Recruitment of participants SH-3

SH-3.3 mt5

Strategy Description:
Hedging is the safest strategy on the market!
Expert Advisor based on correlation and co-integration of currency pairs.
Strategy description:
The robot works with smart hedging, the safest strategy on the market. He is hedging (insuring) orders of two highly correlated currency pairs, so no matter in which direction the market moves, the drawdown will be minimal, and the profit will be guaranteed! The sh expert Advisor trades on a split of currency pairs. When correlated instruments deviate from their course, the expert Advisor bets on a return to the correct rate.
Correlation
Correlation (“correlation, correlation»), – statistical relationship of two or more random variables (or values that can be considered as such with some acceptable degree of accuracy). In this case, changes in the values of one value accompany a systematic change in the values of another value. The correlation coefficient is a mathematical measure of the correlation of two random variables.
Cointegration
Cointegration is a property of several non-stationary time series, which consists in the existence of a certain stationary linear combination of them. Co-integration is an important property of many economic variables, which means that despite the random (poorly predictable) nature of changes in individual economic variables, there is a long-term relationship between them, which leads to some joint, interrelated change.

How the strategy works:

We choose two currency pairs with a high correlation and cointegration coefficient. I have described how to choose pairs in several articles on this site. There is also a script for matching pairs of CORR. The Expert Advisor itself also has an algorithm for automatically selecting a pair. But more on that later.. If a pair of instruments has a high correlation, then most of the time the pair moves almost synchronously. But there are times when couples diverge from each other. At such a moment, the ADVISER opens counter positions as shown in the screenshot below:



the closing of transactions occurs when the currencies converge again and give a total profit. Let’s analyze the principle of hedging (insurance) in this example. We see that the sell position is open for GBPUSD, and the buy position is open for EURUSD. As long as the currencies run in parallel, their total profit will not change. If there is even a very long trend in one direction, for example, up, then we will get a loss for GBPUSD, and about the same profit for EURUSD. Thanks to this trading principle, we do not get large drawdowns. One deal always protects the other! The total profit for us occurs when the pairs approach each other. And at this moment, the adviser starts a profit trawl and takes the maximum possible profit.



These currency pairs are taken as an example only. This is not an ideal to look up to! But they show the principle of trading well because they often diverge and give a large number of transactions. Keep this in mind when choosing tools! If You want to get the most secure trading, you need to select pairs of instruments with a very high correlation. However, there will be very few transactions. Many people are tempted to put the correlation in the opposite direction. For example on EURUSD GBPUSD to trade in negative correlation or on-the-EURUSD-USDCHF – positive. This type of trading can bring a large profit in a short period of time. But it is this kind of trade that will sooner or later lead to a complete drain, since in this case, the pairs do not insure each other, but rather push the trade into the gap. If you want to trade safely, be sure to correctly consider the direction of correlation. The correlation coefficient on some pairs can show both positive and negative correlation on short sections. In this case, check the correlation sign for a longer period, such as 2000 candles. If the sign can change there, then it is better not to contact such pairs, since they most likely do not correlate with each other.