How to protect profit from depreciation | Forex Factory

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How to protect profit from depreciation

  • #1
  • First Post: Apr 26, 2011 11:34am Apr 26, 2011 11:34am
When i opened account at broker i opened it in dollars, probably like many traders.
And now eur is very bullish, dollar is getting smashed, value of dollar is depreciating.
So i wonder how forex traders protect their profit from depreciation?
Maybe to open one more account/sub-account and part of money put in eur or chf?
Or covert all usd account in eur account, but what if 1.51 cap this bullish eur...
  • #2
  • Apr 26, 2011 11:45am Apr 26, 2011 11:45am
for every 146,000$ in your account you buy one lot EURUSD
Invincibility lies in the defence, the possibility of victory in the attack
  • #3
  • Apr 26, 2011 12:17pm Apr 26, 2011 12:17pm
Quoting silverheat
for every 146,000$ in your account you buy one lot EURUSD
How often would you rebalance that position? On a weekly basis?
If you don't risk, you don't ever have to lose.
  • #4
  • Apr 26, 2011 12:19pm Apr 26, 2011 12:19pm
For example; let's say i earn 300 pips a month with 1 lot, which is 3000$ a month. My country currency is kn, before 1$ was 5.20 kn, now 1$ is 4.80 kn, and if dollar countinues with downtrend it's gonna be 1$=4 kn..........so with 3000$ a month before i could have 15 600 kn, and if dollar continues to fall i will have 12 000kn, which is a loss -3600 kn.
But, if i hedge my account, part of it in dollars, other part in euro, that's kind of complicated to trade for a scalper, and i can take less lot with halved account.
  • #5
  • Apr 26, 2011 12:30pm Apr 26, 2011 12:30pm
I agreed with you,
take one lot and dont worry you will not lose, if usd depriciate.

trade with another secound lot...

Quoting silverheat
for every 146,000$ in your account you buy one lot EURUSD
Trade what you see, Not what you think.
  • #6
  • Apr 26, 2011 1:30pm Apr 26, 2011 1:30pm
Quoting bug
How often would you rebalance that position? On a weekly basis?
on every balance change excluding the hedging position, otherwise never
Invincibility lies in the defence, the possibility of victory in the attack
  • #7
  • Apr 27, 2011 3:26am Apr 27, 2011 3:26am
Quoting silverheat
for every 146,000$ in your account you buy one lot EURUSD
That is like longterm trading, and i never trade longterm.
If i have, let's say, 5 000$ account, use leverage 1:20, 1 pip=10$, and if i longterm buy 1 lot, for daytrading i would have to use bigger leverage.
  • #8
  • Apr 27, 2011 3:59am Apr 27, 2011 3:59am
Quoting fx111
That is like longterm trading, and i never trade longterm.
If i have, let's say, 5 000$ account, use leverage 1:20, 1 pip=10$, and if i longterm buy 1 lot, for daytrading i would have to use bigger leverage.
just divide your balance by EURUSD exchange rate

5000 / 1.47 = 3400 ... buy 0.034 lot

whether EURUSD goes up or down, your balance in EUR will stay the same as long as you have the position open
when you make a profit or loss or withdraw or deposit money you need to adjust the position accordingly, or you can do it for every 3% change in your balance for instance

you could also just open an account denominated in EUR instead
Invincibility lies in the defence, the possibility of victory in the attack
  • #9
  • Apr 29, 2011 3:23am Apr 29, 2011 3:23am
Quoting silverheat
just divide your balance by EURUSD exchange rate

5000 / 1.47 = 3400 ... buy 0.034 lot

whether EURUSD goes up or down, your balance in EUR will stay the same as long as you have the position open
when you make a profit or loss or withdraw or deposit money you need to adjust the position accordingly, or you can do it for every 3% change in your balance for instance

you could also just open an account denominated in EUR instead
Thanx for clarification, but i just realized i can't hedge my account with going long, because if i do that then i can't trade short, US brokers don't allow hedging.
I guess the only way is to open sub-account in EUR and put there 50% of my money from USD account.
When i have 50% in USD and 50% in EUR my account balance will always be in zero profit and zero loss no matter if dollar goes up or down, right?
  • #10
  • Last Post: Apr 29, 2011 4:19am Apr 29, 2011 4:19am
Quoting silverheat
just divide your balance by EURUSD exchange rate

5000 / 1.47 = 3400 ... buy 0.034 lot

you could also just open an account denominated in EUR instead
Most brokers allow denominated accounts and since the USD fundamentals only get worse each month, I'd avoid USD denominated accounts completely.

If you chose to short the EURUSD scalping within your USD account, you can always place the devaluation hedge on another currency AUD/ CHF/ GBP/ JPY etc. Since you are holding this hedge for the long run, the AUD would be your best bet because of rollover.

Balance /Exchange Rate == Lot size _ Very simple to do. You can even make a small basket holding other currencies (currencies you normally dont day trade).
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