Question about the maths of hedging correctly/equally

[Southwallholdingsltd]

Hi, I trade 18 different markets with a small stake account. I'm hoping someone can help me work out how to adjust each stake size differently for each market so it matches the FTSE. In other words, when there's moves on the markets all posistions would be balanced equally. At the moment when big moves occur certain markets seems to generate large profits and others hardly anything despite a big move.
Hope that makes sense.

FTSE 100 = min. size 0.1 - (bet per 1 - spread 1 point)

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WTI Crude Oil = min. size 0.07 - (bet per 0.01 - spread 0.04 points)

IBEX 35 = min. size 0.08 - (bet per 1 - spread 8 points)

BRENT Crude Oil = min. size 0.07 - (bet per 1 - spread 7 points)

FTSE-MIB 40 = min. size 0.08 - (bet per 1 - spread 10 points)

DOW JONES 30 = min. size 0.07 - (bet per 1 - spread 1 point)

GOLD = min. size 0.07 - (bet per 0.1 - spread 0.3 points)

SILVER = min. size 0.07 - (bet per 0.5 - spread 2.5 points)

NASDAQ 100 = min. size 0.07 - (bet per 1 - spread 1 point)

SMI 20 = min. size 0.07 - (bet per 1 - spread 4 points)

DAX 30 = min. size 0.08 - (bet per 1 - spread 1.5 points)

S&P 500 = min. size 0.07 - (bet per 1 - spread 0.4 points)

EUR/USD = min. size 0.07 - (bet per 0.0001 - spread 0.0001 points)

GBP/USD = min. size 0.07 - (bet per 0.0001 - spread 0.00015 points)

CAC 40 = min. size 0.08 - (bet per 1 - spread 1 point)

USD/JPY = min. size 0.01 - (bet per 0.01 - spread 0.01 points)

NIKKEI 225 = min. size 0.01 - (bet per 1 - spread 10 points)

EUR/GBP = min. size 0.11 - (bet per 0.0001 - spread 0.00013 points)


Thanks in advance

 

[12WBT]

Hi, I trade 18 different markets with a small stake account. I'm hoping someone can help me work out how to adjust each stake size differently for each market so it matches the FTSE. In other words, when there's moves on the markets all posistions would be balanced equally. At the moment when big moves occur certain markets seems to generate large profits and others hardly anything despite a big move.
Hope that makes sense.

FTSE 100 = min. size 0.1 - (bet per 1 - spread 1 point)

--------------------------------------------------------------------------

WTI Crude Oil = min. size 0.07 - (bet per 0.01 - spread 0.04 points)

IBEX 35 = min. size 0.08 - (bet per 1 - spread 8 points)

BRENT Crude Oil = min. size 0.07 - (bet per 1 - spread 7 points)

FTSE-MIB 40 = min. size 0.08 - (bet per 1 - spread 10 points)

DOW JONES 30 = min. size 0.07 - (bet per 1 - spread 1 point)

GOLD = min. size 0.07 - (bet per 0.1 - spread 0.3 points)

SILVER = min. size 0.07 - (bet per 0.5 - spread 2.5 points)

NASDAQ 100 = min. size 0.07 - (bet per 1 - spread 1 point)

SMI 20 = min. size 0.07 - (bet per 1 - spread 4 points)

DAX 30 = min. size 0.08 - (bet per 1 - spread 1.5 points)

S&P 500 = min. size 0.07 - (bet per 1 - spread 0.4 points)

EUR/USD = min. size 0.07 - (bet per 0.0001 - spread 0.0001 points)

GBP/USD = min. size 0.07 - (bet per 0.0001 - spread 0.00015 points)

CAC 40 = min. size 0.08 - (bet per 1 - spread 1 point)

USD/JPY = min. size 0.01 - (bet per 0.01 - spread 0.01 points)

NIKKEI 225 = min. size 0.01 - (bet per 1 - spread 10 points)

EUR/GBP = min. size 0.11 - (bet per 0.0001 - spread 0.00013 points)


Thanks in advance

You need to work out the ratio.
And trade them in the same currency

FTSE 6608 and DOW 17610 at the mo

17,610 divided by 6,608 = 2.66

So DOW 1 point equal to FTSE 2.66 points

Currency ratio to index ratio lot harder to do.

 

[ACstudio]

Correlation values will vary from market to market. For example /ES is not very correlated to /GC especially recently. So beta weighting the whole portfolio against the FTSE will not give you a real picture of what is going on.

Correlation can be valued between -1 to 1....with 0 being not at all correlated.
So some correlations may be more relevant than others.

I try to stay delta neutral to slightly negative right now over all on my positions that are correlated to the SPY. But with positions in things like SLV or USO I just sell the volatility to the long side since they are beat down.

 

[Southwallholdingsltd]

thanks for the replies guys.
@12WBT thanks for explaining the index ratios, do you know how would I go about doing it for a currency pair or commodity like oil/gold etc. Also if I'm doing everything against the FTSE, say i went long/short on the FTSE one week, then a week later i wanted to trade another market do i work out the ratio based on the current FTSE price or the price it was when i initiated the trade from the week before?

@ACstudio thanks for the comment. I know it's tricky to ever get them fully equally hedged, especially doing it against the same market each time. I'd just like to get them a close as possible as at the minute i'm trading every market on the list at the minimum size possible and it's annoying when one of the winners moves quite a lot and hardly makes anything and annoying when one of the losers hardly goes against me much and it's a big loss . However even doing it minimum sizes on each market i am consistently always up so I'm hoping having them equally sized can only help my profits.

Thanks

 

[12WBT]

thanks for the replies guys.

@12WBT thanks for explaining the index ratios, do you know how would I go about doing it for a currency pair or commodity like oil/gold etc. Also if I'm doing everything against the FTSE, say i went long/short on the FTSE one week, then a week later i wanted to trade another market do i work out the ratio based on the current FTSE price or the price it was when i initiated the trade from the week before?


@ACstudio thanks for the comment. I know it's tricky to ever get them fully equally hedged, especially doing it against the same market each time. I'd just like to get them a close as possible as at the minute i'm trading every market on the list at the minimum size possible and it's annoying when one of the winners moves quite a lot and hardly makes anything and annoying when one of the losers hardly goes against me much and it's a big loss . However even doing it minimum sizes on each market i am consistently always up so I'm hoping having them equally sized can only help my profits.

Thanks

The ratio will change all the time.

The FTSE to DOW at the start of the year was 2.45 but is now running at 2.66 because the DOW outperforming the FTSE over the year.
It's your call on what ratio you use.

Best to do a currency pair or commodity on a chart with both instruments showing.
Tried the AUD/USD to DOW a few years ago on excel and was a nightmare.
To me it's better on excel but very hard to formulate.
No problem with index to index on excel.


Couple of threads to have a read of on correlation.
http://www.trade2win.com/boards/indices/154280-barjons-money-machine.html

http://www.trade2win.com/boards/indices/193598-market-correlation-variance.html

 

[Southwallholdingsltd]

The ratio will change all the time.

The FTSE to DOW at the start of the year was 2.45 but is now running at 2.66 because the DOW outperforming the FTSE over the year.
It's your call on what ratio you use.

Best to do a currency pair or commodity on a chart with both instruments showing.
Tried the AUD/USD to DOW a few years ago on excel and was a nightmare.
To me it's better on excel but very hard to formulate.
No problem with index to index on excel.


Couple of threads to have a read of on correlation.
http://www.trade2win.com/boards/indices/154280-barjons-money-machine.html

http://www.trade2win.com/boards/indices/193598-market-correlation-variance.html

Hi thanks for another useful reply. I'll have a look through those threads.

Just not sure how I'll work it out if I've already got trades on.

Say I wanted to to go long on the FTSE and Nikkei at the same time so i would do 17472/6634 so would do 1 on Nikkei and 2.6 on FTSE, what would I do if I wanted to go long on the DAX a few days later against the FTSE still but I'm already into the FTSE for 2.6?

Also if it was WTI Oil I wanted to trade, as it's bet per 0.01 is it just a case of x100 then dividing against the FTSE again? So 76.71 becomes 7671/6634 so 1 on Oil is 1.3 on FTSE....again though I'd already be into FTSE at 2.6 in this example. So would need to do 2 on Oil in this case to match the 2.6 I'm already in on the FTSE?

Gold bet per 0.1, so x10 1161.1 becomes 11611/6634 1 on gold is 1.75 on FTSE? So would need to do 1.4 on gold to match 2.6 on FTSE?

 

[12WBT]

Hi thanks for another useful reply. I'll have a look through those threads.

Just not sure how I'll work it out if I've already got trades on.

Say I wanted to to go long on the FTSE and Nikkei at the same time so i would do 17472/6634 so would do 1 on Nikkei and 2.6 on FTSE, what would I do if I wanted to go long on the DAX a few days later against the FTSE still but I'm already into the FTSE for 2.6?

You are correct on the Nikkei, but when you need to treat the next trade separate from the last, so DAX 9243/6638 = ratio of 1.39

Also if it was WTI Oil I wanted to trade, as it's bet per 0.01 is it just a case of x100 then dividing against the FTSE again? So 76.71 becomes 7671/6634 so 1 on Oil is 1.3 on FTSE....again though I'd already be into FTSE at 2.6 in this example. So would need to do 2 on Oil in this case to match the 2.6 I'm already in on the FTSE?

Gold bet per 0.1, so x10 1161.1 becomes 11611/6634 1 on gold is 1.75 on FTSE? So would need to do 1.4 on gold to match 2.6 on FTSE?

When I done the AUD/USD to DOW I would take both back to a base of 0-100 then work them back out again to find the variance.
Then work the ratio on the base of 0-100 to each instrument.
Ratio did not work that well for me, so ended up stopping.