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  • #441
  • Apr 13, 2012 10:13am Apr 13, 2012 10:13am
Quoting fierceman
Please note I've changed the emphasis. Buying and selling the same currency pair in the same market at the same time is not hedging. It is called being out of the market. Only your NET position matters. Let's go with cars on this one: say you buy a car and then sell that car - at that point are you long car or short car? Neither. No matter how you do your accounting, you are OUT of the car market.

Also, please understand how arbitrage works and you will see why EUR/JPY is very much dependent on USD/JPY and EUR/USD (and vice versa).

I'm...
Give me a chance to ask a question here. The USD/JPY and EUR/USD are a moderate volatility pairs. How do you get that to equal a high volitility pair like the eur/jpy. For example the eur/usd has a 29.98% chance of going over 300 pips in one week. The usd/jpy goes over 300 pips in one week 30.57% of the time. How would those two produce a currency EUR/JPY that hits over 300 pips 47.66% of the time if their price actions are not independent from each other?? That would be an interesting answer??

I also believe in my illustration I used that when I buy a car I help the entire car market but the specific deal was done with FORD. Chevy and Toyota dont directly benefit from the sale but the entire industry as a whole does. I tried to make that clear.
  • #442
  • Apr 13, 2012 10:17am Apr 13, 2012 10:17am
Quoting nanningbob
Yes nice math, interesting isnt it. Tell me after doing all that are you going to buy or sell? It is what I call worthless information.
So it went from being "false" to being "true but worthless". That's a step in the right direction .

It is also not worthless however, if you consider the relationship in your analysis. Trading opportunities can be confirmed and can sometimes even present themselves to a trader who is aware of the relationships between currency pairs.

Still though, as another poster mentioned, this is a bit off topic...
  • #443
  • Apr 13, 2012 10:25am Apr 13, 2012 10:25am
Quoting Lonestar
Here's something for you Bob:

EU * UJ / AJ * ANZD / GBPNZD = EGBP

Do the math. How about I do it for you.

1.31463 * 80.981 / 84.264 * 1.25388 / 1.92092 = .82469
Lonestar...we've been through this on other threads before..some people will never get it.

I think every trader should be required to spend a few days with an Excel spreadsheet and MT4 DDE to get a firm understanding of forex math.
  • #444
  • Apr 13, 2012 10:27am Apr 13, 2012 10:27am
Quoting nanningbob
Give me a chance to ask a question here. The USD/JPY and EUR/USD are a moderate volatility pairs. How do you get that to equal a high volitility pair like the eur/jpy. For example the eur/usd has a 29.98% chance of going over 300 pips in one week. The usd/jpy goes over 300 pips in one week 30.57% of the time. How would those two produce a currency that hits over 300 pips 47.66% of the time if their price actions are not independent from each other?? That would be an interesting answer??
The short answer is that if JPY is strengthening against USD, and EUR is weakening against USD, then it follows that JPY is strengthening even more against EUR. The long answer would be to write this as a mathematical function and to plot it with a mathematical graphing tool (or by hand if you are so inclined). You could even do it in Excel if you don't have access to Matlab/Maple/Mathematica or a graphing calculator. Once you see a visual representation of the function, the answer will be very clear.
  • #445
  • Apr 13, 2012 10:46am Apr 13, 2012 10:46am
Quoting nanningbob
Yes nice math, interesting isnt it. Tell me after doing all that are you going to buy or sell? It is what I call worthless information. I dont trade the eur/gbp by EU * UJ / AJ * ANZD / GBPNZD is doing. I dont trade the eur/jpy by trading usd/jpy along with eur/usd. I trade the eur/jpy based on what it is doing. Your math formula has nothing to do with price action. That is the point. I understand that all the books around the world need to be balanced. OK. Now if you took all of that and started a thread showing people how...
Entries? Exits? Buy? Sell? Price action? Why bring that into it? That's completely out of context with the issue at hand. I addressed the issue which was your ignorance on how pairs are related and how a single price change causes a cascading effect across many pairs. But of course instead of admitting you were incorrect in your thinking and being happy you learned something you bring up a bunch of stuff that's not related to the issue we're discussing to try to save face and divert the attention to something else. Typical tactic of a person with a big ego that can't admit their mistakes with humility.
  • #446
  • Apr 13, 2012 11:15am Apr 13, 2012 11:15am
Quoting zznbrm
Lonestar...we've been through this on other threads before..some people will never get it.

I think every trader should be required to spend a few days with an Excel spreadsheet and MT4 DDE to get a firm understanding of forex math.
True dat!
  • #447
  • Apr 13, 2012 11:16am Apr 13, 2012 11:16am
Quoting Lonestar
Entries? Exits? Buy? Sell? Price action? Why bring that into it? That's completely out of context with the issue at hand. I addressed the issue which was your ignorance on how pairs are related and how a single price change causes a cascading effect across many pairs. But of course instead of admitting you were incorrect in your thinking and being happy you learned something you bring up a bunch of stuff that's not related to the issue we're discussing to try to save face and divert the attention to something else. Typical tactic of a person with...
He probaly wont admit anything..because it would also effect ,all his other systems/methods then his holygrail house is falling down..
StopLoss is for none belivers... Trust the Gurus..
  • #448
  • Edited Apr 14, 2012 3:21am Apr 13, 2012 12:43pm | Edited Apr 14, 2012 3:21am
Quoting Lonestar
Entries? Exits? Buy? Sell? Price action? Why bring that into it? That's completely out of context with the issue at hand. I addressed the issue which was your ignorance on how pairs are related and how a single price change causes a cascading effect across many pairs. But of course instead of admitting you were incorrect in your thinking and being happy you learned something you bring up a bunch of stuff that's not related to the issue we're discussing to try to save face and divert the attention to something else. Typical tactic of a person with...
That's Bob for ya. Typical ole Bob. Whenever you pin him into the corner (which happens often btw), he responds with something that has nothing to do with the topic. He will never admit he is wrong even though anyone with half a brain can see it. Unfortunately most of his little cult following on his 10.0 thread don't have half a brain.
  • #449
  • Apr 13, 2012 12:54pm Apr 13, 2012 12:54pm
Quoting lillelise
He probaly wont admit anything..because it would also effect ,all his other systems/methods then his holygrail house is falling down..
I think that's part of his problem. Aside from his ego being too big to admit he's wrong, he feels the need to maintain this illusion that he is a very knowledgeable trader (which sorry to say, but I don't see him as one). He has spent years creating a "system" (more like mess) and getting people to follow him. He feels he can't have his image tarnished. The great teacher can never be wrong! Anyone who challenges him, or better yet, proves him wrong is "misinformed" or "doesn't understand". It's no wonder why he lives in China.
  • #450
  • Apr 13, 2012 9:38pm Apr 13, 2012 9:38pm
Quoting nanningbob
Dumb. Thank you for proving how incapable of a trader you really are. You and BS ought to form the incompetent club, you are totally unable to explain something you are clearly not successful at.




Coming from the master explainer himself. Hey Bob you did such a wonderful job with "Hedging"..

Why don't you explain how your "recovery" method IS NOT martingaling....

Were all ears....
Master your Mind,,,Master the Market
  • #451
  • Apr 14, 2012 3:10am Apr 14, 2012 3:10am
Quoting 2+2=4ex
The great teacher can never be wrong! Anyone who challenges him, or better yet, proves him wrong is "misinformed" or "doesn't understand". It's no wonder why he lives in China.
he might be a shaolin master,you may never know,reminds me of one of my favourite mtv show - 'fist of zen'
Please posters,letz leave this hedging topic alone...
  • #452
  • Apr 14, 2012 10:52am Apr 14, 2012 10:52am
Quoting Lonestar
Entries? Exits? Buy? Sell? Price action? Why bring that into it? That's completely out of context with the issue at hand. I addressed the issue which was your ignorance on how pairs are related and how a single price change causes a cascading effect across many pairs. But of course instead of admitting you were incorrect in your thinking and being happy you learned something you bring up a bunch of stuff that's not related to the issue we're discussing to try to save face and divert the attention to something else. Typical tactic of a person with...

Who ever doesn't get what you say is totally doomed , stupid and ignorant
  • #453
  • Apr 14, 2012 10:58am Apr 14, 2012 10:58am
Quoting 2+2=4ex
That's Bob for ya. Typical ole Bob. Whenever you pin him into the corner (which happens often btw), he responds with something that has nothing to do with the topic. He will never admit he is wrong even though anyone with half a brain can see it. Unfortunately most of his little cult following on his 10.0 thread don't have half a brain.

I think his problem must be his zodiac sign, I bet his zodiac sign is pisces , they may even tell that a white chair is black in front of 1000 people )) Like my ex-girlfriend
  • #454
  • Apr 14, 2012 12:57pm Apr 14, 2012 12:57pm
Quoting Lonestar
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....
I cant answer every single post but I will discuss some of this. Lonestar, you are first. It is not a problem of understanding the math. I have kept the books of my businesses for decades and took basic accounting in college. What you are describing is basic accounting. In other words the balancing of the books is the same as the balance in FOREX. For every buy there is a sell. For every positive entrance in the ledger their is a negative entrance. So no matter how you look at it the equation will always balance. It is basic accounting 101. The relationship will always balance unless a mistake is made someplace and then it will be balanced out at some point. With today's computer systems these imbalances only appear for very short periods of time. The reason the math works usd/jpy, eur/jpy, and eur/usd as a group is because in accounting everything will always and must balance. For every buy there is a sell. So the math understanding is a simple concept. But making the books balance, which they always will do, has nothing to do with price action and trading. Trading the eur/jpy is independent in each individual transaction as compared to each transaction on the eur/usd and usd/jpy. But the accounting will always balance because that is what must happen with accounting. So trading the usd/jpy and eur/usd is not the same as trading the eur/jpy. Each individual transaction is independent from each other. That is why a tick move in the EUR/JPY does not correspond with a tick move in the USD/JPY and EUR/USD. The math is balanced because that has to happen in accounting. I know my explanation may not be fully understood but you will not get the same results from trading usd/jpy and eur/usd that you would trading the eur/jpy directly. They are three separate markets whose accounting must always balance out. This balancing out in accounting does not make them the same thing market wise. Price action is separate in each currency pair and is not connected with the overall accounting. Does this help you understand the difference??
  • #455
  • Apr 14, 2012 1:11pm Apr 14, 2012 1:11pm
Quoting thelws
Bob,

With all due respect. You are not getting the concept of hedging correctly. At least based on the examples you are providing in this thread.

Hedging over multiple instruments are generally the norm because of the fact that there could be premiums paid out to the trader while being in a hedged position.

Hedging in stocks (as the only instrument) can also be viable (although I have not encountered any examples simply because using options as a hedging strategy is much more efficient and profitable) because [b]stocks pay...
I am not arguing the strengths and weaknesses of hedging, whether it is good or bad. I cant use it here in the USA and when I could I only used it a handful of times. Whether you like it or not, agree with it or not, or think it is wise or not--the definition used by every forex dealer, in forex letters, newpapers, articles, newsletters, websites, etc.etc. is to buy and sell on the same currency pair. That is it, fight over everything else if you want to but that is the basic definition. How it is used in other investment fields is different. That has never been the dispute. So accept the definition that is used industry wide and move on.
  • #456
  • Apr 14, 2012 1:15pm Apr 14, 2012 1:15pm
Quoting fierceman
Please note I've changed the emphasis. Buying and selling the same currency pair in the same market at the same time is not hedging. It is called being out of the market. Only your NET position matters. Let's go with cars on this one: say you buy a car and then sell that car - at that point are you long car or short car? Neither. No matter how you do your accounting, you are OUT of the car market.

Also, please understand how arbitrage works and you will see why EUR/JPY is very much dependent on USD/JPY and EUR/USD (and vice versa).

I'm...
Sorry I am not, see my post above about your arbitrage. Price action and accounting are two separate issues.

If you are short and long in the market you have two separate trades, one long and one short. You are not out of the market. At some point you have to close one trade and find a point to close the other. Then you are out of the market.
  • #457
  • Apr 14, 2012 1:17pm Apr 14, 2012 1:17pm
Quoting 2+2=4ex
That's not the point.


Anyway, hedging = dumb. Let me explain why...


Scenario #1:

10 lots short hedged with 5 lots long = 5 lots short

Scenario #2:

5 lots short without hedge = 5 lots short

Therefore, net position of scenario #1 = net position of scenario #2


Follow me so far? Good. Moving along...


Scenario #1 pays out interest on 10 lots and gains interest (at a lower rate than interest is paid out) on 5 lots.

Scenario #2 pays out interest on 5 lots only.

Therefore, with hedging you pay more interest...
Why did you even post this? I am not even talking about how to use a hedge. I only talked about what the definition is. ????
  • #458
  • Apr 14, 2012 1:28pm Apr 14, 2012 1:28pm
Quoting nanningbob
Sorry I am not, see my post above about your arbitrage. Price action and accounting are two separate issues.

If you are short and long in the market you have two separate trades, one long and one short. You are not out of the market. At some point you have to close one trade and find a point to close the other. Then you are out of the market.
Arbitrage is the mechanism by which the prices between a cross and its components always stay connected (aside from small oscillations). It has nothing to do with accounting. The only time I mentioned accounting was on the separate topic of hedging being an accounting trick.

I can't quite understand how you think a hedged position is not being out of the market. When price changes don't affect the value of your portfolio, you are out of the market (i.e. not exposed to the market). That is what happens when you are "hedged". Once you close one side of the hedge, you have net exposure to the market, so in fact, you didn't close anything - by closing one side of your hedge, you are in effect opening a position in the market. You are an intelligent person so I find it very difficult to see how you are not seeing this for what it is.
  • #459
  • Apr 14, 2012 1:54pm Apr 14, 2012 1:54pm
Since neither one of us is going to really call the SNB to ask that question, let's continue speculating . I bet you 1000 pips that if you asked anyone at the SNB if hedging was defined that way, they would laugh and hang up.

Actually they will refer you to one of their brokers which advertise with them and many of them offer hedging. I know you will never pay your 1000 pips.


Show me one place where they said they are banning hedging. What they are doing, is implementing a FIFO rule, which is logical, and therefore doesn't allow for accounting absurdities such as nedging. Oanda and several other reputable brokers (if there is such a thing) never allowed it in the first place - not because they are evil, but because they implement logical accounting standards.

They didnt call it hedging,they called it off setting orders.

Effective Date of NFA Requirements Regarding Forex Orders
NFA has received notice that the Commodity Futures Trading Commission has approved new NFA Compliance Rule 2-43 regarding forex orders. The prohibition on carrying offsetting transactions will be effective for any positions established after May 15, 2009. The requirements regarding price adjustments will become effective as to all customer orders executed after June 12, 2009.\
Offsetting Transactions
New Compliance Rule 2-43(b) requires an FDM to offset positions in a customer account on a first-in, first-out basis, thereby prohibiting a trading practice commonly referred to as "hedging."

Oanda and several other reputable brokers (if there is such a thing) never allowed it in the first place -

This statement is a misnomer, Oanda allowed more than one account whereby you could do a sell in one and a buy in the other thereby creating a hedge by using multiple accounts. This is also allowed in IBFX and other brokers. In other words if you really want to hedge you can just takes a little more work and two accounts.


I don't think anyone claimed that they move in lockstep (I certainly didn't). What I said was that there is no significant difference for any significant period of time. What that means is that whenever a significant difference does present itself, it is arbitraged away by super fast computer algorithms that participate in the market, and by their very participation, alter prices in such a way as to close the very gaps that they are exploiting. It seems you didn't look up the word arbitrage. I still recommend it. Furthermore, synthetic pairs are generally not calculated using 1:1 lot ratios, and pricing precision is therefore affected further.

See my previous post about accounting and price action.
  • #460
  • Apr 14, 2012 2:03pm Apr 14, 2012 2:03pm
Quoting fierceman
Arbitrage is the mechanism by which the prices between a cross and its components always stay connected (aside from small oscillations). It has nothing to do with accounting. The only time I mentioned accounting was on the separate topic of hedging being an accounting trick.

I can't quite understand how you think a hedged position is not being out of the market. When price changes don't affect the value of your portfolio, you are out of the market (i.e. not exposed to the market). That is what happens when you are "hedged". Once you close one...
I dont hedge, I cant, unless I use multiple accounts but I dont there either. I have found in practicing it on a demo to be a headache to unhedge the trade. I dont know how you guys ever got to me using hedging. My threads are open to the public and I have written thousands of posts. You havent found me propagating hedging in any of my material. I have mentioned it but it has never been part of any trading strategy of mine other than the only real use I have seen for it is a time out for some reason. It freezes time so you can relax, plan, and think what you want to do next. I find that to be a simple basic use. But that is not available to US brokers. Sheeeeeeesh can you not get that. The only thing i have debated is its definition. In FOREX it is defined as having a buy and sell of the same currency pair. In other fields it is defined differently than other investment fields. Dang.
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