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Hedge a losing position? 62 replies

Take a loss in a losing position or wait for it to turn around? 16 replies

Money Management - Losing Position 5 replies

How to rescue a losing position?

Quoting kingsurfer
This is one method. Do you have a problem with it. Will you still have a problem with it if a trader is making above average returns with it. ie is your problem with it not subject to reason?
I don't have a problem with anything anyone does here. I'm just saying I don't understand why someone would try to rescue something that cannot be rescued. It just doesn't make sense to me.


Quoting kingsurfer
At price A you may fell comfortable having 3 lots in the trade while at price B (or set up B) you judge merits 5 lots. Every set up are not equal. Trading is not always full position opening and full position closing.
Sure that seems reasonable. For the record, I never said each trade has to be the same position size (in case you thought that).
Top-Forex-Systems. com
I use hedging.
BUT: beware, you need an extra stop "somewhere not too far" to prevent a margin call on one subaccount on a crazy spike..someday...you need a solid trading strategy to find a new turning point...then you might add, substract, etc...I trade 5 min... sometimes it takes a whole day just to recover a position, but it´s posible.Sometimes you make money on both...sides.
Once locked in a hedge you can leave it over night, (you pay on interest....!), and continue the fight for recovery next day...

Scenarios are as random as the market...all in all it´s not recomended for the faint in heart...demo for at least a month before even trying....you could loose your shirt.
On top of that, many rightly argue it´s no different than stop loss, rinse and wash....and start again.
AS USUAL; THERE´S NO FREE SANDWICHES IN fOREX.

Quoting incomeideas
Hi All,

This thread is NOT about whether to use stop loss/hedging, but searching for some practical and feasible recovery method(s) on how to rescue a losing position.

Please vote whether you are using any rescue method, do share more if you are using one.

Thanks in advance.

Background :
#21, #37

Interesting posts :
#46,...
Quoting 2+2=4ex

Just curious... How about if you close the trade (aka rescue) right before it turns around to what would have eventually been a profit. Is that considered rescuing a trade from profit?
I am discussing a trade I have already decided is a loss. For profits I take them at their first attempt. I don't joke with the profit!
Quoting kingsurfer
I am discussing a trade I have already decided is a loss. For profits I take them at their first attempt. I don't joke with the profit!
Why not put the stop at where you know your trade is wrong (i.e, a loss) and just cut it from the get go instead of letting it move beyond that point? Consider it your risk, accept that it may be lost, and move on instead of wasting time and resources on the inevitable.
Conventional wisdom leads to conventional results.
To me a loser is not a position that is in the red.

For instance a position closed at BE (or +1pips) is a loser because it yielded no profit while a risk has been taken.
This reduces the expectancy of any system: if you add zeros to an average this drives this average towards zero.

A position closed in the green is not necessarily a winner either IMO. For instance you realize the next minor
resistance doesn't want to break to let the price go and reach your target. The plan doesn't work as expected since the resistance
is now proven to be not that "minor". Instead of stubbornly hoping the breakout, you close in profit. But the price didn't
reach the target, the plan didn't work. Your R:R is not achieved and this also contributes to lowering the expectancy.
=> I'm also interested in rescuing this loser by catching the BO. If it happens. But it is the same trade I resume or is it another one on its own?

I agree with kingsurfer, as long as the plan still makes sense. But in this case you are not rescuing a loser because it's not a loser.
A position 50 pips in the red is not a loser just by this fact. The position can be in the red without voiding the plan.

An example I'm thinking about is the bullish outside bar on the daily sitting on a nice S/R level. The range of this bar can easily
bracket the last 4 days of PA. That's quite a big SL. And it is required because those bars are frequently followed by a consolidation.
On the other hand if you wait the price to come lower it may run straight up without you and leaving no opportunity to enter a superb rally...
I think this is a case where it makes sense to average down. But this becomes the plan. All the SLs are at the same place below the support (it voids the plan) and the sum of the potential losses equals your intended risk.

Now if it fails does it make sense to rescue it? I doubt. So many other pairs to seek an easier opportunity of profit. Plus you trade them
with a strategy you know instead of reacting against the market. Making the money back on this same pair or any other that's the same (that stupid Cable gonna know who's da boss!).
Quoting cuchuflito
I use hedging.
BUT: beware, you need an extra stop "somewhere not too far" to prevent a margin call on one subaccount on a crazy spike..someday...you need a solid trading strategy to find a new turning point...then you might add, substract, etc...I trade 5 min... sometimes it takes a whole day just to recover a position, but it´s posible.Sometimes you make money on both...sides.
Once locked in a hedge you can leave it over night, (you pay on interest....!), and continue the fight for recovery next day...
I'm wondering if this isn't the same as virtually trading a higher TF. Just thinking loud... Say a long on M5 goes against you. This position may perfectly make sense on say H4. Unfortunately you are awfully over-leveraged for the SL required for trading this TF. By hedging you reduce the leverage to zero. Here again I agree with kingsurfer when he says that the position shall be sized according to its merit. Zero is not good.
hanover said it clear: if the price is supposed to go up you shall be net long. The short (hedger) should be sized such that the net position is long and for the SL on H4 (instead of a stupid martingale or 1,1,3,3 and the like, you REDUCE!). The pair of positions is now one H4 trade. If the price goes up again... fine! because you're trading H4 long, sized for a H4 long trade and it goes in your direction. Sure the pips make less money but you now target much more (hey you would have been happy with BE two hours ago).

When closing the short in profit you average down the H4 long trade. You are back over-leveraged but you may be at a very good price that allows to consider this increase of risk or, if not, you can scale out thanks to the profit of the short side. Or you can simply close both because the H4 trade turned a loser too (let's trade it on monthly! ).

No free lunch but a free drink maybe... Hanover do you think it's possible or the gap between the two entry points is enough to ruin any hope?
There is only one way to 'rescue' a losing trade. Get out of it, and it should be the first and only option. Cut your losers short and let your winners run.
Quoting incomeideas
Hi All,

This thread is NOT about whether to use stop loss/hedging, but searching for some practical and feasible recovery method(s) on how to rescue a losing position.

Please vote whether you are using any rescue method, do share more if you are using one.

Thanks in advance.

Background :
#21, #37

Interesting posts :
#46,...

there is no way to rescue a losing position , cut your losses short and let wining run my friend.
Hohoho Merry Christmas everyone!

After not visiting for a good few months I see that this raging topic is still the hot stuffs in FF.

As I once heard, if our job as a trader had a description, that description would be "to manage only the entry and exit."

My vote goes to cut loss. There is no rescuing. The moment you put on that trade, whether you are right or wrong has already been decided.

Trade to trade well my friends!
Quoting PipMeUp
I'm wondering if...?
Stupid me! That's perfectly the same as closing at a loss on M5 and taking another trade on H4.
Quoting PipMeUp
I'm wondering if this isn't the same as virtually trading a higher TF. Just thinking loud... Say a long on M5 goes against you. This position may perfectly make sense on say H4. Unfortunately you are awfully over-leveraged for the SL required for trading this TF. By hedging you reduce the leverage to zero. Here again I agree with kingsurfer when he says that the position shall be sized according to its merit. Zero is not good.
hanover said it clear: if the price is supposed to go up you shall be net long. The short (hedger) should be sized such...

I haven't thought it through enough but ......wouldn't that be the same as ....start small and scale up

hedge big and reduce hedge?
AVT INVENIAM VIAM AVT FACIAM
Quoting PipMeUp
Hanover do you think it's possible or the gap between the two entry points is enough to ruin any hope?
Depends on your trading method, which I assume you've tested over a large number of trades, to satisfy yourself that it's on-balance profitable in all market conditions, right?

Gil Blake, interviewed in Jack Schwager’s New Market Wizards (Harper Business, 1992), attributes his success to the following formula (see p 248):

1. Focus on trading vehicles, strategies, and time horizons that suit your personality.
2. Identify non-random price behavior (while recognizing that markets are random most of the time).
3. Convince yourself totally that what you’ve found is statistically valid.
4. Use this to set up trading (entry and exit) rules.
5. Follow these rules.

Anything less is mere guesswork, IMO.
I'm taking a rest from forums. Please don't expect replies to your posts.
Quoting the redlion
I haven't thought it through enough but ......wouldn't that be the same as ....start small and scale up nedge big and reduce hedge?
Yes, you're right. As I posted just earlier that was an idiotic idea... This is indeed perfectly exactly the very same thing. It brings nothing at all.
Quoting hanover
1. Focus on trading vehicles, strategies, and time horizons that suit your personality.
I block a little on this one. If I must trade with no greed, no fead, no impatience, no ego... But instead based on the market and only on the market. Why shall I use a strategy or a take profit (the time horizon) based on my personality instead of based on the market?

I mean if an optimal strategy (if it exist) is a strategy I don't like at all. That's me. Market doesn't care. I must use this method and that's it. No?
If you find a method better than yours (according to any of your metrics) but you dislike it totally, wouldn't you use it anyway? Sticking to your method becomes a matter of ego.
It´s possible, absolutely, it´s not rescuing if the market come back anyway...market is random, then not random, and then again...guess...random again....and to make it it even nicer, it switches from one to the other: randomly....recovering is hard work but specially in Forex it is possible...unlikely on stocks that could just collapse for good...

But I agree with most here...easier to stick to the good olde stop...

Quoting hanover
Depends on your trading method, which I assume you've tested over a large number of trades, to satisfy yourself that it's on-balance profitable in all market conditions, right?

Gil Blake, interviewed in Jack Schwager’s New Market Wizards (Harper Business, 1992), attributes his success to the following formula (see p 248):

1. Focus on trading vehicles, strategies, and time horizons that suit your personality.
2. Identify non-random price behavior (while recognizing that markets are random most of the time).
3. Convince yourself totally...
Quoting PipMeUp
I block a little on this one. If I must trade with no greed, no fead, no impatience, no ego... But instead based on the market and only on the market. Why shall I use a strategy or a take profit (the time horizon) based on my personality instead of based on the market?

I mean if an optimal strategy (if it exist) is a strategy I don't like at all. That's me. Market doesn't care. I must use this method and that's it. No?
If you find a method better than yours (according to any of your metrics) but you dislike it totally, wouldn't you use...
Fair enough. I'm merely quoting a famous trader from a textbook (that was written, albeit, 20 years ago).

But what is a "better" method? Higher annual return? Lower drawdown? More consistent income? Greater diversification, to mitigate risk? One that suits your lifestyle (e.g. you don't have time to sit at the computer all day)? One that doesn't stress you too much?

I think what Mr Blake means is that if you feel comfortable with scalping, then scalp; if you prefer position trading, then do that instead. Price moves as waves within waves, hence there are plenty of timeframes/horizons to (profitably) choose from.

A big part of trading is psychology; so even if you find a "better" method, but don't have the nerve/patience/discipline to execute it consistently, then it's not much use to you. You stick to a method not necessarily because of ego, but because it's proven itself to be profitable, and you feel familiar and comfortable trading it. It takes time, effort, and possibly money, to test new methods; and you need only one 'edge' to succeed. As the saying goes, if it isn't broken, don't try to fix it.
I'm taking a rest from forums. Please don't expect replies to your posts.
Quoting hanover
Depends on your trading method, which I assume you've tested over a large number of trades, to satisfy yourself that it's on-balance profitable in all market conditions, right?

Gil Blake, interviewed in Jack Schwager’s New Market Wizards (Harper Business, 1992), attributes his success to the following formula (see p 248):

1. Focus on trading vehicles, strategies, and time horizons that suit your personality.
2. Identify non-random price behavior (while recognizing that markets are random most of the time).
3. Convince yourself...
Top-Forex-Systems. com
Quoting incomeideas
Hi All,

This thread is NOT about whether to use stop loss/hedging, but searching for some practical and feasible recovery method(s) on how to rescue a losing position.

Please vote whether you are using any rescue method, do share more if you are using one.

Thanks in advance.

Background :
#21, #37

Interesting posts :
#46,...
If you really want to rescue your position, you'll have to load up the back end to bring your new average position to within a retraceable distance. Most will say a move will retrace at least a third, .333 or for you fib lovers .382. Beginning from the start to the end of the move, not where you actually entered, you'll have to increase your position size so that your new average falls within that distance... the best way but with higher risk is to figure from the last broken level.

Then sit on your hands and wait it out, hoping price doesn't continue to move against you, because the snowball just keeps growing exponentially if you have to try to rescue a third time. Past that point you've irreversibly damaged your account if you're still in the game. Some one in here mentioned earlier about going to a higher time frame when looking for a place to rescue.

There's not many reasons to attempt this if your in a LOSING position and not part of your calculated entry positioning. You'll eventually slip over the edge....if you wipe out half your account then from that point you have to double your account to get back to break even. huge losses are very hard to recover.

It's much easier to stop and reverse positioning.

fwiw,
Quoting Kanzler
Why not put the stop at where you know your trade is wrong (i.e, a loss) and just cut it from the get go instead of letting it move beyond that point? Consider it your risk, accept that it may be lost, and move on instead of wasting time and resources on the inevitable.
Kanzler, do u continue to analyse your trade after you have entered it? If you do, why?

Obviously you do, for in ur comment above you noticed the trade was wrong before it hit your stop loss. That's why you considered completely exiting at that time. What will you do if conditions are the best you can hope for in your system, will you still close the trade at that point? What then did you base this decision on?

No body knows what the very next formation in the chart will be. That finding will alter what you do with the trade.

For me I will exit at any point that my analysis tell me it will continue in the negative, or will get worse. If my analysis says it will get better then I do not exit, instead I do whatever my analysis says is the right thing to do.

If the strategy/system keep putting me in trouble, then it is the system/ strategy that needs revision. If the system continue to be very productive, I dont't need to disobey it against my best judgement.
All true!
BUT how about combining rescue with hedge...it´s starts to open new roads.. you run many positions both ways, with a clear position size system (OANDA , no lots or minis, unless youré rich!!) ... sound method and trading strategy....it can be done....last week I started risking 1R...5 min chart...went both ways ,up and down the rollercoaster, finally next day I closed the "campaign" with 6 R profit...
Again not recommended for the faint in heart, at one point I was - 10 R down, market wants to scare retailers...guns all the stops and comes back from behind ...
Big boys take it all...they love our sweet traditionall systems....it takes new ideas to play ...most of the good old stuff get´s eaten by the robots.

Yes black swan is an issue if you are not carefull....but you are in control...possibilities are there....solid MM (position size)...is paramount.market is a loosing game...start there....no free sandwich...
Risk 1 R, put a stop, get hit 3 or 4 times in a row and it could take you days, weeks to recover...if ever....

Quoting kingsurfer
Kanzler, do u continue to analyse your trade after you have entered it? If you do, why?

Obviously you do, for in ur comment above you noticed the trade was wrong before it hit your stop loss. That's why you considered completely exiting at that time. What will you do if conditions are the best you can hope for in your system, will you still close the trade at that point? What then did you base this decision on?

No body knows what the very next formation in the chart will be. That finding will alter what you do with the trade.

For me I will...
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