hedge for s/l??? | Forex Factory

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hedge for s/l???

  • #1
  • First Post: Apr 13, 2007 3:52pm Apr 13, 2007 3:52pm
I remember reading about putting a hedge as a Stop loss instead of a fix value. This could be an alternative for those who want to trade without stop losses and fearing of blowing their accounts

The positive side is that, if your trade goes bust, your hedge is in positive, so you end up net zero (or almost with spread, interest, etc.). So when your orignial trade is out, you just close your hedge for a profit that almost offsets your losses.

I just can't think of a downisde to this
  • #2
  • Apr 13, 2007 3:56pm Apr 13, 2007 3:56pm
for example,

if you buy euro at 1.3490 and my s/l is 1.3400

then place a hedge short at 1.3490 with tp 1.3400

So you loss is also your gain, wiht a little loss I assume from the spread. But doesn't this reduce your loss greatly???
  • #3
  • Apr 13, 2007 3:59pm Apr 13, 2007 3:59pm
nevermind..i just realize i'm placing an order without s/l..

but i want to look into this..cause i'm sure i read it somewhere
  • #4
  • Apr 13, 2007 5:17pm Apr 13, 2007 5:17pm
Quoting hilmy83
nevermind..i just realize i'm placing an order without s/l..

but i want to look into this..cause i'm sure i read it somewhere
I've thought about this as I'm in the twilight zone where I think I can trade without stoplosses. So far all has worked in my favour but I've heard so often what a bad move this is that I'm sure I'm in for rude awakening.
But I'm sort of moving from intra to swing to position trading and it seems that every time I've put stops or trailing stops I've struggled to keep ahead. Every time I've let it run I come out OK.
So hedging this way would appeal if we can get some serious input into the pros & cons.
  • #5
  • Apr 13, 2007 6:55pm Apr 13, 2007 6:55pm
Getting hedged is easy, it's getting unhedged that's tricky.
The breaking of a wave cannot explain the whole sea.
  • #6
  • Apr 14, 2007 5:11am Apr 14, 2007 5:11am
Quoting hilmy83
I remember reading about putting a hedge as a Stop loss instead of a fix value. This could be an alternative for those who want to trade without stop losses and fearing of blowing their accounts

The positive side is that, if your trade goes bust, your hedge is in positive, so you end up net zero (or almost with spread, interest, etc.). So when your orignial trade is out, you just close your hedge for a profit that almost offsets your losses.

I just can't think of a downisde to this
Since the recovery from the Chinese sheakout I'm trading:

- GBPUSD / GBPJPY / USDJPY longs, thus in line with the trend.

- When USD-related moves are strong, one of my USD pairs gives me profit to take, while the other gives me dip to buy. And the carry stalls

- The risk is then restricted for a carry trades selloff, causing all three to fall together. In this case I do what you suggest, I enter (only) GBPJPY short until resuming of the trend. I would short GBPUSD and USDJPY only in case of a massive carry trades selloff.

- When all USD-pairs move up together with the trend, GBPJPY amplifies the profit severely. That's the first I take profit from.

I'm still improving this trades because, after a USD big move, taking profits in one pair and entering in the other's dip may cause the overall position to loose balance and increase your exposure. As soon as any other opportunity appears for the pair I took profit from, I reenter.
  • #7
  • Apr 14, 2007 10:13am Apr 14, 2007 10:13am
Quoting PeterFM
I've thought about this as I'm in the twilight zone where I think I can trade without stoplosses. So far all has worked in my favour but I've heard so often what a bad move this is that I'm sure I'm in for rude awakening.
But I'm sort of moving from intra to swing to position trading and it seems that every time I've put stops or trailing stops I've struggled to keep ahead. Every time I've let it run I come out OK.
So hedging this way would appeal if we can get some serious input into the pros & cons.

NNNNNNOOOOOOOOOOOOOO !!!!!!!!

"Hedging " is simply hiding a loss under another opposite trade...and sooner or later, when the hedge comes off, there is an ugly loss exposed...


.
  • #8
  • Apr 14, 2007 1:16pm Apr 14, 2007 1:16pm
Quoting jacko
NNNNNNOOOOOOOOOOOOOO !!!!!!!!

"Hedging " is simply hiding a loss under another opposite trade...and sooner or later, when the hedge comes off, there is an ugly loss exposed...


.
Speak up I'm not sure I quite understood your message .

OK I guess it's a bad idea, point taken.
  • #9
  • Apr 14, 2007 1:42pm Apr 14, 2007 1:42pm
I was working on a system for a while but stopped because I just have too many fronds open atm. I may return to it in the future (or maybe someone can help along with it). What I did is I simply entered a buy or sell based on pure intuition and a little price action. Let say we are trading E/U at 1.3450 and I sell with a small TP (10 points), no SL. Price goes against me 20 pips so I sell some more. Now at 1.3500 I have 2 buys sitting. If they get opened I move on and continue doing my thing hoping that either price will shoot up and I close the buys at a logical level (1.3600?) or price hangs around there showing weakness in which case I close the buys and move them up 20-30 points, hoping that it will retrace and the sells will return into profit.

I think it has potential but needs more development.

S
  • #10
  • Apr 14, 2007 11:14pm Apr 14, 2007 11:14pm
Quoting PeterFM
Speak up I'm not sure I quite understood your message .

OK I guess it's a bad idea, point taken.
Late Hedging is a form of admmiting you were wrong without actually coming out and saying it.

In this case; Exiting is often the better answer. [not always, but more often than not]

He who runs away, lives to fight another day.
  • #11
  • Apr 15, 2007 1:30am Apr 15, 2007 1:30am
Quoting Bemac
Late Hedging is a form of admmiting you were wrong without actually coming out and saying it.

In this case; Exiting is often the better answer. [not always, but more often than not]
Not necessary a bad idea to hedge.

Last September, I almost blew my account. A bad trade caused my account to drop 70% in just 1 bad position and I hedged it. I hedged it because I want to have more time to think clearly what to do.

But still in the end, I decided to call close both positions and admit defeat. Since then I quickly recovered the loss and ended the fight with a win.

But the bottom line is, and I agree with Bemac:
Quote
He who runs away, lives to fight another day.
I admited the defeat.
There is no valor in holding a loosing position without a plan.
  • #12
  • Apr 15, 2007 8:50pm Apr 15, 2007 8:50pm
Look here for a refreshing view about hedging

http://forexfactory.com/showthread.php?t=23718
  • #13
  • May 14, 2007 7:12am May 14, 2007 7:12am
when it is about to unhedge, it is like searching another entry price...
should you miss, it is like a loss from 2 position....

as for me, as long as the short one is positive, it is ok.... since it is the negative swap and always closed early
  • #14
  • Sep 5, 2007 4:14am Sep 5, 2007 4:14am
Let's say we are trading GBP/JPY in volatile and unpredictable circumstances - like recently.

We've done all our homework and want to set a trade. What stop loss to set? A realistic one might be 200 pips, say. Well if we agree that we must have an emergency stop loss why not put an opposite market order in at 100 pips, with a TP at the 200 pips mark, so that our loss is only half (less the spread).

Any comments on this strategy would be appreciated.
Gone to a better place
  • #15
  • Last Post: Sep 5, 2007 5:18am Sep 5, 2007 5:18am
About a year ago I experimented extensively on this hedge vs. stoploss topic on a demo account, and after few weeks I found no logic reason to go for the hedging formula: you double pay the spreads and swaps slowly-but-surely eat you away.

I reckon that when your trade goes bely-up, it's just best to admit it, respect your stoploss and exit out like a gentleman.
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