{quote} I don't see the point of hedging.
Hedging in most cases is because you don't know what markets/you are doing, so why should you stay in the position in the first position? That's the number one rule in risk management.
plus there is the thing with math
re-entering a trade after stoped out, makes it pretty much a breakeven run, as the gain will likely just pay for the loss generated before.well if you are a trend-trader, then i guess this is different and hedging makes much less sense, but as a range-trader this most certainly is the case.
look at this deal map from today (AUDJPY) (i hedge at 0.65% drawdown)
at 17:21 when price finally broke out (as expected) the hedge positions paid all of the equity loss already (as I realized it twice) giving me a 0.06% drawdown the moment I closed the short position (hedge) .. the last position added a 0.2% loss to the account so makes it a drawdown to total 0.26% .. the spike up made a massive profit, where the initial entry was not even in a profit. thanks to hedging.
in single trades, I would never enter in a structure like this, but because of the hedges, I could let it develop over serval hours, and make money by doing so.
I made 2 failed attempts to resolve the hedge (both made me money), on conventionally trading that would mean 3 stop outs, plus i would never have re-entered anyway.
so let's do the math I maintained a 0.5-0.8% drawdown over the time and exit the whole set with a 4% gain
conventionally this would be 3 stop outs causing a 1.95% balance drawdown. the gain would "just" have paid for the loss and likely not been executed anyway as the setup was not exactly perfect for it. the rest is just math I prefer to maintain a fixed equity drawdown over collecting serval losses in a row.
but that is just how I do it, I'm sure there are many others doing it completely different for different reasons.
as for "not knowing" well i most certainly do NOT know what the market is doing and
, in my opinion, everyone claims otherwise is just delusional.it's about probabilities, not about being right.
not knowing something, doesn't make it a bad thing
{quote} I like hedging, it takes the pressure off when things go wrong, so you stay cool as the drawdown stops, and you can make money the other way as well. plus there is the thing with math
"and you can make money the other way as well"
no you cant when you hedge you have a flat position thats why your drawdown stops.
"plus there is the thing with math
re-entering a trade after stoped out, makes it pretty much a breakeven run, as the gain will likely just pay for the loss generated before"its the same with hedging or are you saying that just because you hedged your loss magically disappears
{quote} I like hedging, it takes the pressure off when things go wrong, so you stay cool as the drawdown stops, and you can make money the other way as well. plus there is the thing with math
{quote} agree, just do it buddy ! everyone claims they know better, just do what we know best is better than following what others do best, unless they are proven better.
provided a live deal map that shows how i utilize it every day. (no theory, real trades) and still, get told that the loss magically disappear. I was actually about to respond with a simple "Yes" haha. but that has no value, so just let it be.
I have no interest in proving anything to anyone, this is not a race, i really don't know why everyone always has to be right, trading (especially intraday) is about probabilities, ego just makes you go broke.
there is always someone better, or know something better.
but in the end of the day, its just You trading, once realized that, trading becomes pretty easy, as yourself is the only enemy as well
Hedging doesnt reduce your drawdown
)I said it STOPS your drawdown, that's not the same plus it delivers a major psychological advantage at first. as you have no more pressure on making a quick (usually wrong) decision.
if the setup is still valid, you stop out the hedge out at +1 (or whatever, most of the time BE is not the right place to do this), no harm done, and you good to go when the price comes back at no cost, and if it doesn't (meaning me being wrong) then just close it all and move on
doing this also allows far greater position sizes by maintaining the same risk per trade. I myself hedge at 0.65% but the trade has an allowance of 1.4%, so i have room to work, once I made my decision on what to do. and if it fails again, close it all at predefined (rule) Drawdown.
sticking to the rules becomes VERY important at his point, as this can become very fast, very expensive, but upholding the own rules makes this a powerful tool.
{quote} I never make any statement like this, that would be just plain wrong and VERY stupid too! (math
{quote} Ok but do you realize that you just went long price went against you, you got stopped out and then you went long again and it made some profit. you just made this in a more complicated way.
that is true. but because price fell so deep, the re-entry price was so much better, that I didn't even need a complete rebound to get out of it at no cost.
well on the Set I made where the screenshot is from, I managed to minimize get back most of the equity loss already by closing the hedge positions (I think was like 144$ to go, so i could close the original Buy position with a 1500ish$ loss to go break even because the hedges put the majority of the drawdown already on the account balance (but I have to admit, this was a prime example, just happen to happen at the day I responded to this topic) its usually looks a lot more ugly.
Hedging is a very convenient tool, which should be used in rice transactions. Hedging in trading is called capital insurance against situations that may adversely affect the trading deposit. Using this method, a trader uses one financial instrument to cover the losses of another. This method is effective only if one of the trades brings profit. Therefore, to compensate for losses, a deal of the same volume is opened, but directed in the opposite direction. Deals counterbalance each other, and losses stop growing. That is, hedging has a second name...
