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No SL No Leverage Strategy - working so far

  • #541
  • May 5, 2012 10:46am May 5, 2012 10:46am
Quoting charvo
i'm with you on NO SL trading is dumb and dangerous.

but in fact, i guess that maybe we neglect one important factor in trading.

although NO SL results in less profit than SL in mathematical sense, but in "timing" sense, NO SL might be better than SL. but how?

i guess it is the second chance???

say i have a 70% correct system, if the 1st entry is wrong, I hedged it with 2nd opposite position. using same 70% system, find another spot where one position is in profit, and the timing is good to entry. at that time, exit the profitable position...
Hanover already covered this. Basically what he and some of the old folks are saying is that you can exit (when you open a hedge leg) the trade and re-enter (when you close your hedged leg).

What you do with a hedge can be replicated 100% and achieve the same result with the exception that you do not pay spread and rollover twice.

The only benefit to hedging the way this thread is describing it is to satisfy your psychology.
The feeling of "2nd chance".
The "I must never lose" feeling.
The feeling of "capture all the pips. leave no pip behind"

While I admit that having this psychological fallback is very helpful and soothing to the mind, you can also reprogram the way you look at things to include stops; although i must say that it might be harder to do for some.
  • #542
  • May 5, 2012 11:37am May 5, 2012 11:37am
Quoting thelws
What you do with a hedge can be replicated 100% and achieve the same result with the exception that you do not pay spread and rollover twice.
Yes, it can be replicated in theory but not in real life.

If somebody would be able to replicate it in real life, he would be a multi-millionaire very soon.

But all I read on all forums is: 95 % of all traders lose money.

How come if setting a SL is so easy and recovering your lost money is even more easy because you only have to enter at the next good setup and win, win and win ? Where is the problem if it is so easy ?

You know very well what the problem is: Psychology and market manipulation for example. To name a few.

There have been very big brokers caught using software like the Virtual Dealer Desktop plugin.

And I am telling you only one of the many options the plugin offers to the broker who is willing to steal money from stop-loss believers:

Just read 99 % of all trading strategies which use SL.
Now the multi-billion dollar question:
Where do all Gurus or not Gurus recommend to place the SL ?

Correct: Place your SL at the latest Swing High or Low.
Or place it behind a strong S/R level. Or at ATR/x .
It is the Bible, it is the dogma of all SL gurus and SL-churches.

It is a breeze for a cheating broker to hunt stops from all the SL believers, even if the SL-believers use hidden stop loss EAs .
Because everybody knows where the SL orders sit.

And if you look at a chart : what happens in 99.99 % of all cases before a huge move happens ?
Correct: price first moves in the opposite direction, shaking all the traders out who have set their SL at exactly the level where it belongs.
When all those SL-believers have lost their trade, price
suddenly shoots exactly in the direction they had their trade which just hit SL.

But I know: You must place your SL. You must do it. Because if you donīt place it, the broker cannot hunt it. Understand ?
Therefore you must place it.
Under all circumstances please: Place your SL where all traders place it.
Otherwise they cannot cheat on you.

You understand ?
Please, please place your SL and believe that it will be easy for you to enter
at the next good setup and recover your money.
Please, place your SL.

If you do not, you are dumb and an idiot and you cannot trade and you have no brains and everybody will laugh at you and you are a fool.
Read this thread and you will know about it.

So, if you want to be a real trader, place your SL. Do it.
Donīt think twice. Just place it there.
Otherwise the broker cannot hunt it and cheat you out of your correct guess about the market.

I hope that eveybody understands why it is so important to place a SL.
I have explained it in detail now.
And nobody should ever tell you to not doing it.
  • #543
  • May 5, 2012 12:05pm May 5, 2012 12:05pm
Quoting fxtr51
Correct: Place your SL at the latest Swing High or Low.
Or place it behind a strong S/R level. Or at ATR/x .
It is the Bible, it is the dogma of all SL gurus and SL-churches.

And if you look at a chart : what happens in 99.99 % of all cases before a huge move happens ?
Correct: price first moves in the opposite direction, shaking all the traders out who have set their SL at exactly the level where it belongs.
When all those SL-believers have lost their trade, price
suddenly shoots exactly in the direction they had their trade which just...
So if I place my entry orders at the latest Swing High or Low or behind a strong S/R level I’ll win in 99.99 % of all cases. Is it your logic?
  • #544
  • May 5, 2012 1:22pm May 5, 2012 1:22pm
I just explained that you must place your SL behind S/R , not your entry.
Maybe you misunderstood what I wrote ?

Let us not disturb the game here.
95% of all traders lose in Forex.
And they all lose because they place the SL according to the dogma about SL.

Please donīt change this.
You would fight the brokers and the 5 % who win in Forex.

Again: Place your SL where everybody is telling you to place it.
Otherwise you are dumb. You can read this in many postings in this thread from the best of the best traders who are missionaries of the SL cult.
  • #545
  • Edited 2:33pm May 5, 2012 2:12pm | Edited 2:33pm
The use of stops doesn't automatically mean setting them at levels which are likely to be tested.

The inference here that all stop use is done this way and part of some 'dogma' is so out of touch with reality I can't even begin to imagine the events that lead up to some of the thoughts being presented here.

If you can't separate the tool (stops) from a method (where/how to place them) then your ability to adapt and grow as a trader is being servery limited.

----------

After hearing traders base their assertions of the 'evil that is stops' on the anecdotal evidence of bad brokers and levels being hunted, I'm left thinking this entire thread needs to take a step back and talk about why we'd even take a trade in the first place.

As you study the market in looking to develop an edge, price movements and patterns emerge as you slowly build up an inventory of information you can use to set entry, take profit, and protective action levels. All this would be based on what keeps your edge within a positive expectancy outcome over many trades.

If your plan does not have a positive expectancy (stop or not) it is flawed from the start (forget about even talking about stops or hedges if you aren't already applying it to an edge in the markets.)

Let's use the comment someone suggested earlier when speaking out against stops: Logical stop levels get run before price moves in the speculated direction.

Setting a stop at a level that's likely to be tested doesn't seem like a very logical decision for a trader. If this was so common, wouldn't this be part of your plan? Wouldn't the "logical stop level" really be the "logical entry level" instead? ...wouldn't you at least notice the tendency and keep mind of it?

If you're building out a trade plan, how does it even make sense to see a price history that suggests running such "logical" stop levels is a common thing yet still place your stops there if you KNOW it would result in the high likelihood of a negative outcome?

Using this argument against stops entirely is completely ridiculous. The assertion makes sense if you want to advocate for not setting your stops at particular levels, but not against stops as a whole.

-----------

Stops are just a tool. They aren't a trading method in themselves. A trader has to know how to use them, and where they are effective, in context to their trading plan/style/system/edge/etc..

If you're going to make an argument against them, do so in context to them as one of many tools a trader could employ... don't do so assuming one specific method that sounds quite logically flawed (for rational traders to use.)
FXGears.com
  • #546
  • May 5, 2012 2:35pm May 5, 2012 2:35pm
If you're going to make an argument against them, do so in context to them as one of many tools a trader could employ... don't do so assuming one specific method that sounds quite logically flawed (for rational traders to use.)[/quote]

I agree 100%,
BUT sometoimes stop hunting is so brutal, and most valid edges are so thin, it makes you think if these Brokers leave any chance at all...or has Forex developed into a Casino, where the House will winn, in the long run , no matter what...
Just look at any chart, any time frame and you will spot those spikes, just enough to clear the table and run, with all that retail cash.. in their pockets...
  • #547
  • May 5, 2012 2:41pm May 5, 2012 2:41pm
Jack,
the whole thread is nothing than beating a dead horse.

Stop-hunting is only one aspect of it.

Trading without a SL is very profitable. That is fact.
And in this thread and others the dead horse is that the SL-believers will never accept that fact.

I will watch how many more pages will be wasted beating the same dead horse by the SL-crowd.
  • #548
  • May 5, 2012 2:42pm May 5, 2012 2:42pm
hanover's elaboration is very sound in math sense.

however, the "2nd chance" is not only a feeling, i'm afraid.

hanover's assumption, which i've pondered for the passing weeks, is that when a trader decides to SL a pos, he is also sure this is a great entry for a new opposite position.

or in other words, the trader SLs a pos based on his market reading/system signal, which is NOT the case in real life.

or in another example, if the system is a 5ma x 10ma entry, then everytime 5ma cross up 10ma, you SL the shorts and go long; if 5ma x 10ma down, you SL the longs and go short. if this system is profitable, then use SL or NOT is same as hanover described.

but in real life, or many other system doesn't work like that.
1. in real life, a trader might take SL only because the capital is being hurt. it is not a decision based on market reading.

2. to read the market and SL a pos may be easier or different than read the market and enter a pos.

3. how come "2nd chance" is a feeling only? i don't understand this point.
let's say, a 60% win system (i'm on the stupid way maybe again ):

SL way:

1st pos, u SL; 2nd pos, u win; ======> breakeven

hedge way:

1st pos, u hedge, now 2 pos (0 margin) with a float loss;
wait, till you find another entry which you are 60% likely to win, you remove the winning pos of the 2 existing pos, now you have the 1st pos which is a losing pos, and it has 60% chance to go back to 0 loss. at this point, u can also add the 3rd pos that is same direction as the 1st one. for both 1st and 3rd pos, you have 60% to win.

in the hedged case, u used 3 entries instead of 2 in SL case. the Expected Return is higher.

isn't it better than SL way?

i understand hanover's math, i think. i just feel it is not happening in real life. few traders can SL their losers and at the same time decide to enter the opposite positions, especially when their systems don't work that way. if I trade a break-out system, i SL a long pos because the breakout (up) is a failure, but maybe not because it is a breakout(down). In other words, i cannot just SL a long and enter a short, since my system doesn't work that way. In that sense, i need to wait, so why not hedge? I feel for the single factor of "time", hedge is quite meaningful in trading.

I myself am a loser who stick SL in my trading, LOL.

Quoting thelws
Hanover already covered this.

The only benefit to hedging the way this thread is describing it is to satisfy your psychology.
The feeling of "2nd chance".
The "I must never lose" feeling.
The feeling of "capture all the pips. leave no pip behind"
  • #549
  • Edited 4:13pm May 5, 2012 4:03pm | Edited 4:13pm
Quoting fxtr51
Jack,
the whole thread is nothing than beating a dead horse.

Stop-hunting is only one aspect of it.

Trading without a SL is very profitable. That is fact.
And in this thread and others the dead horse is that the SL-believers will never accept that fact.

I will watch how many more pages will be wasted beating the same dead horse by the SL-crowd.
No one is debating whether no-stop-loss can be profitable. It can. That is true. What is up in question is how profitable it can be compared to using a stop loss? In my opinion it is much less profitable over the long haul. If you know how to trade with a stop loss it is much more profitable. That is also a fact because you can compound your profits. And for you positive swap fanatics, using a stop loss is also more profitable than any no stop loss method that gains interest.

When you open up trades without a stop loss, you have to enter small positions to be able to withstand huge drawdowns. The interest gained on tiny positions is also tiny. Daily interest payout is also small compared to the value of each pip. By opening these small carry positions with the mindset that you will never close out for a loss you are basically setting yourself up for a bad situation. By 'bad situation' I mean a large drawdown that could potentially take years to get your account back to breakeven. Assuming that swap rates and leverage remains unchanged, that's already a bad situation. Now imagine if interest rates drop! Or leverage changes! Now I know bob is going to come on here and say he trades without leverage, but then you might as well go put your money in bonds or cd's cause the return will be greater per dollar invested. In order for no leveraged positions to outperform a bond or cd requires monthly moves of 10,000+ pips each and every month. That doesn't happen.

Now to answer the smarty pants that is going to come on here and say "well if you pyramid/stack the none-leveraged positions when positive"...

That requires knowing when to enter and exit. If you know how to do that then why not trade straight up on a trade per trade basis with increased leverage and size??!! Stacking also increases the need for a stop otherwise the reversal of all those positions wipe out your profits faster than it took you to build them. Then you just wasted more time to make nothing. Even with interest on your side. Yea that sucks huh.

So forgive me if I have beaten the dead horse that trading with a stop loss is more profitable than without, but the math is indisputable. So far you have continued to debate this without presenting any math. Just like you keep saying that hedging is beneficial (outside of the psychology of it) to trading after I presented mathmatical evidence that it is not due to swap differential where you could replicate the same results without hedging and save the money lost on swap. So far you have failed in presenting any mathemtahical evidence to support your claims.

So I now challenge you to present mathematical evidence. Okay Mr. FXTR51. Now it's on you to explain it clearly and in a way that is not disputable. The ball is in your court. Yes I am calling you out. If trading without a stop or hedging is better then please, please, please show me using math how that is possible. I want you to present it clearly in a way where I'm wrong. If you can I will happily admit that I have wasted all my years of learning. And please don't come on here and say how the broker is chasing your stops. I have explained how unrealized and realized are the same. I've also explained that brokers moving price to "go after your stop" can be exploited to your advantage, so don't even go there. That kind of cynical response is amateur at best.

I look forward to your reply.
  • #550
  • May 5, 2012 5:46pm May 5, 2012 5:46pm
fti doesn't use stops. Graham (Millipede) hedges. At a guess, the two best traders in FF.
  • #551
  • May 5, 2012 6:18pm May 5, 2012 6:18pm
Quoting AllanS
fti doesn't use stops. Graham (Millipede) hedges. At a guess, the two best traders in FF.
I donīt know them and have not read a word they posted, but I know that trading without a SL is profitable.
  • #552
  • May 5, 2012 6:45pm May 5, 2012 6:45pm
Hedging again... I love this topic.

"Hedging" does not help you, it only hurts you. You will make more money (or lose less) the moment you wean yourself off the "hedging" tit. This is a mathematical fact.

The type of hedging that is done by professionals does not mean, has never meant, and will never mean "buying and selling the same thing at the same time and thinking that the two don't offset".
  • #553
  • May 5, 2012 6:53pm May 5, 2012 6:53pm
Quoting 2+2=4ex
No one is debating whether no-stop-loss can be profitable. It can.
I think you missed most of the debate in this thread.
Didnīt you read how dumb traders are who donīt use a SL ?
Page after page it goes.


Quote
What is up in question is how profitable it can be compared to using a stop loss?
That is your point.
Not the one debated by the SL-missionaries who use name-calling etc.


Quote
In my opinion it is much less profitable over the long haul.
That depends on the trader.
Remember: 95 % lose, most of them are SL traders.

Quote
When you open up trades without a stop loss, you have to enter small positions to be able to withstand huge drawdowns. The interest gained on tiny positions is also tiny. Daily interest payout is also small compared to the value of each pip.
I agree.
It is evident, isnīt it ?


Quote
By opening these small carry positions with the mindset that you will never close out for a loss you are basically setting yourself up for a bad situation. By 'bad situation' I mean a large drawdown that could potentially take years to get your account back to breakeven.
I donīt trade without a SL, only when I use lock-unlock.
That is another story because with that method I can start with more initial risk.

Quote
So forgive me if I have beaten the dead horse that trading with a stop loss is more profitable than without, but the math is indisputable.
Real life is different than your math which is indeed indisputable.
Because most traders close winning trades too early and let losers run too far.
If you would please include that into your indisputable math ?
Not ?
Well, I thought so.

Nanningbob and others make more profits as others. That is fact.
It is indisputable and it reflects real life.

Compared to all those who use a SL, they are miles ahead.
Do you agree ?

But ... but .... but if those who lose would know how to trade better, then ... then ... .then they would be ahead.
Correct.
But we donīt live in "if" and "then", we live in the real world and not in a theory.

Quote
So far you have continued to debate this without presenting any math.
And now you know why.
It does not match reality.


Quote
If trading without a stop or hedging is better then please, please, please show me using math how that is possible.
It depends on the trader.
Not on the math.


Quote
I want you to present it clearly in a way where I'm wrong.
I did.
You think that your math matches real life.
But in this you are wrong.
Completely wrong.
Should be clear enough.

If you donīt believe me, then please ask those in this forum why they constantly lose money using SL.
And then ask those who use no SL and constantly win.
That is real life.

Quote
If you can I will happily admit that I have wasted all my years of learning.
If you trade profitably, then you did not waste your years of learning.

Quote
I have explained how unrealized and realized are the same.
You are completely wrong on it.
On your spreadsheet or in your math you can fantasize that they are the same, but in real life you are wrong.

I once had bought stocks for 100k .
Market dropped and on the paper I had lost 50k.( if I had sold it at that price)

I waited until market went into my favor and sold for 200k.

Now you come and you are trying to convince me that if I had sold
at 50k it would have been the same as if I had sold at 200k.


Please explain to me why winning 100k is the same for you as losing 50k.
I am looking forward to your indisputable math about this.
Maybe you can convince me that a realized loss is the same than a not-realized loss. But I doubt it.
  • #554
  • May 5, 2012 6:59pm May 5, 2012 6:59pm
Quoting charvo
hanover's elaboration is very sound in math sense.

however, the "2nd chance" is not only a feeling, i'm afraid.

hanover's assumption, which i've pondered for the passing weeks, is that when a trader decides to SL a pos, he is also sure this is a great entry for a new opposite position.

or in other words, the trader SLs a pos based on his market reading/system signal, which is NOT the case in real life.

or in another example, if the system is a 5ma x 10ma entry, then everytime 5ma cross up 10ma, you SL the shorts and go long; if 5ma x 10ma...
The issue you are having here is an issue of an edge. You do not have a 60% profitable strategy.

I do not wish to speculate on whether or not your strategy really produces 60% wins. But the truth is this:
1)If your strategy really produces 60% wins, you do not need to hedge at all. Just following your strategy repeatedly will already make you a winner.
2)The reason you are hedging is because you find that you are wrong more times than expected and worse of all, you don't understand why you are getting it wrong. Hence, you are resorting to a hedge to "wait and see" if things will get better.

In the example you gave:

Quote
1st pos, u hedge, now 2 pos (0 margin) with a float loss;
wait, till you find another entry which you are 60% likely to win, you remove the winning pos of the 2 existing pos, now you have the 1st pos which is a losing pos, and it has 60% chance to go back to 0 loss. at this point, u can also add the 3rd pos that is same direction as the 1st one. for both 1st and 3rd pos, you have 60% to win.

This is the flaw in logic that I have been pointing out since the beginning of the thread. If you are 60% profitable, you don't need to hedge. You would be right in your trades more than half the time.

What you are doing Charvo, is a psychological fallback. You are giving yourself the illusion of a 2nd chance. I know because I've been there and done that. It is not until you acknowledge that your edge is flawed to begin with that you can start to find better methods.
  • #555
  • Edited 7:24pm May 5, 2012 7:12pm | Edited 7:24pm
Quote
I once had bought stocks for 100k .
Market dropped and on the paper I had lost 50k.( if I had sold it at that price)

I waited until market went into my favor and sold for 200k.

Now you come and you are trying to convince me that if I had sold
at 50k it would have been the same as if I had sold at 200k.


Please explain to me why winning 100k is the same for you as losing 50k.
I am looking forward to your indisputable math about this.
Maybe you can convince me that a realized loss is the same than a not-realized loss. But I doubt it.
Let me explain the flaw in this this logic.

1)When you buy stock, you are not losing. You can hold a stock on forever and still come out positive because stocks pay dividends. This is an important distinction that is different from forex. It is for this reason that hedging could be viable. In forex, you cannot hold on to your position forever because rollover will eat your profits.
2)When you say that "I waited until market went into my favor and sold for 200k." you are doing so with the assumption that you would be right in your analysis and that you would surely be profitable. I find it funny how we sometimes ignore the other scenario where things don't go our way.

This goes back to my original argument that if your edge was so solid to begin with, you would not need to hedge. You need to understand that there could be a chance that you can be wrong the 2nd time as well. If that happens, you could lose more than 50k. When that happens, what would you do? Hedge more? You are now eating more and more into your margin expecting a turnaround to happen (or waiting for your strategy to finally be correct) - all the time paying more and more for spread and rollover.

I hate to bring references into a discussion because I feel it is unfair for the other debating party. It is sort of "you can't dispute that" argument. However I will say that all the successful traders IRL I have talked to employ a stop loss. Or at least know mentally where they will cut off their losses. This goes back all the way till the start of trading history.

Until someone else can come up with a book that champions the cause of no SL trading, I'm afraid the burden of proof lies with you to prove it works.
  • #556
  • May 5, 2012 7:33pm May 5, 2012 7:33pm
thelws,
I have no idea why you and others are beating around the bush.

I bought for 100k.
Market dropped to 50k.
I waited.
Then I sold for 200k.

Then you come and tell me that my logic is flawed and another guy is telling me that a realized loss is the same as a not realized loss.

What is wrong with you ?

It can happen in Forex too.
What if I have positive swap ?

In fact it happens every day and every day traders without a SL profit from it. Alfredo !!! TMA extreme thread !!!
And many others too. Or not ?
They are trading forex, not stocks.

Everybody is only constructing examples to "prove" their point instead of accepting the obvious:

A realized loss of 50k
is not the same
as a realized profit of 100k .

Why is it so hard to accept this simple fact ?

And why is my logic flawed ?
Yours is certainly because you are telling me that a loss of 50k
is the same as a profit of 100k.

Please explain in an understandable way why a loss of 50k is the same for you than a profit of 100k.

Until now nobody was able to convince me that it is the same, but maybe you have a superior knowledge of logic and math.
  • #557
  • May 5, 2012 7:49pm May 5, 2012 7:49pm
Please read this thread from start to finish. It is only about 10 pages long. Unlike our threads in 2012, back then only the really knowledgeable had anything to say about this topic.
http://www.forexfactory.com/showthread.php?t=68598


Merlin is willing to give 100k to anyone who can prove that hedging cannot be replicated 100% using stop loss methods:
http://www.forexfactory.com/showthre...52#post2678252

And to answer your swap question (because I have also done this before). You are fine when you are moving in 1 direction. The moment you hedge, the -ve swap of your hedge leg will overpower your +ve swap on your original leg.

There is a reason for this and that is: brokers will not pay for your swaps. I have mentioned this before. You cannot hold a hedge out in forex till the end of time. You will lose money.
  • #558
  • May 5, 2012 10:26pm May 5, 2012 10:26pm
with all due respect, and thanks for your input to solve my confusion

actually, i've hedged, then determine "never hedge again", then got 2nd thought and confused again. (with many years passed).

the question is that you did not present the mistake in my example or logic, or i fail to understand your reasoning.

or i say, assuming that i have a 60% system, and i prefer to hedge the floating loser and wait for 2nd entry signal. why will that be worse than SL way? the expected return seems higher to me.

Quoting thelws
The issue you are having here is an issue of an edge. You do not have a 60% profitable strategy.

In the example you gave:

This is the flaw in logic that I have been pointing out since the beginning of the thread. If you are 60% profitable, you don't need to hedge. You would be right in your trades more than half the time.

What you are doing Charvo, is a psychological fallback. You are giving yourself the illusion of a 2nd chance.
  • #559
  • Edited May 6, 2012 1:37am May 5, 2012 11:18pm | Edited May 6, 2012 1:37am
Quoting charvo
the question is that you did not present the mistake in my example or logic, or i fail to understand your reasoning.

or i say, assuming that i have a 60% system, and i prefer to hedge the floating loser and wait for 2nd entry signal. why will that be worse than SL way? the expected return seems higher to me.
What flaw in logic I am attempting to point out is that a trade can be replicated using a SL method instead of a hedge. The benefit is that you will not bleed from the extra spread and rollover.

Hanover already posted the calculation with a diagram somewhere near the early discussion in this thread. He did post a lengthy description which I will attemp to simplify here. Do take note the example below is assuming that you have a 100% sure method that you will be correct in your trade.

Hedge method
1.0000 - Buy ENTRY (pay 1st spread) Pay Rollover for 1 position
0.9000 - Ohnoes... price went wrong way
0.9000 - Hedge (by selling). (Pay 2nd spread). Pay Rollover for 2 position. -100 pip floating loss
0.7000 - Price reversing. Oh yea. Close hedge leg. +200 pips.
1.1000 - Oh yea. My original position made 100 pips.
Total pips made: +300

SL method
1.0000 - Buy ENTRY (pay 1st spread) Pay Rollover for 1 position
0.9000 - Ohnoes... price went wrong way
0.9000 - Close position. -100 pips
0.7000 - Price reversing. Oh yea. Open a new trade.
1.1000 - Oh yea. Made +400 pips
Total pips made: +300
Now let's see what happens if we don't have a 100% surefire edge. This is a more realistic scenario. This is the other scenario where we might be wrong a few times in a row:

Hedge method
1.0000 - Buy ENTRY (pay 1st spread) Pay Rollover for 1 position
0.9000 - Ohnoes... price went wrong way
0.9000 - Hedge (by selling). (Pay 2nd spread). Pay Rollover for 2 position. -100 floating loss
0.7000 - Price reversing. Oh yea. Close hedge leg. +200 pips. (-300 floating loss)
0.6000 - Ohnoes, price didn't move back to my breakeven. Hedge again. (Pay 3rd spread. Pay rollover for 2 positions) -400 Floating loss
Total pips made: -200 floating loss.

SL method
1.0000 - Buy ENTRY (pay 1st spread) Pay Rollover for 1 position
0.9000 - Ohnoes... price went wrong way
0.9000 - Close position. -100 loss
0.7000 - Price reversing. Oh yea. Buy entry. (pay 2nd spread) Pay Rollover for 1 position
0.6000 - Ohnoes, price didn't move up. Cut loss. -100 loss
Total pips made: -200 loss.

Notice that in scenario 2, when things don't go your way, you still pay swap and spread. For every position you keep open, you pay and bleed. And what for? In the end the results of the 2 methods are the same.

You can play around with the way you hedge. You can modify the strategy of hedging. But just remember that every time you open a hedge leg, you pay for spread and you pay for rollover.
  • #560
  • May 6, 2012 12:20am May 6, 2012 12:20am
Quoting nanningbob

You notice how self-proclaimed Pro traders rag hedging, call it nedging. Nedging doesnt exist but hedging does. India has position on hedging for its banks and large corp. customers, Hedge and protect your assets.

MUMBAI -- India's central bank Monday urged companies to hedge a larger portion of their currency exposures, saying that any foreign-exchange losses incurred by the firms could hurt their creditor banks.
lol, oh Bob you're just soooo lost!

India's central bank was referring to corporates, not retail forex speculators! Companies who trade internationally (import/export) are exposed to transaction risk from (sometimes volatile) currency fluctuations, they're not speculators in FX! They hedge that risk to protect bottom line invoicing by using options, forwards, futures, money market borrowing, currency swaps, and a host of other instruments, their motives are completely different than FX traders!

lol, tooo funny!
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