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  • #141
  • Apr 4, 2012 6:18pm Apr 4, 2012 6:18pm
Quoting LazyPawn
fxtr51,

You posted charts showing how hedging worked for you. Great, good job. But you fail to see that reading the market in the same way and using a SL would have gained the exact same number of pips. You never compared the 2 methods, as hanover did in his diagram above. If that diagram and the explanations that go with it are not enough for you there is really nothing more that I can add. Maybe just that I'm honestly surprised to see such an excellent coder having a hard time grasping a simple mathematical model.
No, LazyPawn.
I often compared both methods
and the essence is:
- 3 % is not equal to + 1 % .

Sorry, but if you think both have gained the same number of Pips, then you do not understand - and hanover neither - how lock-unlock is traded.

Because - 3 does not equal + 1 and that
is the inevitable outcome of both methods.

Pipsgeek, just read your posting.
You have not understood the method, constructed a wrong example which leads you to a wrong
conclusion and then you say:
in general it is plain stupidity.

Go figure that one...
  • #142
  • Apr 4, 2012 6:26pm Apr 4, 2012 6:26pm
Quoting hanover
Bob, we've had some great discussions, and the respect is mutual.

My problem here is that (A+B)+C = A+(B+C) = (A+C)+B. If A, B and C represent the P/L of individual trades, it doesn't matter how I group them, my overall bottom line is still the same. Hence I don't see how the grouping provides an advantage; I'm afraid I belong to the "mystified" club.

David
I understand. The bottom line is I just use bigger SL which allows more trades to hit profit. As long as I can see I am following a trend or big fundamental I see no use in a SL. If I am wrong, which does happen, I take my hit and go on. Because I trade like this my win ratio hovers near 75-80%. That is what I do trend trading.

Counter-trend trading or range trading, I use multiple levels and multiple entrances. These are all based on my read on the market. You know sometimes I am wrong in a trade and have to eat a loss but overall through the years I have increased my account.

I guess groupings advantage is this. When you take a SL it is permanent and you have to recover that loss with a future winning trade. I do the same thing but I dont close the loss until I have winners to cover it. Then there are a couple of times I have to just take a loss like you do and make it up later. The best part is though I have losing trades you take losses on that I dont because they do turn around and later become profitable. That is my advantage.
  • #143
  • Apr 4, 2012 6:28pm Apr 4, 2012 6:28pm
Let's take one of your charts, ok?

To the left you had a bad sell (I suppose) which you then hedged by opening a buy above it. The distance between them is the lock range. I don't see exactly how many pips it is, but let's make that 30. So ... at this point the SL trader has hit his SL, and he lost 30 pips. He has no position open. The hedging guy has a -30 floating loss.

Then to the right you notice a good signal to go short and you unhedge your position by closing the long. Again I cannot count how many pips, but let's say the long is a 300 pip win, meaning that at that point your short is a 330 loss. You let the short go for 100 pips let's say. Overall you will have a 300 pip win (the long) and a 330-100 = 230 pip loss on the short. Your total PL is 70 pips.

The SL guy simply opens the short at the same point, and also closes it after 100 pips. So he gained 100 pips on this trade, he has the 30 loss from the first trade. Overall: 70 pips as well.

So tell me please, what is not clear with this?
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  • #144
  • Apr 4, 2012 6:46pm Apr 4, 2012 6:46pm
Quoting LazyPawn
fxtr51,

Please provide a chart, or a drawing like hanover did a few posts above. Then show on that chart how the lock-unlock method wins more, if both traders read the market exactly the same way. Simply typing that you make x% has no meaning. Show it on a diagram and we'll see what you fail to understand.
Lazy, the crux of the matter is the way in which floating losses are viewed. The percentages that fxtr51 is providing don't include floating losses (fxtr51, please feel welcome to correct me if I've misunderstood). Hence he will keep locking/unlocking each "cycle" (set of trades) until the set as a whole returns to breakeven or better.

Now (and assuming I've understood correctly) I see this approach to MM as illusory, but that's because I believe that floating losses should be included as part of current P/L, and for exactly the reasons that I've clearly stated. A common theme with all of these these hedging, grid, recovery, martingale variants and other MM-based systems is that they ignore floating losses, on the assumption (whether rightly or wrongly) that they can always somehow be managed back to breakeven. Bob neatly summarizes this school of thought when he says that what goes down must eventually come back up.

As I said in my reply to Charvo, parties on both sides of this debate believe, in all sincerity, that they can see something that the other party can't; and that folk will believe whatever they want to believe, and continue to use methods for as long as they return profit, without having any real motivation to ask any questions why.

Restating my case repeatedly is not going to make it any stronger, so I'll just say that until somebody successfully debunks the math in the annotated example that I posted, or otherwise provides a compelling enough argument, I feel very 'comfortable' maintaining my current point of view.

David
  • #145
  • Apr 4, 2012 6:51pm Apr 4, 2012 6:51pm
Quoting nanningbob
I guess groupings advantage is this. When you take a SL it is permanent and you have to recover that loss with a future winning trade. I do the same thing but I dont close the loss until I have winners to cover it. Then there are a couple of times I have to just take a loss like you do and make it up later. The best part is though I have losing trades you take losses on that I dont because they do turn around and later become profitable. That is my advantage.
Fair enough. Thanks for the explanation.
  • #146
  • Apr 4, 2012 6:53pm Apr 4, 2012 6:53pm
Quote
Let's take one of your charts, ok?
Yes.

Quote
To the left you had a bad sell (I suppose) which you then hedged by opening a buy above it. The distance between them is the lock range. I don't see exactly how many pips it is, but let's make that 30. So ... at this point the SL trader has hit his SL, and he lost 30 pips. He has no position open. The hedging guy has a -30 floating loss.
Yes.

Quote
Then to the right you notice a good signal to go short and you unhedge your position by closing the long. Again I cannot count how many pips, but let's say the long is a 300 pip win, meaning that at that point your short is a 330 loss. You let the short go for 100 pips let's say. Overall you will have a 300 pip win (the long) and a 330-100 = 230 pip loss on the short. Your total PL is 70 pips.
This is your assumption.
And it is wrong.
Hence you come to wrong conclusions.

Quote
The SL guy simply opens the short at the same point, and also closes it after 100 pips. So he gained 100 pips on this trade, he has the 30 loss from the first trade. Overall: 70 pips as well.

So tell me please, what is not clear with this?
I´ll tell you and then you will understand. I am sure.

At the level where I close the profitable long leg, I will open the same
SHORT the losser opens.

Because I always said: A cycle is a cycle and has nothing to do
with the new signal on which the losser will enter trying to recover
his previous loss.

The new signal on which the losser is entering his SHORT has
2 meanings for the locker.

1. it might be a level to unlock.
2. it might be a level to open a new trade , which in itself is a new cycle.

At this level where the losser enters his SHORT hoping that he will recover his loss, the locker must not unlock necessarily and he must not
enter a new cycle either.

But the whole discussion is about the comparison between a locker and a losser.
And the math is easy:

5 setups.
4 hit SL.
1 hits TP.

Both take the same entries with 1% risk.

Outcome:
Losser: - 3 %
Locker: + 1 %

What you and hanover failed to see was the basic difference between
a cycle and a losser setup.
And because of your wrong assumption you always ended up in
wrong conclusions.

I hope I made it clear now.
And sorry for bothering you: I already explained this before.

Cycle does not equal a setup of a losser.
If the setup hits TP without hitting SL ( what a statement LOL ),
a locker-Cycle is identical, not exactly because he has to delete the
pending order and both orders have no SL, but you know what I mean.

If the setup is bad and the SL level is hit,
the Cycle is different from the losser thing because the losser
has booked the loss ( and thus has less equity for his next trade, so what "argument" is that about the equity ? )
while the locker has 2 open positions in a frozen 1 % loss .

Ok, I feel you got it.
Cycle != losser-setup ----> all of the wonderfull arguments which
led to "there is no difference" were based on wrong assumptions.
  • #147
  • Apr 4, 2012 7:07pm Apr 4, 2012 7:07pm
Quoting hanover
Lazy, the crux of the matter is the way in which floating losses are viewed. The percentages that fxtr51 is providing don't include floating losses (fxtr51, please feel welcome to correct me if I've misunderstood). Hence he will keep locking/unlocking each "cycle" (set of trades) until the set as a whole returns to breakeven or better.
Well, the losser has a realized loss of 1 %.
His balance and equity are now 1 % lower than before.

The locker has a frozen 1 % P/L and thus he has 1 % less equity for
new positions.

What is your point then ?

The spread ?
I don´t care about spread because we are talking about 1% risk , meaning a 20 - 70 Pips distance to SL level.
Is anybody here who has a broker who charges 20 Pips up to 70 Pips
spread ?
So what exactly is the point about spread ?

When a locker closes a cycle at breakeven or in profit,
it is exactly that: a breakeven or a profit.
Spread does not matter at all because we are not talking about
a distance of 1 Pip from Open to StopLoss, we are talking about
20 - 70 Pips or more.

Quote
Now (and assuming I've understood correctly) I see this approach to MM as illusory, but that's because I believe that floating losses should be included as part of current P/L, and for exactly the reasons that I've clearly stated.
In my experience it is not illusory but real.

Quote
A common theme with all of these these hedging, grid, recovery, martingale variants and other MM-based systems is that they ignore floating losses, on the assumption (whether rightly or wrongly) that they can always somehow be managed back to breakeven. Bob neatly summarizes this school of thought when he says that what goes down must eventually come back up.
I don´t ignore floating losses, they are part of my MM.
And if you look on a H4 chart, you can find moves of 200 - 800 Pips and more in one direction all the time.
And within such moves you always have pullbacks.

The whole Fib trading armada lives from that fact.

Therefore in every move there will be plenty of unlock levels and when I need 30 - 70 Pips to break even and the pullback is 100 - 200 Pips,
I always manage to close my cycle with a breakeven or a profit.


Quote
Restating my case repeatedly is not going to make it any stronger, so I'll just say that until somebody successfully debunks the math in the annotated example that I posted, or otherwise provides a compelling enough argument, I feel very 'comfortable' maintaining my current point of view.
I debunked it with all due respect to you.
  • #148
  • Apr 4, 2012 7:41pm Apr 4, 2012 7:41pm
again I'm drawn to these type of threads. Only coz hanover is posting

Words of wisdom:
Your hedge-unhedge strategy relies on a very solid and undeniable edge. Something you must 100% be sure will make you money.

Hedging and unhedging the way you(fxtr51) do it assumes that your edge is impenetrable. Every time you unhedge, you are in essence placing a new trade. You are expecting that the moment you unhedge, you will start to move into profits.

The flaw of logic: In the first place, if your edge is so perfect, you would never have to hedge to begin with. The fact that you have to hedge means that your edge is not 100% fool proof. So what happens if you unhedge and you are wrong?

Every time you unhedge and make a wrong decision, you will fall further and further into loss. And as long as your edge is not 100% fool proof (which is impossible) Your loss will keep getting bigger.

Source: My own experience.
  • #149
  • Edited 9:02pm Apr 4, 2012 8:33pm | Edited 9:02pm
Quoting fxtr51
Well, the losser has a realized loss of 1 %.
His balance and equity are now 1 % lower than before.
The locker has a frozen 1 % P/L and thus he has 1 % less equity for new positions. What is your point then ?
If the "frozen 1% P/L" is a loss, then both traders are effectively down 1%.

Quote
The spread ? ..... So what exactly is the point about spread ?
Spread? Who mentioned spread? Anyway, no matter, I agree that spread is irrelevant; and swap applies only if frozen positions are open at 1700 NY EST, and is negligible, in any case.

Quote
When a locker closes a cycle at breakeven or in profit, it is exactly that: a breakeven or a profit.
Confirms my previous understanding as to what a "cycle" is.

Quote
I don´t ignore floating losses, they are part of my MM.
Perhaps "ignore" was bad choice of word on my part. But in your reply to LazyPawn, where you say:
"Outcome:
Losser: - 3 %
Locker: + 1 %"
...... the +1% doesn't include floating or frozen losses, right?
(Just trying to understand, no criticism implied).

Quote
I debunked it with all due respect to you.
I have only one tiny problem with that. I don't see any reference to the math in my post.


I have nothing further to add to my previous posts, and I don't want to repeat myself. The simple fact is that we view floating/frozen losses differently. Let's just agree to disagree. Thanks for the discussion.
  • #150
  • Apr 4, 2012 8:37pm Apr 4, 2012 8:37pm
Sorry Nachos it is unfair for us to hijack your thread with an old debate.
  • #151
  • Apr 4, 2012 8:39pm Apr 4, 2012 8:39pm
Quoting thelws
again I'm drawn to these type of threads.....
FF owes you a free thread after the mods binned your previous one.

Let's hope we don't get into aliens or religion this time around. I promise I'll stay on topic....... but I'm virtually done here, anyway.

And as Bob points out, we've hijacked Nachos' thread. But, whatever their merit, the opinions about locking/hedging are an extension of the no-SL strategy that Nachos started the thread with, hence the discussion is arguably not totally irrelevant.
  • #152
  • Apr 4, 2012 9:22pm Apr 4, 2012 9:22pm
Quoting thelws
again I'm drawn to these type of threads. Only coz hanover is posting

Words of wisdom:
Your hedge-unhedge strategy relies on a very solid and undeniable edge. Something you must 100% be sure will make you money.

Hedging and unhedging the way you(fxtr51) do it assumes that your edge is impenetrable. Every time you unhedge, you are in essence placing a new trade. You are expecting that the moment you unhedge, you will start to move into profits.

The flaw of logic: In the first place, if your edge is so perfect, you would...
My question is this. Why is this different than what you do? He says he hedges at around -30, let us say you SL at -30. When you trade a position again you need to over come the -30, when he unhedges he needs to overcome the -30. Yes he could lose another 30 but so could you. The advantage he has is his original -30 could become a profit trade again while your -30 is permanent. So he gains an advantage by not making his -30 permanent. He has a chance that both trades will become profitable and also both trades becoming losers. You only have one chance at the present trade becoming profitable and a chance at both becoming losers. I see his logic both the dangers and the upside. I think he does too. You argue only that his loss can only get bigger but his position is a double edged sword, his profit can get bigger also and end up with no losing trade. In a sense I see this as no different than entering into a winning position with multiple trades. (Just to drive you guys crazy that will be my next trading update, when and where to add to a winning position. I multi-level when I am down, now I will try to multi-level going into profit also.)
  • #153
  • Edited 10:04pm Apr 4, 2012 9:47pm | Edited 10:04pm
The biggest difference is that there might be a chance that price will NEVER return. Meaning, you may never recover. What you are doing is a double edged sword. By allowing price to "return", you are also taking a risk to allow price to "never return". The deal breaker is this: Unlike stop loss people, whose losses are fixed, you nedgers have an unlimited risk of loss. We all fear the black swan. Apparently you don't.

Maybe you have never been in that situation before. But I have. And it was back in the 2008 crisis. Heck, you don't even need a crisis. Just look at shanghai surprise. Many people died on those random days. The more recent ones are the chf intervention. Imagine if you were caught on the wrong side of the trade.

The only reason you need to nedge like this is if you feel that you cannot trust your edge enough. That means you need to substitute money management for an edge - something that hanover has mentioned many times that it will inevitably fail. If you are confident in your edge, it makes sense to have a SL so that you limit the risk exposure.

For example: My strategy allows me to win 3% when i am right and lose 1% when I am wrong. Yes, I do lose on a consistant basis. But I only need a few wins to pull ahead. That way my risk is always limited and it takes many losses to put me in the -ve. I am in no risk of ever losing more than I bargained for. On the contrary, when you nurture floating losses, you run the risk of losing more than you bargained for.

If you need to exit a trade after a certain drawdown, why not exit now?

Let's use bob's words for a while. He says that at some point, he will exit a trade when he thinks it is beyond doubt that he needs to take a loss. In between he would be hedging in and out hoping that the price will come back and break even for him.

The better solution would be to just use a very huge stop loss. You don't need to hedge, you don't need to add positions. It achieves the same thing. If price eventually goes back to breakeven, then you never had to hedge in the first place. But if price never goes back, your loss if fixed.

Of course, this method implies bad risk:reward ratios. But then that is another discussion.


Summary:
1)hedging allows you a chance to recover but also introduces an unlimited risk situation.
2)stop losses will always make you have a controlled loss.
  • #154
  • Apr 4, 2012 9:57pm Apr 4, 2012 9:57pm
Quoting nanningbob
(Just to drive you guys crazy that will be my next trading update, when and where to add to a winning position. I multi-level when I am down, now I will try to multi-level going into profit also.)

No Bob you do not multi-level when you are down you Martingale.
Why cant you call it what it is?

This thread is nonsense. NO professional trader making their living from the markets trades this way. NO ONE.

Pull up your panties girls....
Master your Mind,,,Master the Market
  • #155
  • Apr 4, 2012 10:05pm Apr 4, 2012 10:05pm
Quoting thelws
The biggest difference is that there might be a chance that price will NEVER return. Meaning, you may never recover. What you are doing is a double edged sword. By allowing price to "return", you are also taking a risk to allow price to "never return". The deal breaker is this: Unlike stop loss people, whose losses are fixed, you nedgers have an unlimited risk of loss. We all fear the black swan. Apparently you don't.

Maybe you have never been in that situation before. But I have. And it was back in the 2008 crisis. Heck, you don't...
I am not a hedger (nedger LOL term) I cant use, USA broker. You miss all the trades that are profitable. There are more than them than the occasional loser. Black swan events dont affect how I trade ........... forget it we have been through this all before.
  • #156
  • Apr 4, 2012 10:12pm Apr 4, 2012 10:12pm
Quoting nanningbob
I am not a hedger (nedger LOL term) I cant use, USA broker. You miss all the trades that are profitable. There are more than them than the occasional loser. Black swan events dont affect how I trade ........... forget it we have been through this all before.
I believe we have... If you can't hedge, then you are in even worse shape because you are averaging losses.

I sincerely hope that one day you will be successful enough to come out and publish a book on how you made it big with your methods. By that time, it will be undeniable that you were right and we were wrong.

But as history has shown us for the past few hundred years, stop losses work. Averaging losses don't. Until you can prove the many paul tudor jones of the past wrong, the burden of proof is on your shoulders.
  • #157
  • Apr 4, 2012 10:30pm Apr 4, 2012 10:30pm
Quoting fxtr51

-1 , -1 , -1, -1 , +1 = - 3 %

0, 0, 0 , 0 , + 1 = + 1 %

For you it is the inescapable mathematical truth that
- 3 % is equal to + 1 %

For me - 3 % is not equal to + 1 % .
Is it not something like this?

-1, +1, -1, +1, +1 = 1%
(-1), 0, (-1), 0, +1 = 1%

within parenthesis are floating loss.
Weigh well output the loss and gain And proper action ascertain
  • #158
  • Apr 4, 2012 10:48pm Apr 4, 2012 10:48pm
Quoting thelws
I believe we have... If you can't hedge, then you are in even worse shape because you are averaging losses.

I sincerely hope that one day you will be successful enough to come out and publish a book on how you made it big with your methods. By that time, it will be undeniable that you were right and we were wrong.

But as history has shown us for the past few hundred years, stop losses work. Averaging losses don't. Until you can prove the many paul tudor jones of the past wrong, the burden of proof is on your shoulders.
I think you missed my short review a couple of posts ago. I did trade and post every trade here at FF for a year. Not an issue of right or wrong. I trade differently from the leveraged high lot formula with a low leverage, low lot formula. It is very conflicting styles. Enjoyed your thread.
  • #159
  • Apr 4, 2012 11:10pm Apr 4, 2012 11:10pm
Quoting nanningbob
I think you missed my short review a couple of posts ago. I did trade and post every trade here at FF for a year. Not an issue of right or wrong. I trade differently from the leveraged high lot formula with a low leverage, low lot formula. It is very conflicting styles. Enjoyed your thread.
Like I said bob, I sincerely hope you will be able to publish your methods one day. I know I will pick up the book if you ever publish it.

But till that day, I will have to wait and see. You and I both know that 1 year of trading history does not warrant enough results to conclusively come to an agreement.

edit: And yes... that thread... I was kinda glad it got binned . Though I wish the meaningful discussions could have been kept somewhere. That is a thread of very powerful discussions.
  • #160
  • Apr 5, 2012 12:53am Apr 5, 2012 12:53am
fxtr51,

if you hedged a 30 pip loss and undo the hedge at an excellent spot and price goes in your favour for 30 pips, you`re at BE.

same for the SL guy who lost 30 pips when you hedged and placed the same trade at that excellent spot is also at BE.

I can only see you getting ahead of the SL guy if you unhedge at that excellent spot, but also place another order at that time.
only then would you be ahead with a 30 pip win.
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