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whats with this "hedging" thing??

  • #141
  • Mar 20, 2008 6:42pm Mar 20, 2008 6:42pm
Not sure if this applies to this thread or not, since most just trade FX markets. I view hedging as one of the most misdirected issue facing most investors today (including the pros). Placing all your eggs in one basket is unwise.

1 Paper (FX,STOCKS)
2 Liquidity(CASH)
3 metals (Ownership)

Most have 100% invested in paper, this IMO is not a proper hedge of assets and will cost many 401k people to freak out at time of retirement.

But as I said most will not understand this.
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Check Mate GAME OVER
  • #142
  • Mar 20, 2008 7:51pm Mar 20, 2008 7:51pm
Quoting boxingislife
hmm
...but to say that hedging can in no way work or make better returns for any strategy is like saying i know everything about financial markets
Nonsense. That's like saying that if I claim to know that two plus two is ALWAYS four that I'm claiming to know everything about mathematics.

Merlin wasn't claiming to know everything, or even anything about your strategy. He was claiming to know ONE specific thing about all strategies; the type of "hedging" described in this thread will never have any effect but to cost an extra spread.

That's simple arithmetic. Anyone who has looked at the examples in this thread (and who isn't the type that still believes the earth is flat or hollow or that we never went to the moon or some other such thing) would know that it's true.

I'll give you the benefit of the doubt and simply assume that you didn't read through the thread and that you may actually be talking about the real legitimate form of hedging that actually works. That form of real hedging is not what this thread is about though.
  • #143
  • Mar 20, 2008 8:54pm Mar 20, 2008 8:54pm
Quoting capitalist88

That's simple arithmetic.
Hmmm, simple arithmetic applied to a complex set of ever-changing variables.

That reminded me of another reason I will hedge (when needed) although I prefere not to. I suppose I could just keep it simple and accept my large loss like a 'real man' trader by using a stop loss, but a stop order has more options such as trailing stop, take profit and of coarse a stop loss for the stop loss. With more options I can be more flexible in my actions and in almost every case I can make back a good portion of what I would have accepted as a loss with simple order types. So far, those who can't/won't see the hedging advantage are also quick to dismiss the pschological benefit of a 'pause' created by a hedge. To me it's a huge advantage. My confidence gets rattled after a big loss, but with a hedged position I remain agressive and alert because I know there is a real chance of recouping some of the equity loss.

I could go on and on and explain the details of how and why I do what I do with an order gone bad, but what advantage is that to me. What do I recieve from you? The boobie prize for explaining the details of a complex trading system to you for free? Not me, not now!
  • #144
  • Mar 20, 2008 8:55pm Mar 20, 2008 8:55pm
ITS only my thoughts on hedging its possible the most misunderstood of all strategys and the most difficult concept to put into practice

. i ve made good money on hedging, but i prefer using the Roll over strategys as you are really garanteed on profit trading,

but for me i used hedging succesfuly. for small scalping trades. i completly agree with many of the opinions that are negative to this form of trading.

its an area of trading that i think applied to the right methods can bring nice scalps but its not for every onE AND AS MANY ARGUE AGAINST IT

. IF YOU MAKE MONEY THEN ITS A GOOD METHOD, IF YOU DONT THEN ITS BAD.

I CAN MAKE MONEY USING THIS FOR SCALPING , BUT FOR ME THE ROLL OVER GIVES THE GREATEST PROFIT
ITS ONLY MY OPINION I COULD BE WRONG
FROM BRIAN
  • #145
  • Mar 20, 2008 10:56pm Mar 20, 2008 10:56pm
Boy, did I (re)open a can of worms or what? Let's see if I can help close it back down, as it seems like the idea of balance-based incentive gaming is not really flying here anyway.

It sounds like boxingislife has experienced one of the possible advantages we ascribed to "hedging": "Psychological - might reduce fear/greed". He may be able to conceptualize (and sustain) his trades more effectively by thinking of them in the manner of what the FX brokers call "hedging". Of course he is not actually reducing his risk in the slightest. In fact, his risk stays the same, but his profits are (mathematically) slightly diminished. The math of transaction costs is not what boxingislife was talking about anyway. He was talking about how it helps him to think about the trades.

Of course, if he could learn to think about his trades in the same way without actually hedging (maybe pretend he was in a hedge ), he would avoid needlessly paying his broker twice the spread and some interest to boot.

-- Note: I wrote this post but went off to dinner without submitting it. Now two others have commented! My response:

SunTrader & brijon - same as above. You are clearly experiencing some of the psychological benefits of hedging. Using the hedging feature is mathematically identical (in terms of pips of profit) to closing your trade at the same level where you hedged and then opening a new one at the level where you un-hedged. Hedging is inferior if you had to hold the hedge across the swap threshold, as you are in every case guaranteed to pay the broker some small amount of interest.

So using hedging as a psychological tool may be useful to some traders. That we acknowledged before, and if you find hedging to be useful for that reason, by all means use it! Be aware that you are incurring extra interest costs and using up your available margin, however. Also, be aware that you could perform exactly the same trades (pip for pip) by exiting your trade and then re-entering it. Either way you are just adjusting your position in the market, which determines whether (and how much) you win or lose as the market moves a certain way.

So everybody here is correct in their analyses... just looking at it from different points of view.
  • #146
  • Mar 21, 2008 4:14am Mar 21, 2008 4:14am
I can't believe this thread is still going... There is nothing more to be said here.

To anyone who thinks they have something to add: PLEASE READ THE WHOLE THREAD BEFORE REPLYING.

BTW, I'm thinking about calling my broker and asking them to double all their spreads - with MY strategy that ends up making me more money .
  • #147
  • Mar 21, 2008 5:38am Mar 21, 2008 5:38am
yep ur right
  • #148
  • Edited 11:49am Mar 21, 2008 9:51am | Edited 11:49am
Hi Trading room,

I read with disgust, that, some traders proclaiming to be retired and experienced and of 1kt status,
comes publicly, with the inability to distinguish between commerce hedging, the "hedging" term used by some brokers, that is being discussed on this thread ( loss locks) and ARBITRAGE that they may have presented.
Although lack of reading and comprehension skills are signs of becoming senile, there is no excuse for experienced or retired traders to mislead due to their conditions.

I really wonder for the motive behind the purposeful misleading. First thoughts, goes to rogue broking. I have just come to realisation of so much misinformation being "sold" to the uninitiated public, that I hope one day that, these rubbish personalities be put behind bars , for the damage that they do to the trading masses.

regards
  • #149
  • Mar 21, 2008 2:16pm Mar 21, 2008 2:16pm
Quoting fierceman
BTW, I'm thinking about calling my broker and asking them to double all their spreads - with MY strategy that ends up making me more money .
PERFECT illustration!! just as every strategy can be improved with tighter spreads, so too can every strategy be improved by not using a hedge. i dont have to be "all knowing" to figure that out!

i really hate when i see misinformation being spread on the forums, especially in the TR. this is why i keep defending the logic that we have so clearly laid out in this thread. my approach was to debate until every last person understood the concept, but here we are 10 pages later and not everyone gets it yet. we are just going in circles now... those of us who understand the arithmetic keep saying the same thing over and over, and those who dont understand keep saying the same thing over and over.

if after a 10 page thread some people still wont get it, i think that says a lot about the state of the forex industry. it is now absolutely clear why these brokers are offering this scammish hedge feature - they know most of their customers arent sophisticated enough to understand the math!

ok i will bow out of this thread before i start sounding too mean. capitalist, drummer, fti, fierceman, and others, thanks for helping me debunk this myth, we have done a great service to our fellow traders here
Relax and be happy.
  • #150
  • Mar 21, 2008 2:34pm Mar 21, 2008 2:34pm
Quoting merlin
if after a 10 page thread some people still wont get it, i think that says a lot about the state of the forex industry.
and the world lol
  • #151
  • Mar 21, 2008 2:37pm Mar 21, 2008 2:37pm
Quoting merlin
PERFECT illustration!!
WOW !!!
Merlin used the Shift Key. Now THAT'S Impressive.
  • #152
  • Mar 21, 2008 5:52pm Mar 21, 2008 5:52pm
i geuse even the most senile trader has used hedging in option trading, call it what you will but its possivble the most succesful used strategy in different forms of option trading , with many variations,of course hedging has been done in share trading with limited success.

its a wonder when so many knowledgeable traders of the forex regard this as crazy abuse the people and accuse them as senile, when most traders of other comodities can vouch for the success of hedging , or maybe you like to use another name for it,

AS MERLIN started of this thread with his definition cdf hedging , i think i understand some of the methods of this strategy perhaps the oponents should read option trading sometime or are they locked into there opinions

now from what ive seen in this thread on this discussion i think maybe the aledge experts realy dont understand the basic principle maybe they never traded options or other comodities .

now i said if you make money from your methods thats great , but to run off
and be so negative to other ideas and use abuse shows me the person is a really frustrated trader,be cause real succesful traders help each other

if you really think you are really qualified then tell me how succesful are you?
ive put up my actual results live many times .

but of course you are the expert better than all the succesful option traders that use various forms of hedging, forex traders to , suprising, but lets see
how many mathmatical facts or augements you can put up to show that these thousands of traders who trade options are wrong.

as i said us senile guys have posted there live accounts many times and believe or not not only me on a nother current thread, tell the guys there live accounts are wrong they make profits

but there is always some negative coments from frustrated traders who enjoy critizing honest traders that give there time and efforts to others

i hope one day these guys will learn the one secret of success be willing to respect each other , there opinions and learn from others

until you do that you will never be a real success in trading or life

thats my opinion

from Brian
  • #153
  • Mar 21, 2008 6:24pm Mar 21, 2008 6:24pm
Hey there Brian.

I've bowed out of this thread a while ago, but just saw your, and indeed fti's posts.

I'm not sure, and I certainly hope not... but I don't think the post was intended as some kind of personal attack on you.

I think, as many have also stated, this thread has been quite skewed from what it started as. Merlin started it to discuss the fallacy of "the hedging feature" that many retail fx brokers are offering. In order to facilitate their own gains against unknowing "new" traders.

Not to debate whether hedging, as many of us that have been in the markets for a while and trade various instruments, know it.
There is absolutely no dispute that hedging (as we know it) works. But again, that is not was is being discussed.

I for one, personally, don't like it. Because, as mentioned above, I think it was designed in the form that it is presented these days, purely for brokers to take advantage of the inexperienced.

I respect both you and fti for different reasons and would hate to see this turning "ugly" and potentially ending in anger.
Please guys, let's cool off, even before we get hot over this.
We can all agree to disagree if that is what it takes, but we are heading into dangerous territory over something that is not really worth it.

As for fti, if you read this, I also understand your disgust and frustration at the brokers that are manipulating the masses into this false sense of security, but your beef is with them, no?

We may not all be as experienced as either of you. I for one know I'm certainly not.

But we should all try to set a professional tone at least.
And as I always say, if you can't, then fake it.
Carpe Divitiae
  • #154
  • Mar 21, 2008 6:26pm Mar 21, 2008 6:26pm
Quoting brijon
i geuse even the most senile trader has used hedging in option trading, call it what you will but its possivble the most succesful used strategy in different forms of option trading , with many variations,of course hedging has been done in share trading with limited success.

its a wonder when so many knowledgeable traders of the forex regard this as crazy abuse the people and accuse them as senile, when most traders of other comodities can vouch for the success of hedging , or maybe you like to use another name for it,

AS MERLIN started of this thread with his definition cdf hedging , i think i understand some of the methods of this strategy perhaps the oponents should read option trading sometime or are they locked into there opinions

now from what ive seen in this thread on this discussion i think maybe the aledge experts realy dont understand the basic principle maybe they never traded options or other comodities .

now i said if you make money from your methods thats great , but to run off
and be so negative to other ideas and use abuse shows me the person is a really frustrated trader,be cause real succesful traders help each other

if you really think you are really qualified then tell me how succesful are you?
ive put up my actual results live many times .

but of course you are the expert better than all the succesful option traders that use various forms of hedging, forex traders to , suprising, but lets see
how many mathmatical facts or augements you can put up to show that these thousands of traders who trade options are wrong.

as i said us senile guys have posted there live accounts many times and believe or not not only me on a nother current thread, tell the guys there live accounts are wrong they make profits

but there is always some negative coments from frustrated traders who enjoy critizing honest traders that give there time and efforts to others

i hope one day these guys will learn the one secret of success be willing to respect each other , there opinions and learn from others

until you do that you will never be a real success in trading or life

thats my opinion

from Brian

You're confusing real hedging with fake hedging.

We all know that real hedging (like with options) works.

This thread is about fake hedging. Fake hedging is a broker scam.

I'm with Merlin. I'm done with this thread too.
  • #155
  • Mar 21, 2008 6:33pm Mar 21, 2008 6:33pm
btw, we had a spinoff to this thread about REAL hedging: http://www.forexfactory.com/showthread.php?t=70995

it is a good thread, although there is a lot more to discuss about it
Relax and be happy.
  • #156
  • Mar 16, 2009 11:28am Mar 16, 2009 11:28am
Quoting steviet
I don't know about other brokers but I am using Saxo Bank and if I have 3 long positions at 50,000 and 3 short positions at 50,000 on at once my margin utilisation is 0%.

Steve
Hi Steve,

Could you please let me provide the links for how to hedge busing and selling same currencies instead of using stop loss. Obviously there must be a method like scaling-in if the position goes against you. Should we keep scaling in positions ? or just cover with one position and wait for a retracement or release at what you think turning point and again be prepared to hedge if that position also goes against you? Appreciate if you can provide some links and your way of handling hedged positions.
  • #157
  • Apr 16, 2009 9:52am Apr 16, 2009 9:52am
Giving this thread a bump since the new NFA regs are spurring a lot of ?'s re this subject.
In trading, there is no bullshit. You either make money or you don't.
  • #158
  • Edited 8:00am May 3, 2009 7:43am | Edited 8:00am
Quoting Vensik
Actually, having two identical positions in the same size is the same as paying 2 spreads for nothing at all. .
No you lose only one spread because the first spread you already losed it before

And by not allowing hedging , you don't lose only a lousy spread( as i said first one you already losed it , so it counts no more ), in fact you lose an entire position , because if you want to take an opposite order, by not allowing hedging , broker will close your initial -50 pips order..

..which i don't want because as long as there is not a huge trending market you win by hedging.
..market goes back 70 % of time
so:

by not allowing hedging you lose.

Why brokers take opposite hedging positions ( on the same pair )for all
of their clients positions if hedging is not profitable ) ?

And by the way , yes real hedging , i agree is about taking those

USD/CHF against EUR/USD or similar
but common, you know that many traders call these , on the same pair opposite positions also as hedging and after all these are 100 % hedging,

those USD/CHF against EUR/USD or similar are only 90 % hedging considering correlation of those pairs is 90 %..


About this NFA no hedging rule :
Someone ( NFA ) is limiting the options someone else has ( traders ) and that is claimed as beeing "help" ?!


NFA should protect traders by not allowing so many REQUOTES , OFF QUOTEs, and other errors which appear when you want to close a winning trade , why these errors appear mostly on winning trades ? There are lots of complains about these.. Where is NFA ?


And after all is MY money , I should be able to trade how i want with my money.
  • #159
  • Feb 10, 2010 7:44am Feb 10, 2010 7:44am
Quoting merlin
has anyone noticed this new feature that many forex brokers have been offering called "hedging"?? basically they allow you to take two opposite positions on the same instrument, and they call it a "hedge".

i have heard many traders say they choose their broker based on whether or not they offer this feature. i have hear[color=black]d experienced traders sing the praises of this feature. i have...
Hi there,
I'm new, but I just want to share my opinion about this 'hedging' system.
I think hedging is really works, but only if you already had a really good based of technical analysis of supports & resistances ( which are the reversal points of the price that will come back to that points again ). So it's like you need to mastering the swing trading system first . Other than that 'hedging' system can help to save you with your double ( multiple ) margin requirements for your double ( multiple ) orders.
That's my opinion. Please correct me if I'm wrong.
  • #160
  • Apr 26, 2011 10:31am Apr 26, 2011 10:31am
Quoting steviet
Well, I hedge exclusively on GBP/JPY using very wide stop losses and over the last 5 months have been fairly successful.

When I say very wide stop losses, I use 1000 pips but this only equates to a small % of my account balance per position. I may have up to 10 positions on at once with a maximum of 5 either long or short. Take profit on each position is 50 pips so I need to be successful in 95% of trades.

When I say fairly successful, I've closed over 700 positions, taking 5 losses so far. The last 81 trades have been on an account for...
look - this a bit my style
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