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Proposal to phase out Hedging

  • #161
  • May 9, 2009 11:23am May 9, 2009 11:23am
Quoting pipmutt
Nedging....ok I give up, give us a clue! Negative Hedging? Never-do-it Hedging?
Lol,

I was only Infomed of the meaning of 'nedging' afew weeks ago when I asked smjones(?), he said:

Nedging is Newbie Hedging, ie. Going/being long and short the same Instrument at the same time.

Real hedging Is used In similar but not Identical markets, Eg. Banking sector- You suspect bank A Is going to do well because they have new pens tied to the desks so you go long, but to secure yourself just incase the whole sector falls you take a short possition In several others. This way you are only exposed to the risk of the new pens not bringing In new customers and not an overall desaster for banks in general.
^^^^
Just thought I would repeat this again Incase anyone missed what hedging actually is.

Leon

Ps. If there are any sexy new bank clerks working in your local branch consider going long.
Living the adventure in my head.
  • #162
  • Edited 2:37pm May 9, 2009 1:33pm | Edited 2:37pm
OK, so in the end ,majority, ( not all from beginning though ), but nice and easy admitted hedging is profitable if applied corectly, sure might be also dangerous, but if your attentive might bring benefits and profit.


Example :

flat-smittens kept loud out "you are flat by hedging"...well you apply in a strategy, man, not like that , as you said , "flat".

Well, in the end you changed your mind, ( LOL ),
that "it might be profitable..."..

Seems only pipmutt still believes it can't be profitable, as he said :
" hedgers are inexperienced traders or dumb"

Your ridiculuos ...
When 10 people say the contrary pipnutt , u better go to bed.

You both begun to contest by insulting and calling names like dumb that hedging is in no way profitable .
Hedgers is profitable but course only if applied corectly and if you make no mistakes , otherwise you lose big.
But for some, is profitable.


You two showed off with something was not true at all, making yourself ridiculuos, pipnutt.


You better go play backgammon and save your accounts



So we didn't need this no hedging rule , that was all about.
We better needed protection against slippage , it was more important.
  • #163
  • May 9, 2009 2:30pm May 9, 2009 2:30pm
Quoting Leonlorenzo

Ps. If there are any sexy new bank clerks working in your local branch consider going long.
LOL, researching sounds like a whole lot more fun than watching a chart, is there anything like that for forex

I'm not an expert on the subject but the most popular way of hedging currency exposure seems to be options, I saw Oanda have a simple version but with some quite complex structures. I don't know if it's cost effective as opposed to simply trading spot with a stop but it seems to cap/reduce risk, I guess someone must use them.

Probably another topic for another thread......
  • #164
  • Edited 6:13pm May 9, 2009 4:19pm | Edited 6:13pm
Here's my summary, then, for whatever it's worth:

-- One profits from any strategy, including hedging in the same pair, by being net long while price is rising, and net short while price is falling, frequently enough to overcome costs. P/L is ultimately determined by one's net position, and orders are merely a vehicle for adjusting it.

-- The NFA ruling can easily be worked around. Any hedging strategy, however complex it might appear, can nonetheless be replicated pip-for-pip, by simply taking the relevant net position, either long, short, or out of the market. Traders who are unable to grasp this, and adjust their systems accordingly, will probably have to take the unnecessary step of migrating to a non-NFA regulated broker.

-- Hedging is arguably a more convenient way for traders to operate, in terms of placing orders, but it comes at a price. One pays more swap, and (in certain situations) additional spreads, by holding offsetting positions, than simply being either long, or short, or out of the market altogether.

-- Traders who believe that every floating loss will return to breakeven, before a margin call occurs, are ignoring the basics of prudent risk management, at their peril. Similarly, traders who fail to take unrealized losses into account are living in an illusion, one that could likewise eventually result in a margin call. Moreover, only net equity can be withdrawn from an account, or otherwise utilized elsewhere.

-- The NFA would arguably have helped traders more by addressing less 'superficial' issues. However, any discussion as to what the NFA's motive might be in banning hedging can only be speculation.

-- It's possible to post without name-calling, flaming, or otherwise violating forum rule #1. If I can be civil, anybody can.
  • #165
  • Edited 8:22pm May 9, 2009 7:52pm | Edited 8:22pm
Quoting hanover
Here's my summary, then, for whatever it's worth:

-- One profits from any strategy, including hedging in the same pair, by being net long while price is rising, and net short while price is falling, frequently enough to overcome costs. P/L is ultimately determined by one's net position, and orders are merely a vehicle for adjusting it.
Well, this is yours, pipmutts and smittens opinion,and there are some more , very good traders ,btw, ..., you are free to have your opinion , it's very good you have an opinion, though, sorry but others have OTHER opinions .

Ok you three, and some others, very good traders, btw, I don't say you are not good traders, have one opinion , there are many other good traders that , sorry they have another opinion, and they know truth is they win both opposite positions , sure some continue to say math says no, it's not true, but hedgers know they are, the equity of account shows it, not the balance.


There are people , profiting, not only from net position , as for me, I win about 70 % of the WHOLE opposite positions, there are people which are closing both opposite positions in profit, the equity of account follows the balance, it grows, doesn't shrink !!!..if hedging is done right.

And when those are not won , both, the loss is ONLY a lousy spread.
So this rule was not needed at all.

And no, there where , more important problems like slippage.

Quoting Hanover
-- Hedging is arguably a more convenient way for traders to operate, in terms of placing orders, but it comes at a price. One pays more swap, and (in certain situations) additional spreads, by holding offsetting positions, than simply being either long, or short, or out of the market altogether.
Sorry , but you forgot some ARE closing BOTH positions in the end,
and no, they don't remain witha lot of positions open , there IS a way to do it , i'm not going to reveal it because is to precious

Quoting Hanover
-- Traders who believe that every floating loss will return to breakeven, before a margin call occurs, are ignoring the basics of prudent risk management
Well , after hedging for a while , but ONLY if done in a more complex strategy and corectly, a hedger always withdraws the initial deposit and plays with the won money.


Quote
-- The NFA would arguably have helped traders more by addressing less 'superficial' issues.

Oh , sorry , forums are full of complains against brokers , some deniers of hedging here might working for the brokers.........

- there are quite many , many,many complains on forums against brokers

Quote
-- It's possible to post without name-calling, flaming, or otherwise violating forum rule #1. If I can be civil, anybody can.

I agree , you should please tell that to smittens and pipmutt who begun to call me names and not only to me...without reason
(just because they have another opinion , or because they might work for brokers)
, .so I just send those words back where they left from, i always like to send back x2 when somebody starts calling names.

..And sorry, no, you can't replicate hedging in an account that doesn't allow it, by taking only, the net position, JUST because hedgers win about 70 % BOTH positions and having 2 opposite positions will be no more allowed.

Sure, I agree is not so simple ... someone to get a good hedging strategy, many hedging strategies might increase, as you said the drawdown, balance increases and equity suddenly fals down, but only if you play the wrong hedging strategy.

Many pips to you , but sorry , others have other opinions.
And those are not only a few.

Sure not all hedgers are winning , maybe that's why those consider hedging or nedging is useless.

IMO ,if you don't choose the right hedging strategy you lose but there are , you know, a bunch of traders who developed a good hedging strategy.

Yeah sure if hedging is not corectly , only balance increases, tequity not , and all of a sudden you might lose, but only if not done corectly.


But as i said many traders know from their account equity hedging IS profitable ,and we didn't needed this, ..

and there were lots of other complains about brokers on the forum..

Besides NFA should regulate brokers , not traders.
All people are free to have their opinion, you know you three keep saying hedging is deceiving , not true, if done corectly equity grows

So you three are free to chalennge what i said it's your right , but others have another opinion, and this is a fact:
we didn't need this rule.
NFA has to regulate brokers, plenty of complains about brokers on forums, not traders.

Many pips to you
  • #166
  • May 9, 2009 9:05pm May 9, 2009 9:05pm
redox,

Look at the post from the guy who used hedging recently-- the guy opened opposing positions, with take profits on both sides, and went to bed. When he woke up, both take profits were hit for 100 pips each. 200 pips profit. Not bad for a night's trading.

I can do the same. Without hedging. With less transactions. Wait til the long (or short) target is hit, and open an order opposite it. If the long target was hit first, I go short, and ride it to the short target-- 200 pips. One transaction. Less spread/commission costs.

I completely understand you are not just opening positions and staying flat forever, as much as you want to continue saying that (because you can't read, and are a flying fucking moron, but I digress), I'm saying I can do cheaper. While you go flat hedging, I stay flat with no open trades (because they ARE the same, in every single way, except accounting). I'll keep saying it: being hedged means you can not make money. Of course you don't have the comprehension skills to understand what I am saying. You can make money when the hedge is unlocked. I.e. you come out of being flat (or hedged). Like the guy did above, he was hedged, and then closed one position in profit and then later closed the other position in profit. However, while both trades were open, he was not making money. He opened positions at 0, then took profit at +100 and -100. He could have made more money with two trades (long only at the beginning, for 100 pips, and then short to to the -100 target, for 200 pips. 300 pips total), or the same money with one trade, and less cost.

There is no financial benefit to hedging. If I can do the same thing you can do for cheaper, then why hedge? There is no hedging strategy that can't be duplicated cheaper or at the same cost. I've seen 'hedging' strategies on these forums, they're almost always a rehash of the same idea.

Now I know you have a million dollar strategy, and that is why you are so reluctant to show trades (although again, showing one trade sequence wouldn't give away your system, since there's almost always multiple ways to accomplish the same profit), but if so, why are you spending all your time on these forums talking about your million dollar strategy, and not actually trading it? And if it's a million dollar strategy, why are you trading it with a $400 account?

So many questions, no answers. If you really have a million dollar strategy, you should be making money, not spending your time in forums. Time is money brother! I have an excuse to spend time here at least-- a job

Happy trading, let me know how that 'million dollar' system works out LOL
  • #167
  • May 10, 2009 12:55am May 10, 2009 12:55am
Quoting Redox77
Well, this is yours, pipmutts and smittens opinion......
Believe whatever you like. Let's just agree to differ.
  • #168
  • May 10, 2009 2:24am May 10, 2009 2:24am
While it's obviously true that everyone is entitled to their own opinion (and I absolutely agree, name-calling is totally unnecessary when attempting to express that opinion, shoot the message not the messenger), this isn't so much a case of opinion as plain, logical, mathamatical fact.

Having equal long and short positions on the same pair has absolutely no financial benefit, period, that's an inescapable fact no matter which way you cut it. The NFA recognizes it and apparently institutional investors do as well, even FDM's openly admit it themselves and they're the ones selling the facility! If that fact isn't immediately obvious to you then take a piece of paper, a pen, and a calculator and work it out for yourself and you'll see that not only is it not financially beneficial, it will actually cost you money. Then I suggest you ask yourself why it wasn't immediately obvious to you at the start, perhaps you need to reconsider whether you're suited to trading at all.

As has already been explained numerous times, in order to benefit financially a trader needs to have net exposure either long or short. In every one of these so-called 'hedging' strategies there is a point where the trader is either net long or net short, there simply has to be in order to profit.

The fact that some people are arguing with such a basic premise suggests NFA were justified in their concern and subsequent decision to introduce the mandatory FIFO rule:

Compliance Rule 2-43(b): Offsetting Transactions
"......NFA is concerned that customers employing this strategy do not understand either the lack of economic benefit or the financial costs involved....."
  • #169
  • May 10, 2009 3:07am May 10, 2009 3:07am
Quoting pipmutt
While it's obviously true that everyone is entitled to their own opinion (and I absolutely agree, name-calling is totally unnecessary when attempting to express that opinion, shoot the message not the messenger), this isn't so much a case of opinion as plain, logical, mathamatical fact.

Having equal long and short positions on the same pair has absolutely no financial benefit, period, that's an inescapable fact no matter which way you cut it. The NFA recognizes it and apparently institutional investors do as well, even FDM's...
Well this is simple enough. They are wrong and the reason simply is they only look at it from one angle. At the time of the entrance it has no benefit, however depending how you exit does. That is the issue they and you are not acknowledging. If you or they don't see that it is really not my problem. I am going to trade whether they like how I do it or not. Hanover is right no more need to debate issue.
  • #170
  • May 10, 2009 3:29am May 10, 2009 3:29am
Quoting nanningbob
Well this is simple enough. They are wrong and the reason simply is they only look at it from one angle. At the time of the entrance it has no benefit, however depending how you exit does. That is the issue they and you are not acknowledging. If you or they don't see that it is really not my problem. I am going to trade whether they like how I do it or not. Hanover is right no more need to debate issue.
nanningbob, even in the detailed example you gave of your strategy you were still net long or short at some point and that's what makes (or loses) money, there's no escaping that fact.

Like you say there's probably little point in further debate unless someone can actually demonstrate how there's potential for profit by being equally long and short in the same pair, and I don't think that's going to happen somehow!

Anyway, good trading to you
  • #171
  • May 10, 2009 4:29am May 10, 2009 4:29am
So it would seem that each side believes that they can see something that the other side can't comprehend. IMO that's a stalemate, and further debate is futile.

I found the following exchange between Merlin and a hedge trader entertaining. I don't know what the outocme of the wager was, but I think it's a safe bet that Merlin didn't lose his $100,000.
  • #172
  • May 10, 2009 4:36am May 10, 2009 4:36am
Quoting pipmutt
nanningbob, even in the detailed example you gave of your strategy you were still net long or short at some point and that's what makes (or loses) money, there's no escaping that fact.

Like you say there's probably little point in further debate unless someone can actually demonstrate how there's potential for profit by being equally long and short in the same pair, and I don't think that's going to happen somehow!

Anyway, good trading to you
Actually no, I have banked my profit I just need to bring the account back to break even. It is a different mind set. My long short position is now based on reaching 0 or getting enough in return to make my banked profit profitable. I no longer have to play for big runs just one short one will do. less stress in trading if done right and dont have to read the market during its volatile hours. Try it sometime i think you will like it. You just have to get your support and resistance levels rigth during off hours that is all. If it breaks a S/R in the wrong direction you know to get out quickly or rehedge.
  • #173
  • May 10, 2009 5:21am May 10, 2009 5:21am
Well there you go, Merlin is offering 100k or even 1 million dollars, I'm assuming no-one has won that wager yet!

I doubt anyone in this thread is going to demonstrate how being flat is profitable, or that nedging is not in fact less profitable than whatever-the-opposite-is-to-nedging (trading I guess!) when there's a million bucks on offer over there

Go for it, I'm serious, we'll all be rootin' for ya from the cheap seats (silently of course)!
  • #174
  • Edited 6:15am May 10, 2009 5:57am | Edited 6:15am
Quoting smittens4212
redox,

Look at the post from the guy who used hedging recently-- the guy opened opposing positions, with take profits on both sides, and went to bed. When he woke up, both take profits were hit for 100 pips each. 200 pips profit. Not bad for a night's trading.

I can do the same. Without hedging. With less transactions. Wait til the long (or short) target is hit, and open an order opposite it. If the long target was hit first, I go short, and ride it to the short target-- 200 pips. One transaction. Less spread/commission costs.

I completely...
Yes, that's true that trading w/o hedging can be more profitable
But for someone who lived in Asia with TimeZone of GMT+7, i oftenly need to remain awake up to 3~4 AM(sometimes i only sleep 4 hours a day) just waiting for the best price to open/close a trade for my intraday trading,
So the only way i can sleep at normal hours is by hedging

But personally i don't thinx hedging is suitable for newbies, because when hedging we need to be sure the price won't jump too high/too low and makes the price at different level (usually due to news) and it will takes days/weeks before the other positions will be in profit, newbies won't be able to choose the right pair to hedge or knowing the effect of the news and they also need to know the effect of market hours of related currencies(otherwise they won't be called newbies anymore if they know such thing XD)
Also hedging only works the best with "Swap Free/No Overnight Interest" account, since it could takes a long time before both positions in profit and we don't want to pile up too much fees

So my conclusion that hedging, can't gives a much profit as with normal trade, but it helps people like me to sleep at normal hours
And hedging can helps me stabilize my equity if i ever made mistake while using too high margin(which is another mistake XD), i can just open an opposite position before my available margin drops below required margin and wait for reversal

Hmm.. if hedging no loneger allowed, i guess i can only sleep 4hours a day T_T
i will surely make more "human error" mistakes if i don't get enough sleep
May be i shouldn't trade on USD/xxx or xxx/USD pairs anymore so i don't need to be awake upto 4am ^_^
  • #175
  • Edited 2:26pm May 10, 2009 6:17am | Edited 2:26pm
Quoting AdamN
Yes, that's true that trading w/o hedging can be more profitable
But for someone who lived in Asia with TimeZone of GMT+7, i oftenly need to remain awake up to 3~4 AM(sometimes i only sleep 4 hours a day) just waiting for the best price to open/close a trade for my intraday trading,
So the only way i can sleep at normal hours is by hedging


But personally i don't thinx hedging is suitable for newbies, because when hedging we need to be sure the price won't jump too high/too low and makes the price at different level (usually due to news) and it will takes days/weeks before the other positions will be in profit, newbies won't be able to choose the right pair to hedge or knowing the effect of the news and they also need to know the effect of market hours of related currencies(otherwise they won't be called newbies anymore if they know such thing XD)
Also hedging only works the best with "Swap Free/No Overnight Interest" account, since it could takes a long time before both positions in profit and we don't want to pile up too much fees

I agree with all what you said.


one thing is for sure , when some goes to bed he has to lose more :
- or by inserting SLses ( and we know how brokers hunt those SL-ses,
- or by closing the losing positions with a loss.


So we didn't need this rule which constrains us to close a position which might be profitable ( because has the direction of the weekly trend ), at the price of a lousy 3 pip spread.

Oh and we might win also the opposite position, because market is in a only 4 hour retrace, so we would have won also the opposite position which goes in the direction of the retrace, it's soo simple .

But you , go ahead , those 3 , you are free to have your opinnion , but others have other opinion ,
the hedgers know hedging was an aid, we are free also to have our opinion, in my case it's backed up by account equity.

Even say say you don't have a winning overall position ,
it helps a trader not to lose more, so TADAAAAAAAAAAAAAA
you lose MORE by not hedging.


Quote
So my conclusion that hedging, can't gives a much profit as with normal trade, but it helps people like me to sleep at normal hours
And hedging can helps me stabilize my equity if i ever made mistake while using too high margin(which is another mistake XD), i can just open an opposite position before my available margin drops below required margin and wait for reversal

Hmm.. if hedging no loneger allowed, i guess i can only sleep 4hours a day T_T
i will surely make more "human error" mistakes if i don't get enough sleep
May be i shouldn't trade on USD/xxx or xxx/USD pairs anymore so i don't need to be awake upto 4am ^_^

YES, very well said,
all thing is obvious , if some don't want to see it, they are free to not see it, but it is veeeery weird why they don't want to see that...

So ,
- even if we admit hedging is not profitable ,( profit zero )
- not allowing it makes a hole in the account ( profit -1 )

So:
drawing the line,
0 -1 = -1 by not allowing hedging.

It's that simple .
  • #176
  • Edited 7:45am May 10, 2009 6:52am | Edited 7:45am
Quoting hanover
Believe whatever you like. Let's just agree to differ.

That is what i also said , both sides are free to have their own opinions.


As nanningbos and Adam said , hedging IS an big aid for a trader, even if sometimes is just flat betting,

- thing is, like others said ,if one position is on a small retrace and the other is in the direction of the weekly trend , you win yes BOTH.

- So you lose ONLY a lousy 3 pip spread on GBP/USD but might win the retracing zone
TADAAAAAAAA.

- besides BOTH positions sometimes are winners , so if you draw the line there IS a profit .

- BUt if not applied corectly ,. might indure a loss, so that trader will never believe i hedging again
- A simple order is more dangerous than a hedge order, in a hedge order you lose a a spread ...
- So it's obvious we didn't need this rule a protection against 3 pips .

- - All over forums a beginner is told 95 % lose in forex, there is also a disclaimer "trading currency might indure a huge loss.."

- any order introduced in the market, any simple order is more dangerous against a hedged order,
- any order introduced in the market, any simple order is more dangerous against a hedged order,
- any order introduced in the market, any simple order is more dangerous against a hedged order, ,
in any hedge you lose only the spread which is a lousy 3 pip on GBP/USD.

- any beginner knows he might lose all his money in forex,

there wasn't a need a rule which regulates a trader and not how it was supposed the brokers, forums are full of complains against brokers.

- lots of people say hedging helped them .
  • #177
  • May 10, 2009 7:16am May 10, 2009 7:16am
Quoting AdamN
Yes, that's true that trading w/o hedging can be more profitable
But for someone who lived in Asia with TimeZone of GMT+7, i oftenly need to remain awake up to 3~4 AM(sometimes i only sleep 4 hours a day) just waiting for the best price to open/close a trade for my intraday trading,
So the only way i can sleep at normal hours is by hedging

Hmm.. if hedging no loneger allowed, i guess i can only sleep 4hours a day

AdamN,

If, despite all that's been said in this and other threads, you still think you need to use this type of 'hedging' strategy then the solution is simple, move your account to a non-NFA-regulated broker. Quite a few US based brokers are offering a seamless move over to their operations based outside US and therefore outside NFA jurisdiction. Call or email your broker and ask would be my advice.

Problem solved, you'll still be able to get a good night's sleep http://www.jonrb.com/emoticons/sleep.gif
  • #178
  • Edited 8:03am May 10, 2009 7:33am | Edited 8:03am
Quoting pipmutt
AdamN,

If, despite all that's been said in this and other threads, you still think you need to use this type of 'hedging' strategy then the solution is simple, move your account to a non-NFA-regulated broker. Quite a few US based brokers are offering a seamless move over to their operations based outside US and therefore outside NFA jurisdiction. Call or email your broker and ask would be my advice.

Problem solved, you'll still be able to get a good night's sleep http://www.jonrb.com/emoticons/sleep.gif
Sure, but moving the money between accounts implies additional costs, bank commissions , and majority of the brokers charge you for moving account money too, so we didn't needed this rule because you see ,even like that it it makes you earn less


Many pips
  • #179
  • May 10, 2009 7:38am May 10, 2009 7:38am
Quoting Redox77
Sure, but moving the money between accounts implies additional costs, commissions ,
so we didn't needed this rule because you see ,even like that it makes a hole in the pockets.
If you're using the same broker I believe it's totally free and like I say seamless, I doubt you'll even notice the change.

They obviously value their hedgers business
  • #180
  • Edited 8:59am May 10, 2009 8:46am | Edited 8:59am
(...)As has already been explained numerous times, in order to benefit financially a trader needs to have net exposure either long or short. In every one of these so-called 'hedging' strategies there is a point where the trader is either net long or net short, there simply has to be in order to profit.(...)

(...)Like you say there's probably little point in further debate unless someone can actually demonstrate how there's potential for profit by being equally long and short in the same pair, and I don't think that's going to happen somehow!(...)

(...) So it would seem that each side believes that they can see something that the other side can't comprehend. IMO that's a stalemate, and further debate is futile.(...)

Well there you go, Merlin is offering 100k or even 1 million dollars, I'm assuming no-one has won that wager yet!

I doubt anyone in this thread is going to demonstrate how being flat is profitable, or that nedging is not in fact less profitable than whatever-the-opposite-is-to-nedging (trading I guess!) when there's a million bucks on offer over there (...)

(quoted from pipmutt and hanover, posts #168, 170, 171 and 173)

Maybe the "million dollar strategy" is a grid that I have experimented a few years ago. It is always hedged. All the time. As soon as it closes one position in profit, it opens another, so the position is always net flat. As the market goes up and down, the grid continuously captures profit in both directions. Equity and balance grows continuously while the position is permanently net flat. Looks perfect. But it isn't. It works while the market remains in a range or the range widens gradually. At some point, a strong move out of the range blows the account.
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