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Inverse Pairs

PayPip (PayPip)
Apr 12 2012 at 02:03
28 ieraksti
+1 for Midoru.

You have to think in terms of portfolio management. This style of trading is positional and swing trading typically. Stops are not used. If you are of the belief that markets are cyclical all you need is for TIME to go by.

If I have a potion(s) (long only) open in AUD/USD and the trade goes against me I look to buy USD/CAD. This does two things.

1) buys me TIME to be right on my original position.
2) reduces my risk on my original position (this is my stop)

You have to stay small with your position sizing, this is key.

Lets say I have 30% of my portfolio tied up in Oil, gold, silver and /NQ I'm long, I feel that we are in a bull market. A few days go by and it's in my face big time. What do you do? I have to look at going long the dollar to reduce my risk, buy me time to be right and collect some profit in the mean time. Yep, you are playing both sides of the market (because you believe they are cyclical) and quite frankly, you can't pick tops or bottoms so why try 😈

you are hedging your draw down learn to like it 😉

That's it in it's simplest form, nothing complicated at all.

Apr 12 2012 at 02:39
12 ieraksti
This is getting good, trying to wrap my head around it.

When trading (investing) do you consider Holidays or big announcements that are coming up?

OK this is really getting interesting.

Apr 12 2012 at 03:45
724 ieraksti
If your position sizing is right those don't really matter.

News is just scheduled volatility as apposed to unscheduled volatility.

There is a maximum or minimum amount of volatility that can come into the market before world global systems will fail. Almost did in 2008. For a while couldn't get dollars in places like Singapore or Bangkok at the money changers. I tried, was traveling at the time. So that would be low volatility and on high volatility big business pick up problems and the governments move to intervene.

So that causes blips, but I've seen what 2 or 3 interventions in the last 3 years ? So 3 days in 750 trading days? Not really something to worry about then if the rest of the portfolio is well thought out.

For the most part we won't get serious volatility issues for at least 10 or 15 years or so, since we've just had our big event.

If the world systems see their arse, well, you can't really plan for that in a day-to-day trading system. So get the position sizing right and nothing really matters.

I leave my systems alone for months at a time and it makes no difference.

Apr 12 2012 at 06:33
28 ieraksti
This inverse method is interesting. Which account can i review where this inverse method is being used? My computer is acting flaky tonight, my kids have it all jumbled around. sp

Apr 12 2012 at 11:12
12 ieraksti
This has been very helpful.

As I develop this new investing strategy I am developing two train of thoughts. Take in mind that I am new at this strategy.

First I think of trading both pairs that have the correlation difference. Start small and add to the positions if they go against me with all belief that they will come back at some point in time.

Second, after reading PayPip's comment, I have the thought of only trading one side of the correlation difference and using the other side if the trade goes against me to stop my losses with all belief that the will come back.

I think either strategy might work. Which train of thought should I pursue?

PipGnostic and PayPip, thanks for your patience and sharing your knowledge. The both of you have helped tremendously.

Apr 12 2012 at 16:17
28 ieraksti
This trading method is very promising, we have already automated it. Thank you for yout contributions of knowledge. My uncle writes software on another program, he has it trading by itself already. The links were goldmines of information. Thank you. Gotta run, we have relatives coming into the airport. sp.

Apr 12 2012 at 20:17
35 ieraksti
My point of view is that ok you can make millions on balance by closing positions by hedging positions but 100 bucks on equity, the real money is the one you have when you close all your positions.. as an example.. are we really sure that if i was short just few months ago when eu was less than 1.28 it will come back to that position?.. or maybe if i had cut my loss at 1.29 y will have now more than 200 pips in my pocket.. balance is the worst ilusion we believe is true.. just an opinion.. :)

Apr 13 2012 at 13:34
28 ieraksti
I have received more than one request that we share my uncle's trading software, i will pass these requests on to him. He does not usually give out his work, so dont hold your breath. I understand that he is working out the kinks in the backtesting procedures, or so he says. Everything that he says sounds like greek to me, every other word out of his mouth begins with nano or mega or blip. I am constantly asking him to translate what he says into plain english. The kids have soccer games for the next few days. sp.

Jun 22 2012 at 19:11
795 ieraksti
Im trading similar, negative correlation pairs. I have a home built EA that Im forward testing with different setups. Your welcome to click on my charts. SOMe charts have 2 pair and some charts have 6 pairs. All have different settings. Some pairs are stronger and thus I have 2 smaller strength pairs in inverse to the strong one. I have one chart setup with 3 pair.


Click on my Name to see My Live Charts and Bio.
LK Wong
Jun 23 2012 at 08:28
71 ieraksti

   alphasys posted:
  .... balance is the worst ilusion we believe is true..

This is so, so true. Just look at my signature !

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