help me with hedging

my broker accepts hedging but i have some problem .... if i opened 2 opposite positions at the same time and closed them at the same time would i lose because of the spread ? and if yes , how to avoid that ?

What you are trying to do is not hedging.

If you open two positions at the same time, you lose becasue of spread. The one you buy is at higher price and the one you sell is at lower price. The difference between these two prices is called spread.

There is no way you can avoid spread.

Don't do it.

Yes you would lose because of the spread and no you can't avoid it.

If you get quoted BID of 1.3705 and ASK of 1.3710 (5 pip spread) that means you have to SELL at 1.3705 and BUY at 1.3710! This is called the spread and this is how brokers make their money.

Therefore if you opened 2 opposite positions at the same time, you place a sell at 1.3705 and a buy at 1.3710. In matter of fact you have just paid 2 x 5 pip spread (10 pips) and you position is hedged. If price goes up or down it does not matter, your loss will always be 10 pips if you close both positions at the same time.

A common mistake made by traders just starting out.

The term 'hedging' is for people who actually own the underlying in cash or physicals and they use futures markets and/or other leveraged OTC synthetics to hedge their exposure. But of course some bucket shops allow traders to hold longs against shorts which really is an abuse of terms. In nobody's vocabulary should they use the term 'hedging' to describe a long short squared.

I really like hedging, you can open two opposite trades and see where the market goes. I'm trading ECN,so i'm not so afraid of the spreads.

Why not just learn how to trade and stay on the right side of the market? Loads simpler and a heck of a lot more profitable.

Retail brokers love using it, muppet retail traders love using it, makes them both look so much smarter and part of the in-crowd. In reality it is probably one of the dumbest strategies going, right up there with averaging down.

Don't mind me, am just here for the show, popcorn to hand.

Assuming you mean hedging in the same pair, then you will lose every trade using this strategy, because one position's profit will always equal the other position's loss, and you must pay the spread. There is no way of avoiding it.

There is a way to do it, but it is a top guarded secret. Most will tell you not to do it because if you don't know how you will face a margin call.

Gain without risk is called a J-O-B. If you don't want risk go get one.

This doesn't mean there aren't other ways without hedging, people like to beat up others over stuff they will never understand... and that's ok the market is big enough for everyone.

I will drop a hint... hedging works because the markets range 80-90% of the time depending of course which time frame your eyes are upon. One key is to think 'macro not micro'. With that said you still have to know what you are doing. Noob's it's not for you.

[quote=pip_seeker;4455409]There is a way to do it, but it is a top guarded secret. Most will tell you not to do it because if you don't know how you will face a margin call.


Can't agree enough with this guy.
What do you think Hedge funds do, how do you think these guys and their nano seconds machines make them money in their sleep.

Market is all about inconsistencies. You fill the gap. Take your pidly 10 - 20 pips when you are in profit and do it again and again and again.

As long as there is order imbalance and chatoic scenarios, skews will be developed and correlations exits. You need to sharpen your skills and do not get greedy.

Jackm1, thanks for that. But realize you are in harms way siding with me.

So be careful being too vocal. I've got a thick skin so the heat doesn't bother me at all.

tick-tick-tick... waiting for opposition assault to begin.

Charlie to basecamp: everyone must have taken an early lunch.

These “hedg-ie threads” seem to provoke quite a stir on this forum. I have read many and have found the debates very interesting...seems the conversations get a little heated then somebody says there is some sort of other factor involved, such as varying position sizes, scaling ...bla bla bla...

There is no getting around being on the right side of the market AT THE TME YOU CLOSE YOUR POSITION...it appears the folks who are having success doing this Hedg-ie-ing are profitable (even subtracting the cost of the extra spreads they incur)...they are range traders and could achieve the same results, with the added profit of the otherwise blown spreads...

May we take a moment of silence for these “hedg-ie” warriors and all the needlessly sacrificed spreads/pips they have endured to reach profitability...

d

The misconception of the double spread:

If I place more trades I will take a hit on paying more spreads to the broker?

Everyone in the "No-Hedge" camp always suggest such erroneous information because they IMHO look at the cost of doing business as a reason to not take a trade?

However, I have one question that I have never gotten an answer for. Does your broker pay you for not taking a trade?

In order for the hedge to work you must think macro and micro (at certain times) all at the same time. But micro thinking is very short term. The advantage is not giving a care or whimper to the direction of the market.

No one knows the direction of the market all the time, except for the astute hedger.

If you have a floating loss of $-1000 and a market is in range how long would it take you to overcome the $-1000 loss if you found the range and set and closed numerous buy and sells in profit repeatedly?

If the range is 40 pips?

60 pips?

80 pips?

100 pips?

To do the same thing the other way you take the $-1000 loss, but you don't know the direction so you are more inclined to lose another
$-1000. Reason is the hedger doesn't know how long the 40pip range will last, but they don't care either.

Remember the hedger flips from "micro to macro" on the fly. The non-hedger is either one or the other. I already know these answers and why I waste my time spelling it out is anyone's guess.