Originally Posted by
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Well, this is how I do it. You take any pair and find it's daily range. Like you said, 1 method is to select the ATR, but ensure that you do so from the daily chart. I just do that method with exotics that I can't find daily range data on. I usually do a 20 period ATR to coincide with the 20 day ranges found on mataf.net. Then, you simply take the value of this currency per pip, and multiply it by the daily range.
Ex. USD/JPY daily range 76 pips * $.82 per pip = 62.32
Do the same with the pair you want to hedge.
Ex. GBP/USD daily range 128 * $1.00 per pip = 128
Considering that the jpy is lacking from the DRP (exactly what I dubbed the daily range, and pip worth ), you have to add additional lots into the jpy side.
128 / 62.32 = 2.05
Therefore, you need to buy 2.05 lots for lot of GBP. This formula is worth BILLIONS. I'm demo pairs which haven't deviated double the spread with this method. A savings account on steroids, and you don't even have to watch the screen all day. I have other formulas I created, such as finding the optimum point for closing and re-entering a trade. Have you ever heard of Freedom Rocks? I understand a group of traders that uses that instrument, but they shut and re-enter at 1.75% account gains. If they had this formula they would understand they're WAY off. I really like mathematics.