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"Hedging" Revisited

  • #21
  • Nov 11, 2010 3:25pm Nov 11, 2010 3:25pm
Quoting pip_seeker
only if you don't know where price is going.
no, this has nothing to do with where price will go.

The "hedging"¹ will not help you. "Hedging" is just a more expensive way to close a trade. You still have to know when to open and when to close and for this you need to analyze the market and make an intelligent decision (and only this decision is it that can give you any profit (or loss), not the "hedging" or the color of the buy or sell button).

Please read the postings that are linked here in this thread as well as the examples where it has been shown 1001 times already that the "hedging" does not provide you any advantage over trading the same signals in a normal way.

__________
¹ "Hedging" wrapped in quotes (some also call it nedging) to make it distinct from hedging which means the offsetting of the risk with a different instrument.
  • #22
  • Nov 11, 2010 3:40pm Nov 11, 2010 3:40pm
Quoting 7bit
... "hedging" does not provide you any advantage over trading the same signals in a normal way....
Clearly I didn't explain myself very well on the outset of this thread. I'm using the word "hedge" to mean having two opposing positions at the same time in the same pair but they do NOT start out that way. On any given entry signal I do NOT open a long AND a short.

I open a long on an bullish signal and a short on a bearish signal. Sometimes, during a long trade a bearish signal will come along, and I will scale out a predetermined percentage of the current long BUT LEAVE IT RUNNING. Then enter short on the bearish signal.

It is at this point that I have a "hedge".

Now if the bearish signal confirms I close out the remaining portion of the long and count my profits/losses, and let the short continue until the next long signal (that meets my simple criteria). I scale out of the short leave it running and enter the new long.

If any given signal fails I have a small loss but the original trade continues and since it still have a major portion still going continues making money. More than enough to offset the last loss.

I never enter both long and short on the same signal. I enter long on the bullish signals and short on the bearish signals. I am "hedged" for only a small portion of the time. This is usually during a ranging market where the market hasn't decided which way to go but no matter how the "big boys" work it out I have a position in that direction. This way I am pretty much ALWAYS in the market long or short depending on which way the market is going.

Trends make most of the money and the ranges keep the losses in check. Does that explain it better?
  • #23
  • Nov 11, 2010 3:40pm Nov 11, 2010 3:40pm
I don't need to read anything. I traded it live so I know it does work.

You can say what you want meanwhile the market ranges 80-90% of the time. During this time the hedge can work for you, but you have to put everything you currently know into a box and seal it.

Then turn around and plant your butt on it. Then think about anything other than what is in the box.

AKA- Thinking outside the box. What do you have to lose?... arguing about it got you where?


FAITH--- what makes the impossible --- POSSIBLE.

"I have not failed 1,000 times. I have
successfully discovered 1,000 ways to NOT make a light bulb." ~Thomas Edison

The problem is... it is up to you to figure out how to make a light bulb. I won't show you and I am not here to sell you or anyone anything. I have nothing to gain by saying it is possible.
  • #24
  • Nov 11, 2010 3:44pm Nov 11, 2010 3:44pm
Quoting gspajon
Trends make most of the money and the ranges keep the losses in check. Does that explain it better?
yeah that's the way I understood it... but then again I am the one agreeing with you.
  • #25
  • Nov 11, 2010 3:56pm Nov 11, 2010 3:56pm
Quoting pip_seeker
I don't need to read anything. I traded it live so I know it does work.
This only means that your trading signals are correct, the "hedging" does not contribute any advantage. If you think otherwise then you are profitable without knowing why. This is dangerous.

This posting (and anything else I might write in this thread from now on) is not targeted at you anymore since you seem to have already reached the highest level of enlightenment and can disprove or otherwise get rid of any annoying mathematical fact by the mere act of simply claiming it wrong.

I must stop now before you start claiming my non-existence or the reversion of gravity in my area.
  • #26
  • Nov 11, 2010 4:02pm Nov 11, 2010 4:02pm
Quoting gspajon
Trends make most of the money and the ranges keep the losses in check. Does that explain it better?
This might be true but why do you need "hedging"? You could trade your strategy unchanged at any NFA br0ker by applying the transformations I mentioned before. They are 100% equivalent and provide the same profit, loss and risk but you would at no time need any "hedged" position.

Maybe I did not express it clear enough but I don't know how to explain it better. Maybe you find something in the other threads that have been linked there are more examples that show you why you don't need to hedge to make the same profit from the same trading signals.
  • #27
  • Nov 11, 2010 4:52pm Nov 11, 2010 4:52pm
Regardless if you can get the same results as somebody who is hedging with a different strategy is irrelevent. Trading is 80 percent confidence and if it is more comfortable for you to exit a trade and make money rather than enter a trade to make money good for you.
My trades are 100% profitable 65% of the time!
  • #28
  • Nov 11, 2010 7:54pm Nov 11, 2010 7:54pm
Quoting 7bit
This only means that your trading signals are correct, the "hedging" does not contribute any advantage. If you think otherwise then you are profitable without knowing why.
Quoting 7bit
This might be true but why do you need "hedging"? You could trade your strategy unchanged at any NFA br0ker by applying the transformations I mentioned before. They are 100% equivalent and provide the same profit, loss and risk but you would at no time need any "hedged" position.
Agree 100% with everything you've said. I gave my reasons back in post #4. The math is self-evident.
  • #29
  • Nov 11, 2010 9:11pm Nov 11, 2010 9:11pm
Quoting 7bit

__________
¹ "Hedging" wrapped in quotes (some also call it nedging) to make it distinct from hedging which means the offsetting of the risk with a different instrument.
Correct.. what gspajon is describing does not 'qualify' for hedging and there is a simple reason for that too.
  • #30
  • Nov 11, 2010 9:30pm Nov 11, 2010 9:30pm
1. hedging is a basic strategy that is used to save on capital gains
tax in the United States. As there is a break if you hold a position for longer than a year.

2. hedging with trailing stops can be very profitable before a big move. And saves you from having to make a move because the move has been made. It is a constant tool that is used widely by professionals for many various reasons.


4. Craig can you teach me how to count ? And also does room temperture change in different countries. Just want to no if my IQ is worthy of your precense. (LOL)
My trades are 100% profitable 65% of the time!
  • #31
  • Nov 11, 2010 9:40pm Nov 11, 2010 9:40pm
Quoting 7bit
This posting (and anything else I might write in this thread from now on) is not targeted at you anymore since you seem to have already reached the highest level of enlightenment and can disprove or otherwise get rid of any annoying mathematical fact by the mere act of simply claiming it wrong.

Ok, now that I have you by the Kahonies I give you a small fraction of proof.

You can disregard it as fiction all you want. As I'm sure if you don't others likely will (oh the file is edited blah-blah enter your own excuse for your mental short comings)... in the end this is old news to me, that doesn't mean I go around trying to belittle others who are brave enough to think for themselves to try to figure something out.

It's not easy being "ORIGINAL"... on this board or any other for that matter. You would rather kick and scream thinking I some how owe you my mental capacity to show you something you cannot begin to comprehend.

So this will be your biggest gaffe for the whole world to see. You chose this path, not me. You can claim it is inefficient as hell - whatever - you want. The only thing I ever said is that it is POSSIBLE.

Dangerous--- yes, I already said that too... no need in beating a dead horse. Death by 1 thousand paper cuts --- is still death no matter how you slice it.

I will tell you the statement is old... this particular script was a MT3 script. So if you really want to find the answer, you will have to work some for it to piece it together.

Don't ask for the EA it will not be provided as it wouldn't matter anyway because MT3 no longer exists. This little exercise is primarily to shift the balance of pundits vs believers and I'm a little bored ATM.
Attached File(s)
File Type: zip Frog_a-8-17-9-14.zip   29 KB | 390 downloads
  • #32
  • Nov 11, 2010 9:44pm Nov 11, 2010 9:44pm
Quoting hanover
Agree 100% with everything you've said. I gave my reasons back in post #4. The math is self-evident.
Yeah ok you can join the party too... another pundit. I guess everybody is going to be signing up for additional math classes next semester.
  • #33
  • Nov 11, 2010 9:57pm Nov 11, 2010 9:57pm
more can be gained, at least from my perspective, from these types threads than any other..... not due to the subject matter, the subject is often never resolved.....

it's gained from observing the black and white with no hint of gray responses of the posts that follow......

//---
//---


hey gspajon..... i read your original post carefully several times...... when you mention the word 'hedge' very often people will color-up.....

to best see if an idea that might contain opposing trades for any reason will work or not, there is only one way to know for sure.....

open 2 live accounts, run one with opposing trades and the second without..... view the results...... there are just too many variables in live trading to do otherwise.....

there can also be unseen by us variables in your system/ea...... several of those potientials come to mind......

translating trades as 7bit suggested might work but there is a unseen margin for error.....

//---

most of the better dual direction type forex systems can probably be reduced to single direction.....

personally i've wished we had never lost opposing trades..... it was interesting trading signals which opposed on different timeframes...... thanks to a request by kostas i now have a solution.....

still all in all, opposing trades was convenient sometimes....h
to trade and code, keep both simple... no call to impress....h
  • #34
  • Nov 11, 2010 10:18pm Nov 11, 2010 10:18pm
Quoting pip_seeker
Yeah ok you can join the party too... another pundit. I guess everybody is going to be signing up for additional math classes next semester.
Trolling at its finest. How do these threads happen?
  • #35
  • Nov 12, 2010 5:10am Nov 12, 2010 5:10am
Quoting pip_seeker
Yeah ok you can join the party too... another pundit. I guess everybody is going to be signing up for additional math classes next semester.
OK then, let's settle this once and for all. Here's the deal:

You devise a hypothetical same pair hedge, as simple or complex as you like. You post details of all orders that you place, and the levels that you place them at. Then you create a scenario as to how price behaves throughout the duration of your hedge, and keep tally of the pips gained or lost. The only requirement is that you must provide enough info so that there are no ambiguities in your chosen scenario.

I will then respond with my non-hedge solution. If I can successfully replicate your positions all along the way, pip for pip, without hedging orders at any point, then you agree to admit, publicly in this thread, that I was right all along.

If I can't manage to achieve it, then I'll happily admit that I was wrong. And, as an added bonus, I'll leave the FF forum....... immediately and forever.

I admit that this is juvenile, but IMO no more so than posting meaningless jibes and smileys that prove nothing. At least this will settle the issue, and the fully worked scenario will likely have some educational value. Let's see if you have the self-belief to put your money where your mouth is.
  • #36
  • Nov 12, 2010 5:35am Nov 12, 2010 5:35am
my money is on hanover. everyone wants to reinvent the wheel, yet they keep getting a wheel... WEEEEEEE.
Congratulations ScalaFX for coming out of the closet!
  • #37
  • Nov 12, 2010 5:48am Nov 12, 2010 5:48am
I already posted the scenario at the top of page three. It is up to you to recreate it...

This isn't about making someone leave FF. Hell I could leave any time... whoopti-do who really cares? I don't have an ego that needs soothing. You don't have to admit anything to me... you don't have to say or do anything other than work towards the greater good and be constructive rather than trying to tear people down.

This is to put an end to the ego bashing and crowd mentality to jump on someone who is expanding the knowledge base. All I said was that it is possible. That is the only point I care to make.

As far as recreating this using -no hedge-?

I think your time would be better spent looking for ways to compensate for the big huge trend that comes along 1-2% of the time and eventually kills it off.

Filters don't always keep you out of the big trend. So this should be more about being constructive rather than destructive.

"You agree to admit publicly in the forum that I was right all along."

Your ego is so inflated you can't see the forest from the trees.

If it's any consolation... Yes, Hanover you are right.... OR are you? Conspiracies abound. It's your mind use it when you want to.
  • #38
  • Nov 12, 2010 6:02am Nov 12, 2010 6:02am
Quoting gspajon
I DONT know when the market is going to reverse that's the whole point....

ok. would very much like to know how you get along and your final 'system' for hedge trading.

at present i believe there is no benefit on hedging and it can be very dangerous indeed. the only benefit i can think of is the psychological advantage one might get from it .
  • #39
  • Nov 12, 2010 8:58am Nov 12, 2010 8:58am
Quoting hanover
I admit that this is juvenile,.
hey hanover..... leaving the forum would be a disservice to members left behind.....

by the additional requirements i see you have given merlins original challenge deeper thought..... he slightly reworded it over time which was a wise move..... it needed better defintion and at least the term , "exactly" removed entirely...... i'd left out the striking dead part also......

merlin started his hedge debunking thread very open minded.... true forex hedge deals like 'freedom rocks' had been around a long time prior and had always confused me with their logic....

//---
//--- claiming prizes

merlin's bio says he was 108..... as a joke i thought about posting a gozillion random hedged trades on the highest spread pair and say, exactly replicate this.... even if it was possible, it would be juvenile for someone 108 to waste his remaining valuable time.....

as for your challange, you might need to give it deeper thought and included at least one more condition.....

there is no need for a gozillion complex random trades....... as it stands, in 2 trades and 2 trades only your challenge could be met....

of course both merlin and yourself are absolutely correct in your basic line of thinking and math, within in reason ........h
to trade and code, keep both simple... no call to impress....h
  • #40
  • Nov 12, 2010 9:32am Nov 12, 2010 9:32am
Quoting hayseed
it needed better defintion and at least the term , "exactly" removed entirely
Why? This is the whole point of this discussion: it can be replicated EXACTLY. Not almost, not somehow similar, it can be replicated absolute EXACTLY!

Merlin is not in danger of losing the 100k and Hanover is not in danger of having to leave the forum. They are basing their bets on undoubtedly proven math. Unless the universe changes and math and logic have no meaning anymore they simply CANNOT lose.

Why is this so difficult to accept for some people?
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