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README.md

D-Basket EA - Correlation Hedging Expert Advisor

A production-level MetaTrader 5 Expert Advisor implementing a three-pair correlation hedging strategy for AUDCAD, NZDCAD, and AUDNZD.

Overview

This EA exploits the mathematical relationship between three currency pairs:

AUDNZD ≈ AUDCAD / NZDCAD

When the synthetic ratio (AUDCAD/NZDCAD) diverges from the actual AUDNZD price, the EA enters a hedged three-leg basket expecting mean reversion.

Strategy Summary

  • Long Basket (when AUDNZD appears underpriced):

    • Long AUDNZD
    • Short AUDCAD
    • Long NZDCAD

  • Short Basket (when AUDNZD appears overpriced):

    • Short AUDNZD
    • Long AUDCAD
    • Short NZDCAD

Features

  • Multi-Symbol Management: Single EA instance manages all three symbols internally
  • Z-Score Based Signals: Statistical divergence detection using rolling correlation and z-score
  • Multi-Stage Signal Filtering: 8 validation stages including spread, correlation, volatility, and time filters
  • Coordinated Basket Execution: All 3 legs executed atomically with rollback on failure
  • Circuit Breaker System: Automatic trading halt on drawdown, daily loss, or margin warnings
  • State Recovery: Recovers basket state after EA restart
  • Performance Tracking: Real-time metrics with chart display

Requirements

⚠� CRITICAL: Hedging Account Required

This EA requires a broker account with hedging enabled. Netting accounts will NOT work.

  • MetaTrader 5 platform
  • Hedging account type
  • All three symbols available: AUDCAD, NZDCAD, AUDNZD
  • Recommended: VPS for 24/5 operation

Installation

  1. Copy MQL5/Experts/DBasketEA.mq5 to your MQL5/Experts/ folder
  2. Copy the entire MQL5/Include/DBasket/ folder to your MQL5/Include/ folder
  3. Open MetaEditor and compile DBasketEA.mq5
  4. Attach EA to any chart (AUDCAD recommended)

File Structure

MQL5/
├── Experts/
│   └── DBasketEA.mq5           # Main EA file
└── Include/
    └── DBasket/
        ├── DBasket_Defines.mqh           # Constants & enumerations
        ├── DBasket_Structures.mqh        # Data structures
        ├── DBasket_Logger.mqh            # Logging utility
        ├── DBasket_CorrelationEngine.mqh # Correlation & z-score calculation
        ├── DBasket_SignalEngine.mqh      # Signal generation & filtering
        ├── DBasket_TradeWrapper.mqh      # Trade execution wrapper
        ├── DBasket_PositionManager.mqh   # Basket position management
        └── DBasket_RiskManager.mqh       # Risk management & circuit breaker

Input Parameters

Symbol Settings

Parameter Default Description
Symbol Suffix "" Broker symbol suffix (e.g., ".m", "_sb")

Correlation Engine

Parameter Default Range Description
Lookback Period 250 50-1000 Bars for correlation/z-score calculation
Cache Update 30 10-300 Seconds between recalculations

Signal Generation

Parameter Default Range Description
Entry Z-Score 2.5 1.5-5.0 Minimum z-score for entry
Exit Z-Score 0.5 0.0-2.0 Z-score for mean reversion exit
Min Correlation 0.75 0.50-0.95 Minimum AUDCAD-NZDCAD correlation
Max Spread 3.0 0.5-10.0 Maximum spread (pips) per symbol

Risk Management

Parameter Default Range Description
Fixed Lot Size 0.01 Min-Max Lot size per basket leg
Risk % 1.0 0.1-10.0 Risk % per basket (if dynamic sizing)
Max Drawdown 15.0 5-50 Circuit breaker threshold (%)
Daily Loss Limit $100 0-∞ Daily loss limit in account currency
Max Holding Hours 24 1-168 Maximum basket hold time
Take Profit $10 0-∞ Basket take profit amount
Stop Loss $15 0-∞ Basket stop loss amount

Trading Hours

Parameter Default Description
Start Hour 0 Trading window start (broker time)
End Hour 23 Trading window end (broker time)
Avoid Rollover true Skip trading near rollover

Signal Logic

Entry Conditions (all must pass)

  1. ✓ Correlation data is valid
  2. ✓ No basket currently open
  3. ✓ Within trading hours
  4. ✓ Not in rollover period
  5. ✓ All symbol spreads below threshold
  6. ✓ Primary correlation above minimum
  7. ✓ Volatility not excessive
  8. ✓ |Z-Score| exceeds entry threshold

Exit Conditions (any triggers close)

  1. Z-score returns to exit threshold (mean reversion)
  2. Basket P&L exceeds take profit
  3. Basket P&L exceeds stop loss
  4. Maximum holding time reached
  5. Correlation drops below critical level (0.5)

Risk Management

Circuit Breaker Triggers

Condition Warning Trip (Halt Trading)
Drawdown 60% of max Max drawdown reached
Daily Loss - Daily limit exceeded
Margin Level 500% Below 200%
Consecutive Losses - 6 or more

Emergency Exit

Immediately closes all positions when:

  • Margin level drops below 150%
  • System detects critical error

Backtesting

  1. Open Strategy Tester in MT5
  2. Select DBasketEA.mq5
  3. Choose AUDCAD symbol (EA manages others internally)
  4. Set timeframe (M15 or H1 recommended)
  5. Select "Every tick based on real ticks" for accuracy
  6. Set deposit and leverage matching your live account
  7. Run test for minimum 1 year of data

Optimization Tips

  • The OnTester() function returns a custom score optimizing for:
    • Risk-adjusted return (profit/drawdown)
    • Win rate > 65%
    • Profit factor > 1.3
    • Minimum 20 trades

Monitoring

The EA displays real-time metrics on the chart:

  • Current status (NORMAL/WARNING/HALTED)
  • Net P&L and percentage
  • Daily P&L
  • Current and maximum drawdown
  • Basket count and win rate
  • Consecutive losses

Logging

Configurable log levels:

  • ERROR: Critical errors only
  • WARNING: Errors + warnings
  • INFO: Normal operations (recommended)
  • DEBUG: Full detail for troubleshooting

Enable file logging for persistent records.

Troubleshooting

"Hedging account required" error

Your broker account is in netting mode. Contact your broker to switch to a hedging account.

EA not opening trades

Check:

  1. Risk limits not breached (circuit breaker)
  2. Current Z-score meets entry threshold
  3. Spreads within limits
  4. Within trading hours
  5. Correlation above minimum

Partial basket

If a basket is only partially filled, the EA will:

  1. Attempt to complete the basket
  2. If unable, close the opened legs
  3. Log the issue for review

Disclaimer

⚠� Risk Warning

Trading forex involves significant risk. This EA is provided for educational purposes. Past performance does not guarantee future results. Always test thoroughly on demo accounts before live trading. Never risk more than you can afford to lose.

License

?? License & Copyright

Copyright © 2025 Dineth Pramodya
Website: www.dineth.lk
All rights reserved.

Last Updated: December 28, 2025
Developed by: Dineth Pramodya

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