I'm wondering if you'd be interested in programming an MT4 EA for me.
I think It should be fairly simple to code.
Here's the idea:
It is for the EUR/GBP, and the premise is not based on an indicator, but *potential* inefficiencies in the pricing of a cross pair.
Knowing that the EUR/GBP is a cross pair, with the major pairs being the EUR/USD and the GBP/USD. My theory is the EUR/GBP should always be the ratio of the two major pairs.
Mathematically, the EUR/GBP should equal EUR/USD divided by GBP/USD.
EUR/USD = 1.3642
GBP/USD = 1.6800
Therefore, the EUR/GBP should equal [url removed, login to view] = 0.8120
I'm wondering if there are times when the EUR/GBP and (EUR/USD)/(GBP/USD) don't exactly equal each other - if even for a very brief moment or longer.
I believe the EUR/GBP will always *want* to be that perfect ratio (because the forces driving the pricing (volume of the two majors) would be so much greater than the forces driving the value of the cross pair), so if the value is off by a few pips, would this be an opportunity to pick up a few pips every time the numbers didn't "match" properly.
In the example above, let's say the EUR/GBP *should* be 0.8120 according to the math. However the actual value is 0.8124. This would be an opportunity to pick up a few pips every time this happens.
In trying to see if this idea is even legitimate, I've downloaded the tick data from DukasCopy for the 3 pairs. My plan was to import them into Excel and graph the ratio vs actual and see if this theory has any merit.
However, the tick data timestamps aren't consistent across the pairs. For example, at time 12:00:003 i have data for EUR/USD, and at 12:00:254 I have data for GBP/USD, and so on.
So I can't truly evaluate the math tick by tick - at least I don't think i can. You may have some insight to offer in this point...
If an EA were to be written, I think it would simply divide EUR/USD by GBP/USD to calculate the expected EUR/GBP. It would then compare the expected to actual value to EUR/GBP. If there were a variance, it would enter a trade either long or short based on what the value should be (based on the calculations).
So first of all, do you even think this could be a valid strategy? Secondly, could you write an EA that would be able to execute the strategy?
I have no idea how we could even backtest such an EA, since it would need the value of 3 currency pairs at once - I'm not sure of the backtester in MT4 can do that.
Lastly, I was considering this strategy for the EUR/CHF as well. The exact same principles as above, but using the USD/CHF in place of the GBP/USD.
I'd love to hear your thoughts regarding the strategy, and if you are interested in programming this.
Thanks so much,