1) Two currencies
For to currencies YYY and XXX just if you enter first 1 lot BUY then enter 1lot SELL. it will be true balanced hedging since:
1) net pip value =0
2) net margin=0
always it is a losing system (loss of spread) and there is no way to profit from hedging. mo way at all.
2) Three currencies
If there are three currencies YYY, XXX and ZZZ
and Dominating currency is DDD
M1: ,Margin for pair 1 named YYYXXX
M2: ,Margin for pair 2 named YYYZZZ
M3: ,Margin for pair 3 named XXXZZZ
P1: ,PipValue for pair 1 named YYYXXX
P2: ,PipValue for pair 2 named YYYZZZ
P3: ,PipValue for pair 3 named XXXZZZ
To get accurate balancing: the net should sum to zero.
M1+M2+M3=0
P1+P2+P3=0
we know FROM GENERAL RULES that:
P1=Lots1*XXXDDD ----- M1=C1*Lots1*YYYDDD
P2=Lots2*ZZZDDD ----- M2=C2*Lots2*YYYDDD
P3=Lots3*ZZZDDD ----- M3=C3*Lots3*XXXDDD
so e have 3 variables: Lots1, Lots2 and Lots3.
C1*Lots1*YYYDDD+C2*Lots2*YYYDDD+C3*Lots3*XXXDDD =0
Lots1*XXXDDD+Lots2*ZZZDDD+Lots3*ZZZDDD=0
>
>if C1=C2=C3 (ALL PAIRS WITH THE SAME LEVERAGE) then:
Lots1*YYYDDD+Lots2*YYYDDD+Lots3*XXXDDD =0
Lots1*XXXDDD+Lots2*ZZZDDD+Lots3*ZZZDDD=0
>
We have three variables but two equation.
so we have to assume one variable and solve for other two.
hence C is 100,000/Leverage
For to currencies YYY and XXX just if you enter first 1 lot BUY then enter 1lot SELL. it will be true balanced hedging since:
1) net pip value =0
2) net margin=0
always it is a losing system (loss of spread) and there is no way to profit from hedging. mo way at all.
2) Three currencies
If there are three currencies YYY, XXX and ZZZ
and Dominating currency is DDD
M1: ,Margin for pair 1 named YYYXXX
M2: ,Margin for pair 2 named YYYZZZ
M3: ,Margin for pair 3 named XXXZZZ
P1: ,PipValue for pair 1 named YYYXXX
P2: ,PipValue for pair 2 named YYYZZZ
P3: ,PipValue for pair 3 named XXXZZZ
To get accurate balancing: the net should sum to zero.
M1+M2+M3=0
P1+P2+P3=0
we know FROM GENERAL RULES that:
P1=Lots1*XXXDDD ----- M1=C1*Lots1*YYYDDD
P2=Lots2*ZZZDDD ----- M2=C2*Lots2*YYYDDD
P3=Lots3*ZZZDDD ----- M3=C3*Lots3*XXXDDD
so e have 3 variables: Lots1, Lots2 and Lots3.
C1*Lots1*YYYDDD+C2*Lots2*YYYDDD+C3*Lots3*XXXDDD =0
Lots1*XXXDDD+Lots2*ZZZDDD+Lots3*ZZZDDD=0
>
>if C1=C2=C3 (ALL PAIRS WITH THE SAME LEVERAGE) then:
Lots1*YYYDDD+Lots2*YYYDDD+Lots3*XXXDDD =0
Lots1*XXXDDD+Lots2*ZZZDDD+Lots3*ZZZDDD=0
>
We have three variables but two equation.
so we have to assume one variable and solve for other two.
hence C is 100,000/Leverage
Forex Philosopher