history (which does matter) is pretty childish and unprofessional.
 

Enivid

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If 3 pair triangular trading doesn't work, then explain this account --> https://www.myfxbook.com/members/bestdarngood/fxcm-5000-d1/1822431
There is nothing new to explain. The same 0.172544 lots of Long AUD/USD @ 0.75360. From the data myfxbook offers, the current Ask is at 0.7443 - I don't know what the Bid is, but it is lower than the Ask. Anyway, your position should be at least (0.7443 - 0.7536) = 93 pips down. It is $160.47, but the account is $230.30 in the red - due to the spreads.

I see that you do not learn from from your lessons. It is really mandatory to read and follow the rules of the forum you are trying to participate in.