A free Metatrader indicator to help you set up a hedging strategy or to better diversify your trades. The indicator will find relationships between any instruments. Knowing the relationship between different trading instruments is essential both for risk management and for hedging. This tool will scan through all instruments in your Metatrader market watch window. It will then tell you the relationship each symbol has to the current chart symbol. It will tell you:.
This information can be used to setup hedge trades. It can also be used to diversify your portfolio to avoid trading linked pairs in the same direction. As part of a hedging strategy you may need to find hedge pairs: This is an example of positive correlation. Hedging strategies involve trading related instruments usually in an effort to reduce volatility. This shows the instruments with the strongest relationships, either positive or negative. The table below shows the relationship over different timeframes the times can be chosen in the setup.
Best 1 month hedge is short 6. Of course the goal is not always to hedge but to avoid trading in pairs that have strong relationships. That is, to use diversification. Diversifying trades can help reduce overall risk exposure and even out returns.
So in fact the trader would gain no diversification by adding these to his trading book. Therefore from a diversification point of view, these would be better trades. The settings allow you to customize the outputs to your trading requirements, including trade size, trade direction and time frames. You can also switch between showing hedging trades and showing diversification trades.