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  • #401
  • Apr 12, 2012 12:00am Apr 12, 2012 12:00am
Quoting hanover
Bob,

I wasn’t going to post again, but I saw another way of presenting the diagram back in my post #122. I’ve attached the extended image below. Hopefully it will also help others to see where LazyPawn, 2+2=4ex, pipmutt etc are coming from.

To get the background, you’ll need to work through post #122, step by step. But if you take the time to do this, you’ll see why Merlin coined the term "nedging" (newbie...
Thanks for your explanation. Since I cant hedge in the USA anymore I dont. When I could I used it as a time out. Something happened I didnt expect and wanted time to plan out a strategy, so for me it was like calling a time out OR I liked my position (back when I traded lower TF) and I had to go out or leave the computer. I could freeze the trade at its present profit stage and come back later and see if I wanted to continue. As a strategy I dont use it. The one currency pair I could do sell and buys at the same time and it worked consistantly was the AUD/NZD. It would bounce up and down in a 50-100 pip range all day and night. That changed when China started buying up AUD products and changed the fundamental relationship between those two. You could do a buy and sell both ways set the TP at 25 or 30 and it would hit both of them every day, in fact several times a day. But that wont work anymore. So there is a place for it but I am not a hedger, but I dont discount its occasional use. I see a use for it for special occasions that's all. For that thought let the anti-hedge crucification begin. Watch these guys condemn me as a hedger now.
  • #402
  • Apr 12, 2012 12:08am Apr 12, 2012 12:08am
naninbab your just a pitbull...

freeze the loss..
StopLoss is for none belivers... Trust the Gurus..
  • #403
  • Edited 10:21am Apr 12, 2012 12:30am | Edited 10:21am
Quoting thelws
There is no benefit of the "hedge" in forex. Not by using 1 instrument (spot forex only.) If you went long eurusd, and "hedge" buy usdjpy, you are in effect trading long eurjpy.
Another good point.

Multiple pair hedging can also be reduced down to its lowest terms, which normally represents a single position in one pair.

In your example, EUR/USD x USD/JPY = EUR/JPY. It's a case of cancelling like numerators and denominators. To anybody who doubts this, multiply the current EU price by the current UJ price, and then compare the result to the current EJ price. If you're short in any pair, simply invert the currency, and then proceed to cancel like numerators and denominators, as before.

I've seen threads where folk claim that they can make money from triangular, quadranglar, etc hedges, but the fact is that they could achieve the same thing by trading 1 (or possibly 2) pairs, and pay less spread and swap in the process.

Consider a circular hedge, e.g.: EUR/USD x USD/JPY x JPY/GBP x GBP/EUR
The algebra cancels to 1/1, so we might assume that if we were long 1 lot EU, long 1 lot UJ, short 1 lot GJ, and short 1 lot EG, that our P/L would remain zero, regardless of price movement. Not quite true. This is because (assuming our account is denominated in USD), each pip moved in EU results in a +/- $10 P/L, but not so for the other pairs. However, it would be possible to balance the equation by adjusting the position sizes of the other pairs (continuously, if necessary) to create a net zero position. (Of course there would be no point in doing so, unless we wanted to offer charity by way of spread and swap to our br0ker, LOL. I was merely using this as an example to illustrate the math concepts involved).
  • #404
  • Apr 12, 2012 7:27am Apr 12, 2012 7:27am
hi nacho,
i been following up your thread and discovered that it has deviated from its original intention,especially this ongoing debate about hedging or is it nedging they call it.IDC!
Anyway,to sharpen your trading strategy,i would like to refer you to one of the best thread on FF by pipeasy its called ''Building an Equity Milipede''. By the time youve read his post to abt 50-100 pages,you would know how to increase your account exponentially by pyramiding or creating stacks of positions across different currency pairs and diversifying to ensure a smooth equity curve,just check it out,you gonna love this. Just my 2centz! -lyondegreat.
  • #405
  • Apr 12, 2012 8:29am Apr 12, 2012 8:29am
Quoting hanover
Another good point.

Multiple pair hedging can also be reduced down to its lowest terms, which normally represents a single position in one pair.

In your example, EUR/USD x USD/JPY = EUR/JPY. It's a case of cancelling like numerators and denominators. To anybody who doubts this, multiply the current EU price by the current UJ price, and then compare the result to the current EJ price. If you're short in any pair, simply invert the currency, and then proceed to cancel like numerators and denominators, as before.

I've seen threads...
I know this is often pointed out in forex that if you trade usd/jpy and eur/usd you are really trading eur/jpy. There is a fallacy in the argument because FOREX is about trading funds between companies and nations. traders are only a very small part of the 3 trillion in action. There is little to no relationship between trading between US govt and companies with JPY companies USD/JPY and trading EUR/USD govt and companies. What goes back and forth between the Atlantic Ocean and what goes on between the Pacific Ocean does not correlate with the trade between Europe and Japan. There is a fallacy there with the logic. A buy on the USD/JPY and a sell on the EUR/USD has nothing to do with trading the EUR/JPY. Each currency exchange is independent of each other. I proved this in my aud/nzd thread when it used to have high pip spreads. People would just say trade aud/usd and nzd/usd, you will get the same thing. No you didnt because the price action was not related at all. AUD companies and NZD companies trading with each other has nothing to do with AUD and NZD companies trading with the USA. They are independent actions, therefore the price action will be different. A company in Europe exchanging a JPY business check has no effect on the EUR/USD or the USD/JPY. They are independent actions from each other.
  • #406
  • Apr 12, 2012 9:06am Apr 12, 2012 9:06am
Quoting thelws
Bob... this explanation of yours makes horrible sense. I'm not sure if you are doing this on purpose or what...

In stocks, people hedge using things like options. There is a benefit to hedge in that situation. There are things called interest or premium which can be paid to the trader (in this case you). That way, you not only minimize exposure, you can also profit on interest. That is a reason why people hedge in stocks, options or futures.

By hedging, they will ultimately end up making less than being purely directional. You reduce risk...
That is straight out of Wikipedia. HMMMMMMMMM wonder where they got it or .........???????????????
  • #407
  • Edited 10:20am Apr 12, 2012 10:08am | Edited 10:20am
Quoting nanningbob
There is a fallacy there with the logic. A buy on the USD/JPY and a sell on the EUR/USD has nothing to do with trading the EUR/JPY. Each currency exchange is independent of each other. I proved this in my aud/nzd thread when it used to have high pip spreads. People would just say trade aud/usd and nzd/usd, you will get the same thing. No you didnt because the price action was not related at all. AUD companies and NZD companies trading with each other has nothing to do with AUD and NZD companies trading with the USA. They are independent actions,...
Bob,

I agree that the transactions are completely independent, but prices are somehow manipulated by banks so that AUD/NZD is always equal to AUD/USD x USD/NZD. There may be fleeting moments where this is not the case, at which point arbitrage opportunities are potentially available, if/when the amount of the inefficiency exceeds the transaction costs (spread etc). If this triangular equilibrium were to break down for long enough, then there would be a huge opportunity for everybody to profit at the ultimate expense of the banks; of course, the latter do their utmost to ensure that this is not allowed to happen.

Please see my post here. The plots on the posted chart were created by my Recent Prices indy. I created the indy specifically because, at that time, I was looking for arbitrage opportunities myself. Note how, in the example, the white line (EURGBP) always represents the difference between the red (GU) and pink (EU) lines. I experimented with enough similar charts to satisfy myself that equilibrium is maintained to the point that seeking arbitrage opportunities is a futile exercise.

David
  • #408
  • Apr 12, 2012 10:22am Apr 12, 2012 10:22am
WOW.... I see so much confusion about synthetic pairs and crosses... *sadface*


Here:
http://www.babypips.com/school/creat...tic-pairs.html


Anyone thinking a cross doesn't have anything to do with trading against the USD is forgetting that a synthetic that creates a cross pair has eliminated the exposure to the common currency.

You just have to think in terms of exposure. If one trade gets long USD, and another short for the same value, then your net USD exposure is nil and you are exposed to the remaining long/short currencies, which creates a synthetic cross.

Put another way, all you've done is used a common currency as a pricing tool and eliminated it from affecting your position.


Quoting hanover
Bob,

I agree that the transactions are completely independent, but prices are somehow manipulated by banks so that AUD/NZD is always equal to AUD/USD x USD/NZD. [...]
Specifically, it's called triangular arbitrage (you mentioned arbitrage later in your post.) It's not really manipulated, it's just an efficient market.
FXGears.com
  • #409
  • Apr 12, 2012 11:22am Apr 12, 2012 11:22am
Quoting hanover
Bob,

I agree that the transactions are completely independent, but prices are somehow manipulated by banks so that AUD/NZD is always equal to AUD/USD x USD/NZD. There may be fleeting moments where this is not the case, at which point arbitrage opportunities are potentially available, if/when the amount of the inefficiency exceeds the transaction costs (spread etc). If this triangular equilibrium were to break down for long enough, then there would be a huge opportunity for everybody to profit at the ultimate expense of the banks; of course, the...
This is how I would understand it. Let us take the car industry. When the economy is going good car sales are up and when bad sales are down. I am a buyer and I go buy a car from Ford. As far as the industry goes I helped the entire industry with the car sale but on a specific level I only helped Ford. GM, Toyota, and Chrysler it had no effect. So ............. It shows up on an industry wide level and Ford but the rest of the companies no effect. I think the same thing with currencies. It helps the overall currency level each transaction but on each separate level only where the sale occurred. So there is correlation overall on a broad basis but it only helps the specific currency pair the deal is done in. That is how I understand it.
  • #410
  • Apr 12, 2012 12:44pm Apr 12, 2012 12:44pm
Quoting nanningbob
This is how I would understand it. Let us take the car industry. When the economy is going good car sales are up and when bad sales are down. I am a buyer and I go buy a car from Ford. As far as the industry goes I helped the entire industry with the car sale but on a specific level I only helped Ford. GM, Toyota, and Chrysler it had no effect. So ............. It shows up on an industry wide level and Ford but the rest of the companies no effect. I think the same thing with currencies. It helps the overall currency level each transaction but on...

Ahh that explains alot Bob that Wikipedia is your source..LOL...

Please stop with the examples as your not helping your case.

Compare apples with apples. Were talking the foreign currency market not cars.
Master your Mind,,,Master the Market
  • #411
  • Apr 12, 2012 1:49pm Apr 12, 2012 1:49pm
Quoting nanningbob
There is little to no relationship between trading between US govt and companies with JPY companies USD/JPY and trading EUR/USD govt and companies. What goes back and forth between the Atlantic Ocean and what goes on between the Pacific Ocean does not correlate with the trade between Europe and Japan. There is a fallacy there with the logic.
There is no fallacy. Any differences are immediately arbitraged away by algos. If there was any significant difference for any significant period of time (milliseconds), this would produce a huge arbitrage opportunity. It would mean free money for us. Not gonna happen. This is the way efficient markets operate, and the forex is one of the most efficient markets around.
  • #412
  • Apr 12, 2012 3:48pm Apr 12, 2012 3:48pm
Bob, i like you, been following your thread for a few years.

but i'm sad today to see that this is your belief.

man, it is a wrong concept, you need to correct it now that you are such an experienced trader now.

Quoting nanningbob
I know this is often pointed out in forex that if you trade usd/jpy and eur/usd you are really trading eur/jpy. There is a fallacy in the argument because FOREX is about trading funds between companies and nations.
  • #413
  • Apr 12, 2012 4:31pm Apr 12, 2012 4:31pm
Quoting charvo
Bob, i like you, been following your thread for a few years.

but i'm sad today to see that this is your belief.

man, it is a wrong concept, you need to correct it now that you are such an experienced trader now.
I like Bob also. I think he means well. Just some of the things said have been wrong and don't really help. We're all learning though. We're always learning.
  • #414
  • Apr 12, 2012 4:39pm Apr 12, 2012 4:39pm
I like bob as well.hes obviously trying hard.
But I think his ego has the best of him and he
Cant admit his mistakes. Which is why he trades the
Way he does.

Just calling it the way I see it.
Master your Mind,,,Master the Market
  • #415
  • Apr 12, 2012 5:20pm Apr 12, 2012 5:20pm
sombody please explain what you need to do,its not possible to defy the maths,but its possible to to skew them

let a mathematician step forward,

only a very few posts understand that.

if you cant change the outcome,

change the equation.

a post stated you cant do this with futers.

you can

limited risk,

you can break the maths,consider futers binary options .strikes,ect.

the only way to make money from no stops is where you decide and how to cancel your loosing positions.

limiited risk on your hedging and maximum profit,skew the maths
  • #416
  • Apr 12, 2012 5:26pm Apr 12, 2012 5:26pm
Quoting fierceman
There is no fallacy. Any differences are immediately arbitraged away by algos. If there was any significant difference for any significant period of time (milliseconds), this would produce a huge arbitrage opportunity. It would mean free money for us. Not gonna happen. This is the way efficient markets operate, and the forex is one of the most efficient markets around.

its one of the most enificient markets to date.thats why it will be closed to the outside world,

you have to remember that 95 % of traders loosing money are are quite insignificent to the 5 % that count.and thats not good.you have to understand that the 5 % are not talking utter shit on here
  • #417
  • Apr 12, 2012 5:30pm Apr 12, 2012 5:30pm
Quoting charvo
Bob, i like you, been following your thread for a few years.

but i'm sad today to see that this is your belief.

man, it is a wrong concept, you need to correct it now that you are such an experienced trader now.
I dont know how much simpler I can make this and all your little sad stories dont change it. If Mitsubishi sells a car in France it exchanges the check EUR for JPY. Has nothing to do with usd/jpy or eur/usd. The tick movement will be eur/jpy not usd/jpy or eur/usd. Funny that a simple concept like that is not understood. SHeeeeeeeesh.
  • #418
  • Apr 12, 2012 5:39pm Apr 12, 2012 5:39pm
the reason why you loose money,is because you all believe this market is so efficient,its the most ineffecient market known to mankind,it spends every moment of time trying to correct its inificieny,ther lies its oppurtunity,with stops or without,but if you dont see its own failings,how can you reward its gift
  • #419
  • Apr 12, 2012 5:58pm Apr 12, 2012 5:58pm
Dont like Wikipedia's definition, it is the world's #1 encyclopedia. Encyclopedia Britanica stopped making encyclopedias to sell because of them. How about investipedia's definition then since you dont have one;

Hedging is the practice of purchasing and holding securities specifically to reduce portfolio risk. These securities are intended to move in a different direction than the remainder of the portfolio - for example, appreciating when other investments decline.
Definition of 'Forex Hedge'
A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates. By using a forex hedge properly, a trader who is long a foreign currency pair can be protected from downside risk, while the trader who is short a foreign currency pair can protect against upside risk.
NOTICE THEY DIDNT USE THE WORD STOP LOSS!!!!

Dont like that one, here is the definition form Business Dictionary:

A risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a transfer of risk without buying insurance policies.
Hedging employs various techniques but, basically, involves taking equal and opposite positions in two different markets (such as cash and futures markets).

Finally a definition used by FOREX brokers (SNB recognizes over 700 of them around the world):

There are a number of forex dealers, dare I say even the majority, who allow clients to practice what is commonly referred to as “hedging” in the forex. What this means is that they allow clients to open both long and short positions in the same currency pair, at the same time.

Conclusion: that is the definition of hedging and that is how it is used. Whether it is viable or not is the traders choice but let us quit using stupid word games. IN FOREX hedging means to take opposite trades on the same currency pair.

Again either state your position and quit this poor stupid Bob pooh pooh garbage. If you cant form your own position and defend it, quit posting and quit running running like BlueSteele does. Still waiting for your answer on how to use a SL.
  • #420
  • Apr 12, 2012 6:28pm Apr 12, 2012 6:28pm
Quoting nanningbob
I dont know how much simpler I can make this and all your little sad stories dont change it. If Mitsubishi sells a car in France it exchanges the check EUR for JPY. Has nothing to do with usd/jpy or eur/usd. The tick movement will be eur/jpy not usd/jpy or eur/usd. Funny that a simple concept like that is not understood. SHeeeeeeeesh.
It is funny that a simple concept is not understood and that lack of understanding is on your part. E/U * U/J = E/J. Do yourself a favor and every fifteen minutes whip out your calculator and do the math. As others have pointed out forex is one of the most efficient markets. And that has to be the case or it opens up major arb opportunities as well as it's simple math and the way quotes work since they share a currency. In your example E/J cannot move without one if not both other pairs in the equation compensating for it. That's the way it works. An hour with a calculator will prove that to you. Think of it this way, each pair is a number. 6 * 4 = 24. Now the 6 increases to 8. Now 8 * 4 does not equal 24! So what has to happen is either the 4 has to change to a 3 or 24 has to change to 32. The same way when a single currency pair changes the pairs it's inextricably linked to have to change.
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