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Simple Hedging system for newbies

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  • First Post: Feb 18, 2007 7:56am Feb 18, 2007 7:56am
Want to share a simple method which may keep newbies in the game and earn swaps for them too. The method : Buy one lot of each major pair ie buy a pair of eurusd,usdjpy,gbpusd,usdchf. Let the trade run. It accrues 1.5 $ daily on mini lots. The max swing experienced in the last three months is 300 pips, so keep that margin and sleep comfortably. Being all majors and hedging each other, no nasty surprises may be encountered under normal market conditions- Best of luck.
???
I thought I knew what hedging is.... but maybe I don't. What does this achieve over carry trading???
you buy eur in one cross usd in second, so most of the time they would cancel each other out,

one currency goes into plus other into minus and they cancel each other, but not all the time, if you want to make some profit you would have to close one order, but which one?
on the 20th of this month
the japan interst rates will likely go up
this could be a big event
because of its effect on carry trade
its impact may be way over the .25% raise.
this system looks good
but we maybe going in to non normal markets this week

just a thought
Stunew,
What this achieves over normal carry trading is that it is more safe and less prone to viciiousness compared to a standard carry trade, while giving you the advantage of carry also.
Hedging, at least in this example, achieves nothing more than carry trading. It is carry trading. Each currency pair, if held past 5pm (or whenever the day ends for your broker) will either pay you interest or deduct interest depending on whether you have bought or sold the currency. This varies by currency so you'll have to check it out. What is being described here is a hedge. The idea being that if you buy all four currency pairs, at the end of each day you will 1.50 on a mini account or 15.00 on regular account (mine would pay 1.625 and 16.25 respectively). Now you can't pick just any random set of currencies. Just because it will pay you interest doesn't mean that you won't be down money on the pips you've lost as the currencies will swing. But if you can find a set where that don't swing as much then that would be fine as each day you are earning interest.

Hope this helps.

Mike.
Taking Life One Pip At A Time I officially have my own opinion.
Quoting fffx
Want to share a simple method which may keep newbies in the game and earn swaps for them too. The method : Buy one lot of each major pair ie buy a pair of eurusd,usdjpy,gbpusd,usdchf. Let the trade run. It accrues 1.5 $ daily on mini lots. The max swing experienced in the last three months is 300 pips, so keep that margin and sleep comfortably. Being all majors and hedging each other, no nasty surprises may be encountered under normal market conditions- Best of luck.

...here is this stategy; in the direction of a trend, positon EUR/USD(B),
and position USD/CHF(S), then hedge them both, so will have EUR/USD(S)
and USD/CHF(B), so you have a ...+,-,+,- = 0, but it gets better, once the
market moves up in your favor, cancel out the positives, and you are left
with just the negatives, and with careful margins, the market reverses and
and then you are set for a take profit...can anybody agree?
The market is already starting to price that raise in. Even if the BOJ does raise rates, the only negative effect will be the actual holding of the carry trade on crosses with the Yen.

The Yen will strengthen against the other currencies, and once the effect is over, carry trades will be able to gain again.

I think the main issue to be concerned with is for those who are holding single-way bets against the yen.

There are OTHER crosses to trade that can be hedged for positive gains (like the GBPCHF and the USDCHF). And even so, the Yen can still be hedged for gains.

Just remember as the Yen gains strength, most often other currencies lose out accordingly....SO....you COULD hedge a long USDJPY or long GBPJPY with a short CHFJPY or a short EURJPY (respectively). Again, the key is to know which currency is in play and for how long that currency can stay in strength (which often times can last for a few weeks).

Carry trades are usually one way bets on a certain pair, but don't forget, you can always hedge to mitigate the risk.

Quoting TEB63
on the 20th of this month
the japan interst rates will likely go up
this could be a big event
because of its effect on carry trade
its impact may be way over the .25% raise.
this system looks good
but we maybe going in to non normal markets this week

just a thought
Yes .I think its working in some way.I have bought a lot of each pair EUR/USD,USD/JPY,USD/CHF,GBP/USD on Sunday evening,when markets are closed.Monday morning it was +64 pips,in evening -40pips.Tuesday was up up to +74 pips,but in the evening it was again in -45pips.Today I could see it was +180pips.I am trying that on demo trading right now.I dont think I would try that on live account,too scary .
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even hedging the yen can give sizeable drawdowns. Gotta keep the margin healthy, and then the amounts needed to be "safe" impact the rate of swap return. It definitely beats shoving it in a building society though.
TRADE FOR SWAP
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Thats like being long EUR/JPY and GBP/CHF isn't it? Both offer positive swaps but if they both go down it could be more than 300 pips I think...
I have been testing a hedging strategy that involves trading 3 or 4 of the 4 major pairs and then placing grid trades. I do accumulate profit from swaps (Depends on the broker) as well as take lots of small profits while I'm waiting to close at a profit. In one 3 week period my account was up over 70%. I'm still making consistant good profits and compounding. Not bad for a beginner.
grid trading.... works great on short-term, but overal in the long run you'll loose more than you gain in one bad trade. Atleast that's my eXperience
Happy Pip-hunt... KISSes
Well as I said earlier, I'm a beginner so I cant comment on the long term aspect, only on my experience so far and so far it works for me. Thanks for your input thought. I'ts appreciated.
I'm not sure how much info I can share on this site. I have a spreadsheet that shows my profits, drawdowns etc. Can someone tell me if I can share this on this site as a spreadsheet. I dont want to break the forum rules here.
I have looked for some guidelines but havent found them. Would appreciate if someone can point me in the right direction.
Posting your results are fine.

Quoting in_vestor
Well as I said earlier, I'm a beginner so I cant comment on the long term aspect, only on my experience so far and so far it works for me. Thanks for your input thought. I'ts appreciated.
I'm not sure how much info I can share on this site. I have a spreadsheet that shows my profits, drawdowns etc. Can someone tell me if I can share this on this site as a spreadsheet. I dont want to break the forum rules here.
I have looked for some guidelines but havent found them. Would appreciate if someone can point me in the right direction.
Taking Life One Pip At A Time I officially have my own opinion.
and whats your opinion Mike?
Quoting in_vestor
Well as I said earlier, I'm a beginner so I cant comment on the long term aspect, only on my experience so far and so far it works for me. Thanks for your input thought. I'ts appreciated.
I'm not sure how much info I can share on this site. I have a spreadsheet that shows my profits, drawdowns etc. Can someone tell me if I can share this on this site as a spreadsheet. I dont want to break the forum rules here.
I have looked for some guidelines but havent found them. Would appreciate if someone can point me in the right direction.
Hi In_vestor,

I will be happy to give a look at your excel spreadsheet with the goal to understand your strategy!

I'm a newbie in forex market and I'm looking to find mine own trading style so I guess that learn from other's experience could be the right way.

Also I love "hedge" on cross or correlation's trading so I spend mine time with the goal to learn as much as I can on that.

Best pips to all!

Alex
Thanks for sharing your system.
Quoting fffx
The max swing experienced in the last three months is 300 pips, so keep that margin and sleep comfortably. Being all majors and hedging each other, no nasty surprises may be encountered under normal market conditions- Best of luck.
300 pip swing in the course of 3 months or do you mean it has had 300 pip swings in the last 3 months. My concern is if the hedged positions' range starts to drift to a point where you cannot exit your entire positions without some kind of loss. How likely will this happen?
Quoting stimuls
300 pip swing in the course of 3 months or do you mean it has had 300 pip swings in the last 3 months. My concern is if the hedged positions' range starts to drift to a point where you cannot exit your entire positions without some kind of loss. How likely will this happen?
Depending on when you enter such a trade, the drawdown can be much worse than 300 pips. For example, if you had gone long on all four majors on Jan. 22, 2007 you would be down much more than 300 pips now. The EUR/USD is the only pair that has gone up since then, the other three pairs are way down.
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