Today, I am going to take a look at another unfounded claim in the series of assertions made without any real proof or substance.
The 'anti hedging strategy'.
The following post states the basics of that strategy:
Quote:
Originally Posted by PipGoddess
OK Jacko
So as I understand it. I sell the gbp at 1.9500. It hits my stop at 1.9550 and goes to 1.9600. I then open another sell at 1.9600.
Have I got it right?
Sue
No.
1. You sell the GBP at 1.9500
2. It hits your stop at 1.9550
3. The market continues to 1.9600 (GBP is a little more volatile than Euro which is what I trade...so lets change 1.9600 to 1.9650)
4 At 1.9650, you place a Sell Stop order at 1.9550.
5. (a) If the market keep going up, your sell order is NOT triggered.
(b) If market trend reverses, it will eventually come back to 1.9550 and your sell is triggered at the price that you were stopped out...but the trend is now in your direction..
THE ADVANTAGES OF THIS STRATEGY IS THAT
a. IT HAS AN EFFECTIVE AND DISCIPLINED COURSE OF ACTION
b. IT GIVES YOU A SPECIFIC "ENTRY" POINT
c. IT REDUCES LARGE DRAWDOWNS
d. IT PUTS YOU BACK IN THE MARKET EXACTLY WHERE YOU GOT OUT
I have now been using this strategy for a couple of months and it is working brilliantly.
__________________
First of all, 'hedging' has a completely different background than simply opening an equal position in the opposite direction on a single instrument. The term was used by retail brokerages to induce traders to open more positions under the false pretence of protection of the original position. Real hedging works completely different (and goes too far for the discussion). Needless to say that the restriction of the practise was overdue.
Putting aside the (non existing) possibility of actually seeing some statements that show when and how well the strategy['anti-hedging'] actually worked, I would say that this is the biggest nonsense I have heard in my entire trading career.
Let me get this straight: your analysis results in an opinion about the possibility of the market going down (trending down, or any other description of the sort). You sell. You have a stop. You lose because your analysis was either wrong, or, your stop was too tight. Now in case your stop was too tight, there is a remote chance that in those cases placing a re-entry at the stop level might work - but I say remote because if your stop gets hit overnight, you won't be lucky enough to place that set of orders.
What substance is behind this: (b) If market trend reverses, it will eventually come back to 1.9550 and your sell is triggered at the price that you were stopped out...but the trend is now in your direction..
Who can claim to know that because the market triggers your re-entry, it will continue to move in that direction? Every time, or in fact in the majority of times? Because if it happens equally often than not, the whole premise is wrong (let alone if it happens less often than not and your account would dwindle).
In case your analysis was wrong, you still run the danger (after being stopped out) to place the re-entry according to the strategy at the stop point, only to find out that your re-entry gets triggered (you have already lost 50-100 pips on the original trade),the price moves 30 pips in your favour and then continues in opposite direction - having formed support around the level you re-entered.
What's next? Putting on another 50-100 pip stop for the new position? If your analysis was wrong, surely one stopped out trade would be enough to tell....unless, like seen in the Daily FX thread from p. 159/160 onward you are willing to risk (as claimed without proof, again) the whole previous months profits on a single trade. In trading reality, that is plain idiotic - although some people might say 'no guts - no glory'.
There is nothing wrong with the concept of re-entering a trade when being stopped out.....but that 'strategy' seems to reinforce stubbornness in believing and sticking with the wrong analysis when it should be abandoned or at least reassessed.
Yes, it is a disciplined course of action - but the markets themselves have a habit of not following that part of the discipline.
Yes, it gives you a specific entry point - but that means nothing if the entry point is at a price that was not favoured by the market moves on the first trade - 50/50 is really not good enough (on the occasions that happen during daylight trading hours).
No, it does not reduce large drawdown's since there is no way of knowing whether the second/third/fourth trade will A) yield at all, and B) yield enough each time to make up for the extent of the losses of the strategy.
No, it puts you back in the market where the market has taken you out - which in many instances is a sure sign that it was better to be out of that position - only amateurs who try to predict market movement would re-enter on a fixed basis that way.
But by all means, prove me wrong on that as well - show me a meaningful sequence of trades in which the strategy has improved the DD ratio and was profitable to the extent claimed by the 'inventor'.
regards
daytrading
The 'anti hedging strategy'.
The following post states the basics of that strategy:
Quote:
Originally Posted by PipGoddess
OK Jacko
So as I understand it. I sell the gbp at 1.9500. It hits my stop at 1.9550 and goes to 1.9600. I then open another sell at 1.9600.
Have I got it right?
Sue
No.
1. You sell the GBP at 1.9500
2. It hits your stop at 1.9550
3. The market continues to 1.9600 (GBP is a little more volatile than Euro which is what I trade...so lets change 1.9600 to 1.9650)
4 At 1.9650, you place a Sell Stop order at 1.9550.
5. (a) If the market keep going up, your sell order is NOT triggered.
(b) If market trend reverses, it will eventually come back to 1.9550 and your sell is triggered at the price that you were stopped out...but the trend is now in your direction..
THE ADVANTAGES OF THIS STRATEGY IS THAT
a. IT HAS AN EFFECTIVE AND DISCIPLINED COURSE OF ACTION
b. IT GIVES YOU A SPECIFIC "ENTRY" POINT
c. IT REDUCES LARGE DRAWDOWNS
d. IT PUTS YOU BACK IN THE MARKET EXACTLY WHERE YOU GOT OUT
I have now been using this strategy for a couple of months and it is working brilliantly.
__________________
First of all, 'hedging' has a completely different background than simply opening an equal position in the opposite direction on a single instrument. The term was used by retail brokerages to induce traders to open more positions under the false pretence of protection of the original position. Real hedging works completely different (and goes too far for the discussion). Needless to say that the restriction of the practise was overdue.
Putting aside the (non existing) possibility of actually seeing some statements that show when and how well the strategy['anti-hedging'] actually worked, I would say that this is the biggest nonsense I have heard in my entire trading career.
Let me get this straight: your analysis results in an opinion about the possibility of the market going down (trending down, or any other description of the sort). You sell. You have a stop. You lose because your analysis was either wrong, or, your stop was too tight. Now in case your stop was too tight, there is a remote chance that in those cases placing a re-entry at the stop level might work - but I say remote because if your stop gets hit overnight, you won't be lucky enough to place that set of orders.
What substance is behind this: (b) If market trend reverses, it will eventually come back to 1.9550 and your sell is triggered at the price that you were stopped out...but the trend is now in your direction..
Who can claim to know that because the market triggers your re-entry, it will continue to move in that direction? Every time, or in fact in the majority of times? Because if it happens equally often than not, the whole premise is wrong (let alone if it happens less often than not and your account would dwindle).
In case your analysis was wrong, you still run the danger (after being stopped out) to place the re-entry according to the strategy at the stop point, only to find out that your re-entry gets triggered (you have already lost 50-100 pips on the original trade),the price moves 30 pips in your favour and then continues in opposite direction - having formed support around the level you re-entered.
What's next? Putting on another 50-100 pip stop for the new position? If your analysis was wrong, surely one stopped out trade would be enough to tell....unless, like seen in the Daily FX thread from p. 159/160 onward you are willing to risk (as claimed without proof, again) the whole previous months profits on a single trade. In trading reality, that is plain idiotic - although some people might say 'no guts - no glory'.
There is nothing wrong with the concept of re-entering a trade when being stopped out.....but that 'strategy' seems to reinforce stubbornness in believing and sticking with the wrong analysis when it should be abandoned or at least reassessed.
Yes, it is a disciplined course of action - but the markets themselves have a habit of not following that part of the discipline.
Yes, it gives you a specific entry point - but that means nothing if the entry point is at a price that was not favoured by the market moves on the first trade - 50/50 is really not good enough (on the occasions that happen during daylight trading hours).
No, it does not reduce large drawdown's since there is no way of knowing whether the second/third/fourth trade will A) yield at all, and B) yield enough each time to make up for the extent of the losses of the strategy.
No, it puts you back in the market where the market has taken you out - which in many instances is a sure sign that it was better to be out of that position - only amateurs who try to predict market movement would re-enter on a fixed basis that way.
But by all means, prove me wrong on that as well - show me a meaningful sequence of trades in which the strategy has improved the DD ratio and was profitable to the extent claimed by the 'inventor'.
regards
daytrading
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