Buy and sell at the same time/Hedging

Hello forex experts,

I am a beginner who have been trying to build a trading strategy. I came across a write-up which intoduced hedging, buy and sell at the same time.
I want to know your views on this. How do I trade this successfully and make profit?

Kenny

There is no way to profit from this approach (there is but at some point you wouldn't be hedged anyway so what's the point?)

Hedging is protecting yourself in the event a trade goes against you. The idea is that as one position falls (the short for example) the long side would go up.

Doing them at the same time however the net effect regardless of what happens will always be a loss (the spread)

The only way I can see this work is if you put a s/l on both. So if you took Friday for example with the consumer centiment announcment. If you put a buy & sell in with a s/l on both, when like friday it shot down your sell would be in big profit and your long would trigger a s/l and you loose some pips there made up by the big profit on the short. or
if you in a short and it goes long but you still expect it to go short, you take a long position you will make pips as it goes long then you exit the long when it turns short and put ini another short to your original short. well thats the theory anyway!

what if there was a spike and both SL got trigerred or lets say whiplash.

not a good idea.

maybe you read the hedging strategy that uses two brokers...one is with swap free account and the other is that pays overnight intrest...The idea is to go short (GBP/JPY) on a swap free account and long on the other account...this way you earn daily swap... Of course, you need to have large margin due to high volatility of the pair plus reliable brokers....otherwise your good to go

This technique is sometimes used in stock w/ options as hedges given that options come leveraged. Doesn't seem there's a way to match that effect (unless you're buying currency futures perhaps?? no idea if that would work, don't know anything about that market) w/ currency so I'm guessing it'd end up as a wash... or a loss on both.

From what I've seen, simple is usually better it seems.

hedging is useful for very experienced traders when trading long term positions. It is used to trade in the opposite direction on smaller moves against your longerterm position. It looks like it may be useful in volatile markets where both positions are expected to win due to movement on bothsides of the spread. For example, if you take a hedged position with a ten pip profit on each in a volatile, but sideways market, then both positions are likely to win. However, after one position is closed out at profit, the market needs to move 20 pips in the opposite direction for the remaining open position to get its ten pip profit target. The fact is, you would save yourself on spread if you had just taken one position with a 20 pip target after the initial 10 pip move rather than opening two positions at market. In short, as a newbie, hedging offers no advantage. Concentrate your efforts on other areas namely risk management, psychology and discipline

Hello Runway,

If I got you right, it seems you meant it is best used during fundamental announcement. As for using stop loss, I tried it on my demo account using pending order, bus top and sell stop with stop loss, the results were loss. I realised that after the price reached my stop loss, it closed and then retraced.

I am concerned with this HEDGING because I realise that when I enter a trade for example, going log on USD JPY on my Demo, within few days, I make huge pips. I f I left it untouched, it reversed later to the negative after some days. So, I want to know if I can hedge and when I see reversal, I should close my profit and allow the loss to reverse. Is there any risk or disadvantage in this? If it is possible, what is the best timeframe to use it on. Also, am I right for not placing stop loss in the hope that it will retrace at least in a significant percentage?

Need suggestions pls!

You are paying the spread twice.

You set yourself up to be stopped out on both sides, or you will have to close both positions at same time netting nothing - just losses on spread.

Perhaps if you are in a huge winning position, and you you want to hedge against an event (as others have said), then you can put in a position to mute any big moves. On the other hand, I know a guy who hedged long term losing positions (GBPUSD Short - that ran up 1400 pips on him), to avoid any further losses, then as you know in the past couple months it TANKED and could have been a positive trade, but his hedge locked in his losses!! Truely a bad idea.

The best advice I can give, and I am hardly qualified, is pick your positions sparingly, pick one or two pairs, don't trade every day, just watch and make picks on "paper" trades (or mental), and you will become familiar with a pairs movements. Wait for that perfect setup, where the odds are clearly in your favor. ( as I type this I am thinking I need to follow this advice more often, too)

Peace and good trading!

I would say simply avoid Hedging. If you know when the market will reverse and that's the point when you close one side of you positions, waiting for the loss on the other to subside, why don't you just go short and make even more profit? lol Hedging give you absolutely no advantage. It's basically the same as closing your position but you pay double spread. So do yourself a favour, don't try being smart with this nonsense hedging idea...

Best advice

try doing it without a SL and close the losing trade manually after a direction has been determined

Why hedge when you go with the trend?

At the end of the day...... If you have the skill to hedge properly, identify turning points in the market, close out one side of the hedge, and leave the other to run for profit......... then you will also have the skill to trade normaly. So in the end whats the point?

Over at the SFS chatroom we once had a woman who used to hedge her possitions when I was a complete newb. She had a large following, including me. Months later when I returned from a break she had gone bust. Now thinking about it her hedge plan was completely ilogical.

The only ways I see hedging as a viable strategy are:

With the swap and non-swap accounts, or

If you are in a possition and are a little unsure to whether price is going to move in your direction, so the possition is hedged for protection. But even in this instance it would be best to close, we dont want to pay even more spread do we?

Like always, Id suggest to start your trading with PA and sup/res. But I think its a compulsory evil stage that we go through with the las vegas lights on our charts.
Also search the site for the thread about V-hands EA for MT4, a great tool, and you can test your discretionary systems quickly over large amounts of data, great for learning how the markets act.

Good luck, your in for the most thought provoking, confusing, and possibly rewarding journey of your life.

Good trading

Leon

I really acknowledge that this forum is full of immense benefits 'cos novice traders are able to gain innumerable experience from experienced ones.
During the course of my search for a customized trading strategy, I came across a thread suggesting HEDGING. I posted a thread to seek opinions of successful traders. As a result of many threads discouraging hedging, I tried to get more knowledge. I came across a post that gave me the insite that the best thing for a newbie is to know how to identify a trend. I held the advice firmly. I then tried trendline analysis, fibonacci retracement, MACD and stochastic on a demo this Monday morning. I traded EUR USD and USD Jpy and came up with more than 100 pips.

I now realise tha the best thing is to set up your trading strategy yourself and follow it.

Thanks to all.

Kenny

Moksha

Australia

Mob: 0400 412 400

E-mail: [email protected]

FX Hedging Strategy

For Metatrader Platform: Broker which allows “Hedging” in same currency pair
For example www.fxcm.com.au in Australia

Variables: TP = Take Profit, SL = Stop Loss, TS = Trailing Stop
Entry requirements: None ( may be revised down the track on measure of support and resistance or volatility
Special conditions * see middle case scenario


Idea: Open both long and short position in a pair
Set: ( as example) on both positions
TP = 100
SL = 50
TS = 20

Best cast scenario: (ignore spread)
Long moves up by 100 pips
Short side is closed at -50 loss
Long side takes profit @100 = =100
Overall = +50

Worst cast scenario: (ignore spread)
Long moves up by 50 pips and then moves down by 20
Long side : TS triggered on Long side Long side closes at +30
Short Side stopped = -50
Overall = - 20

Middle case scenario: (ignore spread)
Long moves up by 20 pips and then moves down by 20 pips
Long side : TS triggered on Long side Long side closes at 0
* AT the same time EA Must recognise this and open a Long position again

Why would you go short and long at the same time, the mind boggles, just place the combined trade on once.

Buying and selling the same pair at the same time:
I don't see here any edge.
You pay the spread twice.

When you expect the market will make a huge move there is no guarantee the SL will be hit while the other position should run into profit.

Some participants try to grap the spread when joining the bid and ask at the same time,trying to play market maker.
But there is also no guarantee that the orders will be executed.

Hedging can be very profitable when markets become inefficient.

This can and does work if you combine with market retraces.

But you dont set TP or SL.

Example:

1. GBPJPY is in downtrend.
2. Buy and Sell when OS.
3. Close the Buy when OB.
4. Close the Sell when Market retraces back with the trend.

I wouldnt recommend it for novices but if you combine the OS/OB with FIBS then it works fine.

The obvious question is why bother doing this as you pay twice the spread.

Well the reason is you dont have to be correct with your entries and it prevents DD.

What can go wrong, well the retrace may not be big enough to generate a profit and/or a trend reversal occurs.

Scoobs.

a good discussion has already been done here:
http://www.forexfactory.com/showthre...ng#post3396785

Bottomline:
Don't hedge. There is no benefit. For every reason you come up to hedge, we can show you a better way to not hedge.