"Hedging" Revisited

7bit, it is useless to argue with them. Accept it as a fact of life, they don't get it.

Sure there is... I buy a currency because I expect it to appreciate.

I sell a currency because I expect it to depreciate.

It's only one directional to obtain a profit or loss.

What does your 1546 trades example tell about the usefulness of the concept of nedging? Nothing! You would have had the same results without nedging because the nedging did not contribute one single cent to your profits.

7bit don't get too invested in this. you are right, but what nedge seeker is doing is playing against his own psychology to produce a method that is working for him. he still needs to know when to cut a loss and bury it and that, i believe, is what makes the difference between those who are profitable and those who aren't. it's likely pip nedger could trade the same without nedging, but it'd tip the psychology a different way.

i think the small advantage to nedging is it can help to maintain a bias both psychologically and visually, instead of getting caught flipping from long to short and paying spread when the market isn't even moving.

nedging isn't the answer to profits... it's just one way to maintain a mental bias. keep in mind nedging as i have been reading it in this thread isn't to unwind losses as most newbs try to play it when they first discover nedging, instead, it is mostly intended for pausing profits that are believed to be sitting in a consolidation that is expected to eventually resolve itself to moving one direction or another. nothing that couldn't be played without nedging, but the game changes when you don't have a visual reference to if you are playing against chop monster or not.

like i said, nedging as i see it in this thread still requires a trader who CAN trade their way out of a paper bag, so they aren't using it as 'their edge'. it's just a different way they bake their cake.

Not that this description will do any good...

Your perception of the market and trading in general is comparable to watching regular 2D analog television. [ I don't mean this as a put down, but as what I perceive to be correct and why you are missing it.]

My perception [when discussing this topic] is comparable to watching the "Matrix Trilogy". In which if you pay attention during those special effects you see a 3D encased video that isn't truly 3D in the sense 3D is today and the need to wear the special glasses to see the effect.

The strategy is to manipulate the "dynamics" of the market to meet your overall goal... which always is and should be to "check-mate" the market.

I'll let you use any time period - any pair - any strategy - you can trade it by hand or EA all you need is 1546 Trades to complete the argument that what you have is somehow better.

As by 7bits own words...
I challenge you to practice what you preach.

Understood. I cannot of course replicate it but If you set trailing stops on your nedge and there is a big move from an important news report one trailing stop is stopped out and the other one rides. Not exactly a strangle of course. But as far as i am concerned the idea is the same. Capture a big move with a profit by being hedged on both sides.

I have already posted this. Also i have seen plenty of big moves here in the forex market which this technique would have worked great for gains of 80 pips or more.

P.s. Why do you have to put people down if you don't understand where there coming from and even if they are wrong. I undestand the post was
misinformed. I can't rely on people to have an imagination.

I fully understand . Merlin has explained it the best and understood from his original thread also have admitted it can be replicated on paper. In real time trading I don't think so. Also incorperating trailing stops changes the whole scenrio.

Do you understand?

I am also drained by this thread.

I only asked for some examples of how option hedging ideas are to be applied in the spot forex markets, since it was you who introduced the subject in an obvious attempt to validate the epic fail in this thread with some piss weak proof by association. If you'd have introduced some new ideas on this subject I'd be happy to admit I'd learned something as I'm far from an options expert. But your reply speaks for itself, now I see the analogy was superficial at best. I think the best thing to do at this point would be denigrate me a little, to draw attention away from the actual subject

I have employed a technique that resembles a straddle. if you think it is a superficial anology then fine thats ok.

If if have denigrated myself by inadvertently pointing out you have no idea what you are talking about, oh well, that's a strange conclusion on anybodies terms. As for my Rageaholism, well it's a long road to recovery, one must expect bumps in the road and this thread is just another sorry episode in my struggle. Time to take some pain killers and call the men in white coats.

I figered that one would get your blood boiling. Again a simple Idea. If i have no idea what i am taliking about please explain to the folks here and myself why this strategy would not work. I would be happy to admit i am wrong.

Stop trying changing the subject, I never said your 'strategy' was not going to work, your reading comprehension is as bad as your understanding of options. You made the analogy, the burden of proof is on you, you failed to offer any rational why a strangle is the same as your hedge beyond 'the both have 2 orders'. The white coats are knocking at my door, back to the clinic for me.

How do you not understand the anology. A strangle is a hedged position
that is designed to capture a big move in either direction. As long as the move is large enough a strangle can be profitable. The exact same applies
to setting trailing stops on both sides. If you have a 30 pip trailing stop on both sides and a news report comes out and the cuurency pair you are trading moves 100 pips in one direction your even until a thirty pip move is made.After one side gets stopped out and you net a 70 pip profit. Also with this play you are already in the market before the report to save you from having to make a big move during the noise after the report. The exact same applies to a straddle you are in the trade before it happens.

There obviously are more similarities then you think. Therefore i think the anology is valid.

I have not once changed the subject.

There is no way to replicate options with spot forex. It can not be done.

Options have the beneift of the greeks (Delta, Theta, Gamma, Vega) while spot doesn't.

There are many ways to prove the difference. Just check up on how options are priced and what effects them then it will be obvious.

Obviously the dynamics of the options market don't apply here. My post was misinformed as i have admitted in a previous post. I should have been more clear on the strategy I have mentioned here in that particular post I made. I have a system in the stock market that involves trailing stops before a morning earnings report. I set the orders both short and long. Using different brokers.
usually since the report is fresh the stock either takes a dive or shoots up with this trailing stop method I am gauranteed to catch the move irregardless of where the stock goes up or down. One side gets stopped out the other side rides and i manually make decisions on the side in the money. I would do this in the options market but the options are way over priced (straddles or strangles) due to the amount of people interested in this type of trade. If you did want to use a straddle or strangle for earnings reports you should get in a week or so before the report as the options are priced more fairly . Thus the reason I like my method of trailing stops in the stockmarket because essentially you capture the move that has been made using a hedging technique as the concept is similar.My trailing stops are usually 2 to 4 percent depending on the dollar amount of the stock. It has a very high probability of being in the money. You can do this in after hours reports as well. Of course you have to be able to trade after hours. In a highly liquid stock the spread after hours can be very tight especially after an earnings report. Check some charts out on some earnings reports and you will see. Since i employ this method in the stock market it obviously can be used here in the forex market as well And really that is all I was trying to say.The coolest thing about this strategy is that my drawdown is only 2 % the trailing stop. Usually i get stopped out at the open of the market at break even with one side running because the price has moved more then the 2% in before hours trading. also i have empoyed a backup plan if i get stopped out on the downside. Based on inevitable short covering after the dive. .I go the opposite way with a new trailing stop trade. Sometimes i make two very profitable trades in a row with this techique with a very low drawdown.
Also checking up on short interest gives you an edge on the second trade.

Maybe a little to elaborate on the post. I have no problem throwing strategies out that make me money. This one though is my bread and butter play due to the orders being place before the report and not having to worry which direction the stock is going to move. Just simply knowing that it is going to move sharply in one direction. Most of the time more then my trailing stop. I cancel my trailing stop on the right side sometimes if it is a smaller dollar amount due to the volitility in the lower dollar stocks.

1. Essentially a straddle has the same objective. Make money from a big move in either direction.

2. Order is placed before the report as opposed to during or after.

3. It is a simple hedging technique.

In my book that is as close to a replication as there possibly could be giving the dynamics are completely different. Understanding at the same time you cannot in no way shape or form replicate
but can get similar results and in some cases double digit returns like the option market can offer on a single trade in a relatively short amount of time.



Not sure if you have read the full thread. Thanks though for your input and also for kindly addressing the misinformed post I previously made.

I am officially out of this thread I am sure that pleases some of you. LOL!

Please respect my stupidity as I will be more carefull how I post here in the future. Thanks for the constructive critism.

I thought I would cast a few more shadows on this subject and take the side of the "NO-HEDGE" group for a moment.

While there are differences among the stats that I am about to use as a comparison it all comes down to what is important to you.

When you claim "efficiency" what do you mean? A percentage of winners to losers? number of pips? return percentage?

For the hedging version the sheer number of trades it deals with and still beats out [for now] the percentage of profitable trades should very clearly show you there is more than one way to go about it.

This is also to demonstrate, that while I have been on the side of the Hedging group I can easily switch sides at any time I so choose to do so. This isn't meant to sound like an ego trip, but to hopefully show the market is more 3 dimensional than what some members of this board seem to think.

Hopefully if anyone has something to share we can look at it with the hopes of learning something rather than to just say "oh we have disproven it already in some other worn out thread... or whatever." I don't think anyone here can say they are bigger than the market itself and I would be included in that group.

No. You are flat and the first trailing stop is a buy stop (or sell stop) to bring you into the market and the second one will close it again.

lol, why do you bother 7bit? sucker for frustration?

I have mentioned you have to use two different brokers. Any how I really do not want to debate anymore about a simple concept that I have used many times. I will though throw in the towel and understand that you are far more experienced then me in the Forex markets (by reading your posts) and have never tried to nedge here in the Forex markets. I am not trying to suck up to you but your knowledge is respectable. The way you talk to people is not.

Refering to

The comment earlier that you posted about me not being ready to use real money in the Forex market was out of spite rather then genuingly trying to help me out. I will be happy to prove I am worthy of trading in these markets.

Now officially out of this thread. If you would like to comment back please message me. Thanks!

jimmy, buddy... please.

you can use a million brokers, you are still net flat no matter if the moon is red or my left arm is an alien. a nedge is a flat position apart from any funky spread issues that fluctuate the position. once you get past the simple math you can begin to explore the way you are using this to your advantage. i'm not disputing you are profitable or not... you may be, you may not be. but your posts scream ignorance to some fundamental issues that have been beaten to death time and time again.

if you are in mt4 then please consider the 'close' button in your order window to be non-existent. there is no close. for a buy there is only a sell, and for a sell there is only a buy. it's a balancing scale and whichever button you press will tip you one direction or the other.

the reason mt4 has the 'close' button in the order window is to allow threads like this to flourish. it's a misdirection that gives traders the illusion of more options than they have, while also giving the brokers more opportunity to fleece money from traders who aren't on top of their game.

or to put it another way... it's because mt4 is set up to make trading more like a game.

what happens when you buy currency cross abc / xyz? what happens when you sell currency cross abc / xyz? what happens when you buy then close, or sell then close?

once you can answer the above, you will see why you are so off mark there isn't a map for where you are at. seriously, research and answer for yourself the answers to the above questions. it will do you a load of good (and the rest of the factory who are slapping their foreheads in frustration).

i'm not being entirely a jerk. you really should go and think about the mechanics of what a buy and sell (... and, sadly, the goddamn 'close button') are all about. it WILL help you to see what we see.