I prefer hedging a big loss until you can slowly reduce the loss it has become. Otherwise cutting a large loss can make too big of a dent in your account which may take forever to recover.
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DislikedI prefer hedging a big loss until you can slowly reduce the loss it has become. Otherwise cutting a large loss can make too big of a dent in your account which may take forever to recover.Ignored
Dislikedfrom Hayseed: hey rap..... correlation between pairs changes day to day and even hour to hour...... this would include the eur/usd vs usd/chf also..... That is correct. So does market price... And a correlation that is poor today can be real good tomorrow. Some correlations are strictly happenstance. But others will change less, because they are based on the pair structures: eur/gbp will always have a negative correlation to gbp/usd simply because to buy both you have to buy the gbp in one and sell it in the other. How much will vary, but it will...Ignored
Disliked{quote} Very good post. I read it twice, but still not sure if it also addresses hedging using two pairs with positive correlation. I think hedging a losing position with another pair that has positive correlation to the orginal pair has more advantage over using a pair that has negativ correlation to the original pair. The main factors to watch for is 1) the difference in the speed with which they move in different sessions, 2) the difference in the distance they normally cover (or atr), and 3) the existing distortion (imbalance) in the correlation....Ignored
DislikedThe two parts of the hedging argument that the single one in/one out trader cannot replicate are: 1. There is no risk since the account is hedged so you cannot lose your account where as the single one in/one out can lose his account. 2. There is no thinking, no study of the charts. You are only trading price action and you dont care which direction it goes because you will profit no matter what price action does. All you have to do is cover your permanent DD. In reality I live in the USA and cant hedge here but I am thinking of setting up...Ignored
DislikedThinking outside the box - trading is all about probabilities and what we know or think. - And............ money management. So what if we could eliminate the unknowns and increase the probabilities. So first lets look at what we don't know and I would posit that we don't know EVER which way a currency will go. So our first problem is how to decide whether we go long or short. So what do we know with any certainty - over time a currency pair will return to 'par' - by that I mean that, as someone mentioned(Bob I think) Currencies range 70% of the...Ignored
DislikedThinking outside the box - trading is all about probabilities and what we know or think. - And............ money management. So what if we could eliminate the unknowns and increase the probabilities. So first lets look at what we don't know and I would posit that we don't know EVER which way a currency will go. So our first problem is how to decide whether we go long or short. So what do we know with any certainty - over time a currency pair will return to 'par' - by that I mean that, as someone mentioned(Bob I think) Currencies range 70% of the...Ignored
Disliked{quote} Looked at another way we can know with 70% certainty that all trades will eventually go into profit and all we need to do is harvest some pips along the way. Hedging ensures that at least half(if fully hedged) of our trades will return a profit in the short term.Ignored
DislikedTrading xxx/111 and 333/xxx together is the same as trading just 111/333 (or 333/111). The math says so. But of course, some people here believe that math somehow doesn't apply to forex, that forex transcended basic mathIgnored
Disliked{quote} If you want to be able to think outside the box, first you want to be able to think, and think clearly. You say you know that a currency will return to 'par'. No you don't. This is an incorrect assumption. You talk about EU going where it was 20 years ago...except that the Euro wasn't even in circulation 20 years ago. Come on...think. And again you're wrong about 'hedging'. Stop and think. Don't just post things you don't understand. You want to do both long and short at the same time because you think it's better than flat. Rather than...Ignored
Disliked{quote} The Euro was established in the Maaschrict treaty - 1992 Thats actually 22 years - Notes were introduced in 1999. Over time currencies tend to range or return to par and I said 70% of time not 100.Ignored
Disliked{quote} If you want to be able to think outside the box, first you want to be able to think, and think clearly. You say you know that a currency will return to 'par'. No you don't. This is an incorrect assumption. You talk about EU going where it was 20 years ago...except that the Euro wasn't even in circulation 20 years ago. Come on...think. And again you're wrong about 'hedging'. Stop and think. Don't just post things you don't understand. You want to do both long and short at the same time because you think it's better than flat. Rather than...Ignored
Disliked{quote} And again you're wrong about 'hedging'. Stop and think. I am not wrong about hedging because I have no opinion - just an open mind atm - I'm not an advocate or an anti but I am prepared to listen to all sides of the argument - even from a SFB like you.Ignored
Disliked{quote} You seem to be trying to argue rather than learn. A treaty is just a treaty. So hopefully, rather than argue when you're wrong, you'll admit you are wrong (see how your own bad habits spill over into your trading as you don't wish to close losers there either!). Now read the wiki article and you'll see it hasn't been traded for 20 years. Yet you think it's going to return to some value 20 years ago when it wasn't even traded. That's nonsense. Accept it, and learn. Lets take GBPUSD, it once traded above 2.1170 and once traded below 1.3500....Ignored
Disliked{quote} Lets take GBPUSD, i By all means lets look at the GBPUSD again it is exactly where it was 20+ years ago - Why would you short it below 1.35 - is that how you normally trade? sell the bottom? But even at 140 I notice that price revisited that area 4 times in the last 20 years.Ignored
DislikedThe two parts of the hedging argument that the single one in/one out trader cannot replicate are: 1. There is no risk since the account is hedged so you cannot lose your account where as the single one in/one out can lose his account. 2. There is no thinking, no study of the charts. You are only trading price action and you dont care which direction it goes because you will profit no matter what price action does. All you have to do is cover your permanent DD. In reality I live in the USA and cant hedge here but I am thinking of setting up my foreign...Ignored
Disliked{quote} I have done similar trades without using hedging. The key is thinking in total position size, instead of individual trades.Ignored