How do you get out of your Hedge trade? | Forex Factory

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How do you get out of your Hedge trade?

  • #1
  • First Post: Jul 11, 2008 10:20am Jul 11, 2008 10:20am
I wanted to start a thread to get alternative ideas on exiting a hedged forex trade with little loss, or some profit.

For example let's say I am long on the GBPUSD, and the market starts going quickly against me, instead of taking a good loss, and chalking it up to experience, I hedge my position by going short the GBPUSD. Now I am fully hedged with this pair, lets say for example sake that the gap is 50 pips.

What I do then, is then let the trade go, till either the short or long runs up against a known hard support or resistance level. When it does, and looks like it is starting to retrace, I take the profit from either the long or the short. Lets say for our example it is the long that is taken out with profit.

This leaves me with a short trade that is losing 50 pips. What I do now, is let the trade retrace from whatever level of support and resistance that I took the original profit.

When the retracement appears to be over and headed back the other way, I once again hedge the trade by going long again, this time hopefully the gap has narrowed, lets say to maybe 40 pips this time.

I keep doing this until the gap between the trades is so narrow that a small loss does not compare to the profits I have already taken off the table.

I am curious to hear other traders ideas how they take themselves out of a trade that has been hedged.
  • #2
  • Jul 11, 2008 11:27am Jul 11, 2008 11:27am
exiting a hedged trade requires a great deal of technical knowledge , i will share my method later with its rules, which has worked 90% of times giving me net profit.
know thy edge and abide by it ! 4 in it shall thou be successful !
  • #3
  • Jul 11, 2008 12:40pm Jul 11, 2008 12:40pm
And every time you hedge you pay the spread again. So for a tight one on GU - like 3 pips, you'll loose 3 on hedge, 3 on closure and 3 on new hedge which is about 9 I think ? So what good did the 10 pips do exactly ? And if you strongly suspected the bounce would happen you could just enter right then and there..
On the path to Enrichment.
  • #4
  • Jul 11, 2008 2:28pm Jul 11, 2008 2:28pm
Quoting robertsonakp
exiting a hedged trade requires a great deal of technical knowledge , i will share my method later with its rules, which has worked 90% of times giving me net profit.
I would love to hear your method. Cheers.
  • #5
  • Jul 12, 2008 12:10pm Jul 12, 2008 12:10pm
Hedging a possition in this way.. EG, 1 lot of GU long + 1 lot of GU short has no advantage other than pschological.
Living the adventure in my head.
  • #6
  • Jul 12, 2008 12:22pm Jul 12, 2008 12:22pm
you get out of the hedge when the market starts to move back in your favour and you think it will continue to move in your favour
  • #7
  • Jul 12, 2008 12:33pm Jul 12, 2008 12:33pm
On the long run hedging is useless... Take the loss, you'll feel better. Having predetermine entry/exit and proper money management is the key.
Harmonics and Pitchfork using korHarmonics from TradingArsenal
  • #8
  • Jul 12, 2008 12:37pm Jul 12, 2008 12:37pm
As a retail trader, you should never, never hedge an outright position. The only time you may consider hedging is when you write an option, even then you're still losing.

The reason is, as a retail trader:
1. You need to realize you are wrong and cut your losses, do not throw good money after bad
2. You do not want to tie up capital in a hedged position
3. To retail trader, a hedged position = an outright flat cash position + a locked-in loss
4. Commission

Some people want to hedge not because they think it is a good tactic to limit the down side, but because they think insitutional investors use it. And if the big dogs use it, it must have some merit right? Not for you, pal. Here's a wake up call, hedge funds do not hedge to make money, they hedge only to a small extent to limit short term risk, investment banks and commercial entities do. (I think wall street purposely switch their names to confuse people, lol, it should be investment fund and hedge bank, haha). It makes sense for them to hedge because:

1. They're the sellers, they need to protect themselves from all the crap they packaged up and sold
2. Hedging contracts can be used to secure loans, hell, even the Fed takes them now
3. Hedging contracts can be loaned out to naked-short sellers
4. I'm no accountant but I think a hedged position is easier for fair-value accouting? I'm not sure though

I don't think anyone on the buy-side would seriously consider hedging as a way to limit risk. On the sell-side it's definitely a money-maker.
Take a report.
  • #9
  • Jul 12, 2008 12:48pm Jul 12, 2008 12:48pm
Hello,

I would be very interested in learning your method.

Thank You,
Jeff

Quoting robertsonakp
exiting a hedged trade requires a great deal of technical knowledge , i will share my method later with its rules, which has worked 90% of times giving me net profit.
  • #10
  • Jul 12, 2008 1:05pm Jul 12, 2008 1:05pm
the hedge feature on your broker platform is not real hedging. the feature has no purpose but to scam noobies who dont understand trading math. if you are using the hedge feature, you are getting scammed. i suggest anyone thinking of using this feature read this entire thread first: http://www.forexfactory.com/showthread.php?t=68598
Relax and be happy.
  • #11
  • Jul 12, 2008 1:34pm Jul 12, 2008 1:34pm
The only time I hedge anymore is over the weekend to insure against stupid news causing a gap when it reopens. Paying the spread to hold my profits in tact is worth it to me.
If you really think the market is about to make a move against your position. Reverse you position completely. If your not sure what the market is about to do, then get out where your stop said to. You had a preplanned stop right?
The mantra "Plan your trade and trade your plan" is not just empty rhetoric. Its a good way to trade.
Learn to enjoy taking your loss at the preplanned stop. Trading is difficult. You will be wrong sometimes in what you anticipate. Just keep your risk/reward set properly and you will live to trade another day.
If you are good enough to get in and out of a hedge at just the perfect time. Then you are good enough that you shouldnt have to ever hedge......
  • #12
  • Jul 12, 2008 1:40pm Jul 12, 2008 1:40pm
hi

have you considered you will ALWAYS pay negative swap on your hedge? so as long as the hedge exists, you are losing money.

did you consider this? when you enter a hedge, you are entering a trade you never wanted to..... there is no "setup" or "entry".... it is desperation....
  • #13
  • Jul 12, 2008 2:05pm Jul 12, 2008 2:05pm
Hello everyone,

I for one would like to see what robertsonakp ideas are.

Jeff




Quoting tdion
hi

have you considered you will ALWAYS pay negative swap on your hedge? so as long as the hedge exists, you are losing money.

did you consider this? when you enter a hedge, you are entering a trade you never wanted to..... there is no "setup" or "entry".... it is desperation....
  • #14
  • Jul 12, 2008 4:18pm Jul 12, 2008 4:18pm
Thinking some more about it I think the hedge feature is totally pointless. You can be either long or short. Going both long and short defeats the purpose of trading.
  • #15
  • Jul 12, 2008 4:29pm Jul 12, 2008 4:29pm
I don't agree with pple who keep slamming hedging just for the sake of slamming it.
Hedging works great (for me anyway) in ranging market, but even in trending market, it could still work out since any move would have to retrace at some point. Of course you'll have to pay the extra spreads and swaps, but if done right, it will leave you with a profit at the end of the day (or week...) which is really what matters, isn't it?
  • #16
  • Jul 13, 2008 7:43am Jul 13, 2008 7:43am
Quoting pqt
I don't agree with pple who keep slamming hedging just for the sake of slamming it.
Hedging works great (for me anyway) in ranging market, but even in trending market, it could still work out since any move would have to retrace at some point. Of course you'll have to pay the extra spreads and swaps, but if done right, it will leave you with a profit at the end of the day (or week...) which is really what matters, isn't it?
Keep hedging as you are and you will end up cutting hedges for a living.

I Dont want to be horrible, but seriously think about what your actually doing.

Good trading/hedging

Leon
Living the adventure in my head.
  • #17
  • Jul 13, 2008 8:02am Jul 13, 2008 8:02am
Quoting Leonlorenzo
Keep hedging as you are and you will end up cutting hedges for a living.

I Dont want to be horrible, but seriously think about what your actually doing.

Good trading/hedging

Leon
Thx for your concern. But since I've tripled my account after 3 months, I still think it's good enuf for me (of course for you and your multibillionaire friends in here, that's just chicken feed, but for me it's enuf to pay my bills
  • #18
  • Jul 13, 2008 8:14am Jul 13, 2008 8:14am
Quoting robertsonakp
exiting a hedged trade requires a great deal of technical knowledge , i will share my method later with its rules, which has worked 90% of times giving me net profit.
Me too... I would love to hear your advice on closing a hedge. I agree it takes a lot of technical knowledge as you don't want to close one part of the hedge and have the market go the wrong way only to make your initial loss worse and then you have to pay another spread when you rehedge. Hope you will describe the technique you like to follow.

regards
Daisygirl
  • #19
  • Jul 13, 2008 8:40am Jul 13, 2008 8:40am
Quoting pqt
Thx for your concern. But since I've tripled my account after 3 months, I still think it's good enuf for me (of course for you and your multibillionaire friends in here, that's just chicken feed, but for me it's enuf to pay my bills
Ive probably got less to my name than most in here actually. nearly 3 years ago when I 1st found forex I blindly hedged without realising that there was no benefit to it atall. I more than doubled my account to start with before loosing it all.

Just trying to spaire someone (you) that financial loss.

Goodluck.

Leon
Living the adventure in my head.
  • #20
  • Jul 13, 2008 8:41am Jul 13, 2008 8:41am
Hello Pqt,

I would be very interested in how you apply hedging? Would you mind sharing your ideas?

Thank You,
Jeff

Quoting pqt
Thx for your concern. But since I've tripled my account after 3 months, I still think it's good enuf for me (of course for you and your multibillionaire friends in here, that's just chicken feed, but for me it's enuf to pay my bills
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