Forex EA Robot Trading Blog

Here is part of a discussion i have been having over email. I think the information is useful in a general sense, and as i dont always have time to update the FAQ on the site (and frankly, the blog technology does a better job of organising the content), im going to post most of the FAQ's, mainly regarding the CarryGrid EA, on here.

Q. Differentials can mean several things....yes, one way to look at it is
the correlation between the pairs, in the case of the EURUSD and USDCHF they're
negatively correlated. But I also look at several other ways to measure
risk when I hedge....one is the number of pairs open in any combination for
instance, EUR buys vs EUR sells or CHF buys vs CHF sells or EUR buys and CHF
sells vs EUR sells and CHF buys which are all essentially the same thing.
Its important to see the relationship of all pairs at all angles so that when
there's profit taking, you take it so that you manage each trade individually
but work the entire basket of trades as a whole so as not to break your risk
factors. So whenever I hedge trade, I am mainly concerned about 1) capital
preservation first 2) profit taking second 3) keeping risk at 1% or lower if
possible. This way, you can still have a drawdown of say 2000 pips and
still only risk 1% of your total account. I see many people trading
hedges that don't really have a clue how much risk they're really taking.
Freedom Rocks clients are famous for this. In any case the Carry
Gridding EA looks promising. I used to run standard Grid EA's but with the
turbulent volatility in the markets, its absolutely suicide. The
CarryGridding EA however is great since it seems to be waiting for trend
direction and is intelligent enough to hold back trades if the market turns and
takes small enough position sizes that I feel comfortable with. I'm
not sure which basket of pairs to combine however to get a faster overall gain
but at the same time stay conservative still on risk. Capital Preservation
is my number one concern....

A.I totally agree with you on the capital preservation comments, it is also my
primary concern. The basket/hedging is something i have visited several times -
the concept of using the carrygrid in combination with a basket of pairs to
produce positive interest and minimise overall exposure. However i just found it
insanely complex to manage, and i am a big fan of the 'keep it simple stupid'
motto. If i cant understand it, i cant trade it. Similiarly i find hedges are
notoriously difficult to manage; especiallly with the additional margin they
take up. I prefer taking the minimum lot size, gradually building a
position over time type approach. Well, that is one approach, its not the way i
manually trade, but as i have said before, its a tool that i use on my accounts,
as its smart enough not to position in against the trend.
Also, I was looking at AUDCAD as a new potential candidate for the v5 grid - it looks really promising to run on a short time frame as its a range bound pair. Check out the 4Hr chart for more details.

Labels: AUDCAD, Capital Preservation, CarryGrid EA, Differentials, hedge

# posted by My FX Tools @ 01:27