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Mathematical hedging strategy without a stop loss 22 replies

'Averaging Down Is for Losers' - valid or not? 27 replies

Fast Averaging versus Slow Averaging 1 reply

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Hedging/averaging trades without prediction

Quoting JackintheBox
{quote} This youtube guy is busted if there is a bigger move. He almost lost 2.5% on his account on a 70 Pip drop. He was invested 25 of 163 lots max in peak, starting with 0.1 lot. This is a raise of 250 times of his initial position on a loss of 70 pips. That is, sorry, ridiculous. I would never lend money to this person. I would have traded that better, no joke. If he would used a normal martingale he would have been in with less positions! So His trading at that FOMC was even worse than a normal martingale. I also saw where he made the mistakes....
yes it was a wild FOMC session, but in the end he came out with +2% for the day. not so bad;-)

and if he really got busted, well i didnt find anything about him in the last 3 years...could be.

anyway, just another trader with something to learn about.
trading is like dancing, don't think and just listen to the music!
@Fagin,

Interesting method you have there. I've worked out and tried averaging down with a global risk method before. But i like the twist with the hedge scalps to pick up extra profit as price picks up more averaging orders.

So, if i'm getting this right, you have n number of long orders, each with the same risk but different stoploss distances but same stoploss point. While price is picking up your long orders, you hedge short at each level, banking profits on the way down until price finally reverses and goes long again. Am I correct?
Leave the Gun, Take the Armani
Quoting cliffjaded
@Fagin, Interesting method you have there. I've worked out and tried averaging down with a global risk method before. But i like the twist with the hedge scalps to pick up extra profit as price picks up more averaging orders. So, if i'm getting this right, you have n number of long orders, each with the same risk but different stoploss distances but same stoploss point. While price is picking up your long orders, you hedge short at each level, banking profits on the way down until price finally reverses and goes long again. Am I correct?
Hi Cliff

Yep that’s pretty much it. Best to follow wave’s practice method he’s laid out for you on demo first and then you’ll figure things out easily enough
Quoting birdland
take your time and watch this guy, it is brilliant and it has a lot to do with our style here we are trading but different he is showing it realtime https://www.youtube.com/watch?v=6ElU5vJhz9A he has also other videos interesting to watch
Late to that one but it's interesting! I checked a few more vids from him after this, and he's much more diligent with risk than it shows on that video and the FOMC one. But that way of trading seems to be his bread and butter and in some ways it is indeed what some are doing here. Apparently he's still alive and trading well (just not on that one channel)
Quoting Rfs199
{quote} Late to that one but it's interesting! I checked a few more vids from him after this, and he's much more diligent with risk than it shows on that video and the FOMC one. But that way of trading seems to be his bread and butter and in some ways it is indeed what some are doing here. Apparently he's still alive and trading well (just not on that one channel)
thx for your comment.

when u see him trading then immediatelly it tells u that he knows what he is doing. great guy, i learned a lot from him. and he stays calm when things are going wild.
trading is like dancing, don't think and just listen to the music!
Hedging is definitely the way to go in forex. It eliminates being biased, which I believe is the leading cause of losses.
Quoting ashur123
Hedging is definitely the way to go in forex. It eliminates being biased, which I believe is the leading cause of losses.
I think bias is ok but the need to right about it first time is what does folks in.... most boxing matches don't get won with one punch
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Good indicator for this style of trading, keeps you in the trend , and average its out when trend changes all in 1 m chart
Quoting oyaks
{image}Good indicator for this style of trading, keeps you in the trend , and average its out when trend changes all in 1 m chart
maybe...what indi are you showing here?
trading is like dancing, don't think and just listen to the music!
Quoting birdland
{quote} maybe...what indi are you showing here?
ziz zag points
Quoting oyaks
{quote} ziz zag points
ok, i searched the web for a useful zig zag point indicator but could not find one like yours. do you have a link? or can you upload the indicator? thx.
trading is like dancing, don't think and just listen to the music!
Quoting birdland
{quote} ok, i searched the web for a useful zig zag point indicator but could not find one like yours. do you have a link? or can you upload the indicator? thx.
Attached File(s)
File Type: ex4 DT_ZZ.ex4   11 KB | 340 downloads
here it is , its just shows the paints of ziz zag , so i trade in the direction of the paint instead of trying to get accurate reversal paints
Hello everyone,

I do use hedging technique, but in different way. suppose if your win and lose ration is 50/50. then you can make it 100% as I do. I open a position suppose SELL (sure after my own analysis), if it goes wrong by 20-30 Pips and I expect that short term direction is changed. I hedge the position and open BUY. This is my losing trade that is hedged at -30 pips

When days max movement is achieved suppose market moved upwards (I use my own way to judge, will share my technique), I Close the position that is showing profit (BUY closed and Sell in -30 Pips), and then open SELL position doubling the lot size. Market price has a behavior to retrace. when price moves 30 or more Pips ahead of my target, Losing trade is closed at Break even or some profit and New double position is my winner.

This is my method and I am successfully trading this style. I will share details soon.
(Please note, I will never expect any financial or any other reward sharing my trading style, Please practice before applying to Live accounts).

regards.
Quoting oyaks
{quote} {file}here it is , its just shows the paints of ziz zag , so i trade in the direction of the paint instead of trying to get accurate reversal paints
thank you...i have hardly found an indicator i like and i usually trade without, but you never know;-)
trading is like dancing, don't think and just listen to the music!
Hedging is interesting, say you open a buy and sell trade both the same size at the exact same time with the same TP, a profit is guaranteed whichever side its on, ofcourse as soon as one hits TP you need another to balance the one in the negative and so on, as long as you're hitting the TP's you need another to keep the balance, now say you hit 6 short trades in a row you will still have that one buy in a drawdown, but now you have a larger balance with bigger margin..the big question is can there be a reversal move back to he point of the buy trade? If you can study technicals and get in carefully with good prediction you can make alot hedging.
Quoting venividivici
now say you hit 6 short trades in a row you will still have that one buy in a drawdown, but now you have a larger balance with bigger margin..

Well, not exactly true: assuming that your winning trades and losing trades have the same size, then while you are gaining a larger balance as you collect those TPs, your equity remains the same due to the equivalent pip/$$ draw down of the losing counter trade... therefore, the margin available remains the same. Also, if you're opening a hedge trade every time a TP is hit- and then letting those losing counter trades run as you collect those TPs- then your drawdown is increasing exponentially relative to only a linear increase in your balance = drop in your equity = drop in your available margin (at least in the US where the margin available is determined by your equity).

Best,

Dave
  • Post #1,317
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  • Edited Nov 23, 2022 5:12am Nov 22, 2022 6:10am | Edited Nov 23, 2022 5:12am
Quoting Indigo45
Hello everyone, I do use hedging technique, but in different way... I Close the position that is showing profit (BUY closed and Sell in -30 Pips), and then open SELL position doubling the lot size. Market price has a behavior to retrace..

"Market price has a behavior to retrace"....Until it doesn't and your account gets blown (unless of course your trade size is extremely small relative to your equity). I don't mean to be a pri*k, but you're Martingaling, and this forum is littered with enthusiastic threads, and formally enthusiastic FF members, who thought that they had the "system" beat until their accounts got blown due to a "death" trade (i.e. a runaway trend opposite the direction of their Martingaled position(s)). Anyways, good luck!

Best,

Dave
Managed to get a buy and sell order opened 10 points apart figuring that they would maintain a 0 margin impact. Took me a while to figure out that since this was GBPUSD, the spread was constantly getting revised and impacting the margin requirement.
Quote
Until it doesn't

That's where the skill of the trader should come in, on top of hedging lol
Quoting venividivici
{quote} That's where the skill of the trader should come in, on top of hedging lol
People tend to focus on mathematical part of trading but ignores phycological part. Trading is 90% plus phycological.
Lets say I have system of 20 pip stop loss on a pair and instead of stop loss I do hedge and wait to retrace to next support or resistance and cut looser or average down on entry where I think market reverse or continue. This way trader is increasing win rate.
One can argue there is no guarantee that price will retrace etc. etc. Yes thats why overall daily or weekly loss threshold should be there when trading hedging/Martingale systems with proper position sizing
Now people will argue that oh why dont just take stoploss and move on. Lets say I have a scalping system which takes 10 trades with 20 pip loss and 0.1 lot size.
Is it easier to take 10 loss or just hedge (even though floating equity will be same), I bet most of them (knowingly or unknowingly) will prefer hedging. If taking 10 straight stop loss was easier over 90% of people would be successful even with coin flip system (with proper risk to reward ratio)
How often currency moves 1000 points straight line without 200-400 pips retracement? I have seen only during brexit and swiss peg removal. In that scenario hedge would have saved you instead of stop loss as they were not triggered or honored.
Hedging should not be done when there is no hope like 10-20% or more underwater or near margin call. Better to take stop loss.
It should be done in such a way that when next support and resistance (as per your technical analysis) you can easily scalp to break even trade.
Hedging gives a trader room to breathe and somewhat prevents revenge trading. Hedging is way to manage looser or cut down looser.
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