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Thread: Correlation Martingale EA

  1. #21
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    Quote Originally Posted by madscalp View Post
    I know nothing that can backtest two pairs together...certainly no MT4
    Otherwise I think we need to consider the combinations of EU and UC.
    It seems the logic 2 buys then 2 sells 2 sells ....is correct.
    Next week I'm going to try 2 buys 2 buys 2 buys .
    As they are mirror pairs, it's important that simultaneous orders are same direction for each pair.
    Is this truly market neutral? Movement of 1 lot of EU does not equal movement of 1 lot of UC. If they are market neutral, I think it should be 1 lot of EU equals 1/UC lots. If there is no correction then there will always be a bias in one direction, favoring the direction of UC.

    Anyone(Funyoo) interested on working on a market neutral scalping version of this system? I prefer it be market neutral and scalp any divergence from that neutral position.

    Dan

  2. #22
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    OK
    Your tool ( # 17 ) allows to understand the force of EU vs UC and vice versa.
    We can imagine if the force is positive on a certain level (?) a EU short and a UC long ( with martingale system or no ).
    The mismatch level would be the trading start.
    What do you think about ?

  3. #23
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    Quote Originally Posted by madscalp View Post
    OK
    Your tool ( # 17 ) allows to understand the force of EU vs UC and vice versa.
    We can imagine if the force is positive on a certain level (?) a EU short and a UC long ( with martingale system or no ).
    The mismatch level would be the trading start.
    What do you think about ?
    Since the two pairs have an inverse relationship, trading one short and one long would be trading them with the expectation of both making money. I think the term used is positive beta. To be market neutral both pairs would have be trade in the same direction either both positive or both negative. The value here is unexpected changes result in a near zero change. To take advantage of the system, you close positions when price diverges and gives a positive gap.

    Dan

  4. #24
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    Yes you are right.
    Two inverse positions could be dangerous.
    And you have a tool to measure the delta ?

  5. #25
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    Quote Originally Posted by madscalp View Post
    Yes you are right.
    Two inverse positions could be dangerous.
    And you have a tool to measure the delta ?
    There are many ways to measure divergence. In the chart I posted,

    delta = EC -(EU/(1-UC));

    However the spread is about on average 4 or 5 pips. To trade this as truly market neutral you'd have to open positions in all three pairs.

    The whole theory here is that with a market neutral strategy the composite value of these positions is always near 0. We like this, because it minimizes risk. However, because price is essentially a random walk this value will cycle between positive, negative and neutral. So a trade with these two pairs might see between +-10 pips. We close when the price is in our favor.

    Dan

  6. #26
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    Quote Originally Posted by dbrown View Post

    delta = EC -(EU/(1-UC));

    Hi Dan
    Interesting formula !
    Of course, a strategy can be developed from that.
    As it's not a martingale, maybe can you open a new thread to clarify your system and create an EA ?
    Regards.

  7. #27
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    Quote Originally Posted by madscalp View Post
    Hi Dan
    Interesting formula !
    Of course, a strategy can be developed from that.
    As it's not a martingale, maybe can you open a new thread to clarify your system and create an EA ?
    Regards.
    Actually it is a martingale in the statistical sense, not the gambling sense.

    Martingale - Wikipedia, the free encyclopedia

  8. #28
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    If I look at your graph (#17) with your formula , I realize the average is slightly positive...right ?
    It seems well that the trading have to start at this level with 2 buys EU UC.
    After a certain time or a certain delta level we can imagine the making profit of the winner pair....OK ?
    At this moment, we buy again the same pair and we are waiting for the return to the neutral position with normally a profit.
    It's difficult to know if this strategy is good...maybe to make the second buy with a weaker lot ( half lot ) .....we have to try some possibilities
    Last edited by madscalp; 02-14-2010 at 17:50.

  9. #29

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    hi madscalp,

    i want to try your settings for this ea, but how do u set the target of $20? do i put 20 in the target field? cos i tried putting 20 n the ea closed out all trades with $11 profit. weird. pls advise. thanks!

  10. #30
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    Quote Originally Posted by fxprotrader View Post
    hi madscalp,

    i want to try your settings for this ea, but how do u set the target of $20? do i put 20 in the target field? cos i tried putting 20 n the ea closed out all trades with $11 profit. weird. pls advise. thanks!
    Yes it's correct but as I said before , the EA close the orders when target >=20.
    If there are many orders, it's difficult to close all orders exactly at the same time. So there is sometimes a mismatch between the target and the profit.

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