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Hedging vs Stop Loss

  • #241
  • Jun 3, 2014 3:28am Jun 3, 2014 3:28am
Quoting Exodus
{quote} I guess at this point you will be ready to retire. The minute you place a working and profitable example in an open forum like this it will be seized and exploited, and the forex market behaviour will change. Maybe it will not matter, but something tells me that is not the case. Thank you, and spyderman, for all your efforts above.

Or hedging will be banned like in the USA. The winners will build slowly and greed will overcome the system. I already know the weakness of it and I know how to overcome the weakness, that will be my secret though. I also will not put the EA out on the thread, you will have to go through the learning process to get the different caveats built in. Some will figure it out but I expect greed to kill the idea on a wide spread scale. Human nature doesnt change. However, after saying all that, as long as the SNB ties itself to the euro it will work. When they break it then the system may or may not work after that. So its usage should be limited to only high correlated ranging pairs.
  • #242
  • Jun 3, 2014 4:52am Jun 3, 2014 4:52am
Quoting nanningbob
{quote} Or hedging will be banned like in the USA. The winners will build slowly and greed will overcome the system. I already know the weakness of it and I know how to overcome the weakness, that will be my secret though. I also will not put the EA out on the thread, you will have to go through the learning process to get the different caveats built in. Some will figure it out but I expect greed to kill the idea on a wide spread scale. Human nature doesn't change. However, after saying all that, as long as the SNB ties itself to the euro it will...
I wouldn't worry.
First the big banks are too busy making book, which is a different thing than spot trading. How much of the market is controlled by the little guys? 20%?

Second "you must always use a stop loss, otherwise you could lose your whole account". That mantra will keep many people to the side, no matter what numbers you get and put up. What was the name of the bishop that refused to look through Galileo's telescope because he would then see Aristotle was wrong?

People are still have trouble with Aristotle being wrong. Euclid is taught in the schools today as if it were true, even though Einstein had to abandon one of his "axioms" before he could develop the math behind relativity. People deny evolution even though we can see it going on around us and even accelerate it with our breeding programs.

The truth is safe from fools. You need not be afraid.

Remember this proverb: "You can tell a man's intelligence by the clever way he defends his erroneous ideas"
  • #243
  • Jun 3, 2014 4:59am Jun 3, 2014 4:59am
Quoting jmn5611
{quote} There is a bit of a paradigm shift going on here at the Factory. More and more traders are coming out and saying that intraday is not the way( it never was) to big profits. For intrasession scalpers, I will not say it is wrong, but it sure is one tough way to earn a buck. I cannot hedge in one account, but I can trade negatively correlated pairs in one account, and that is what I do now.


Negatively correlated pairs, eh? Hmmm...

There are fewer of those; easier to handle..

good post: something to think about!
  • #244
  • Jun 3, 2014 5:39am Jun 3, 2014 5:39am
Quoting Rap Skallion
{quote} Negatively correlated pairs, eh? Hmmm... There are fewer of those; easier to handle.. good post: something to think about!
xxx/usd vs usd/xxx will get it done.

You can substitute any pair in the middle.

Yen pairs do not work as well because of the BOJ and it's idiosyncrasies.
If you are good at something, never do it for free--Joker
  • #245
  • Jun 3, 2014 5:48am Jun 3, 2014 5:48am
Quoting Rap Skallion
{quote} I wouldn't worry. First the big banks are too busy making book, which is a different thing than spot trading. How much of the market is controlled by the little guys? 20%? Second "you must always use a stop loss, otherwise you could lose your whole account". That mantra will keep many people to the side, no matter what numbers you get and put up. What was the name of the bishop that refused to look through Galileo's telescope because he would then see Aristotle was wrong? People are still have trouble with Aristotle being wrong. Euclid is...
Good post. Yes non-euclidean geometry was invented and people may say this was a major change. The thing is though, that it only takes one counter example to prove something is wrong. If no counter-example can be found (no example of hedging being an improvement on non-hedging), then you'd work on the basis that it was true, and open to the possibility that you may discover something in the future but there would be a current consensus of what was currently true. All scientific minded people understand this.

Unfortunately though, there seems to be an entire group of people who think this means they can just make up truth (with no experimental evidence), and that it's true to them, so anyone disagreeing should be more open-minded. That's properly down to lack of education. Mathematics on the other hand is pretty strict. In the sense that you lay out your assumptions, and from there you derive truths. We define integers, and we know that 1+1=2 and always will equal that. Euclidean geometry has truths too, that will never be wrong, never change. You can change the assumptions and then you get non-euclidean geometry, but Euclidean geometry truths weren't wrong. In this thread I've explained something that is mathematical, something that is basically sayin 3-3 is the same as 1-1 and the same as 0. For this I've been attacked. What can you do with someone who abuses you for pointing out 1-1=0? It's been a struggle here.
  • #246
  • Jun 3, 2014 6:16am Jun 3, 2014 6:16am
I for one would like to see it in live or demo account that is video documented how can this be done And one question for everyone if you are in a losing position of let's say 300 pips and you open a counter position there how are you sure that the price will ever get back to that level? For example say you went long on gold at 1700, now that was 2 years ago, and you hedged that with short at 1650, and now you are in losing position for 2 years. Will you wait for the price to come back up for another 2-3 years? I am constantly paper trading the hedge method and I can't find a suitable solution. The only way that I see is other FX derivatives like options, futures and other stuff Supra mentioned.

I would love to see this work but I just can't see how. Everyone is talking about hedging when you are in plus, but talk more about hedging when you are in minus.
  • #247
  • Jun 3, 2014 7:33am Jun 3, 2014 7:33am
Dear All,

Pls advise me..

I have been reading this thread from the beggining.But still i have no idea what should exactly do.
Anyone can explain clearly what we should do to trade by using this system


Thanks
Helanka
Helanka
  • #248
  • Jun 3, 2014 7:44am Jun 3, 2014 7:44am
Quoting merquise
I for one would like to see it in live or demo account that is video documented how can this be done And one question for everyone if you are in a losing position of let's say 300 pips and you open a counter position there how are you sure that the price will ever get back to that level? For example say you went long on gold at 1700, now that was 2 years ago, and you hedged that with short at 1650, and now you are in losing position for 2 years. Will you wait for the price to come back up for another 2-3 years? I am constantly paper trading the...
SHEESH video, who would watch a video 24 hours a day 5 days a week. That is not even feasible or worth the time. In fact I really dont have to prove anything all I have to do is make money. I cant hedge in the USA so I cant use it. When we were allowed I used it as a time-out so I could plan my next set of trades. That was a useful tool at times. If you are paper trading one in one out, yes you will not find any useful use for a hedge trade. If you multi level trade then you will find it useful.

Here is the math theory of multiple level trading. One in One out cannot match this because they close trades we are continuing up the ladder. They would have to increase lot sizes to match the profit, trade 1 continues they close it. We lock in profit and dont have to worry about a losing trade meanwhile we have a chance at increasing profit and multiplying it. Therefore their math is faulty when it comes to multiple levels. It works with one in one out, it does not work with multiple levels. Using 10MA shift 1 on a daily. I will many times take in more pips than the entire move using multiple levels of trading. I can trade with less risk with smaller lot sizes in losing trades and can multiply winning trades. I cant hedge trade but I do multiple trades reentering when price comes back inside the 10MA on the daily which is the 60 on the 4H chart. People who know my trading system know I use the 240 and 60 on the 4H as my trading formula.
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  • #249
  • Jun 3, 2014 7:46am Jun 3, 2014 7:46am
Quoting nanningbob
{quote} SHEESH video, who would watch a video 24 hours a day 5 days a week. That is not even feasible or worth the time. In fact I really dont have to prove anything all I have to do is make money. I cant hedge in the USA so I cant use it. When we were allowed I used it as a time-out so I could plan my next set of trades. That was a useful tool at times. If you are paper trading one in one out, yes you will not find any useful use for a hedge trade. If you multi level trade then you will find it useful. Here is the math theory of multiple level...
More nonsense.

You claim single direction traders (i.e. not using this hedging) can't match the gains. Looks like you have 6 trades there, list the entries and I'll show you how you can match it without hedging, for the umpteenth time. Then once I've done that, kindly stop posting nonsense.
  • #250
  • Jun 3, 2014 8:08am Jun 3, 2014 8:08am
Quoting Rap Skallion
{quote} I wouldn't worry. First the big banks are too busy making book, which is a different thing than spot trading. How much of the market is controlled by the little guys? 20%? Second "you must always use a stop loss, otherwise you could lose your whole account". That mantra will keep many people to the side, no matter what numbers you get and put up. What was the name of the bishop that refused to look through Galileo's telescope because he would then see Aristotle was wrong? People are still have trouble with Aristotle being wrong. Euclid is...
As it says in Ecclesiastes "There is nothing new under the sun". I have found similar ideas in different traders writings. There is a guy from Australia who claimed he ran millions of dollars of his account this way. He used very little leverage (less than 5:1) so swap costs were nothing and charged a monthly fee. He claimed to have made over 20% every year for his clients. From his talk it seemed to match this idea I had but I am sure he had a slightly different twist. People were not beating down the doors to put their money there but it was big enough for him to make a nice living.

I found another thread where a guy proposed a similar idea and wanted to collect Merlin's offer of 100K but Merlin wouldnt bite. They guy would only divulge his system if Merlin agreed to segregate his money so once he revealed it could be done he couldnt renig on the offer. He offered enough information though for me to realize it was similar type of trading system. So I am not the only person who has thought of this and it is out there. I am just happy to find out some have used something similar.

Anyway I just found out that I cant do this with EASY FOREX, the EA wont work with their MT4 so I am going to try Global Prime and set up a demo tomorrow and see if it works. The guy who wrote it for me says it works on their platform.
  • #251
  • Jun 3, 2014 8:20am Jun 3, 2014 8:20am
Quoting SupraSense
{quote} More nonsense. You claim single direction traders (i.e. not using this hedging) can't match the gains. Looks like you have 6 trades there, list the entries and I'll show you how you can match it without hedging, for the umpteenth time. Then once I've done that, kindly stop posting nonsense.
Silly, one in one out does not run simultaneous trades, I know your math unless you increase your lot sizes which is what happens when your run multiple trades you cannot match it. Trade 2 for you must also include the lot size of trade 1, plus the lot size of trade two to equal it. You have increased your risk.
The issue is not the math, the issue is you wouldnt trade this way. My example can be done in real trading, yours is not. I keep my profit without risk and chance an increase with the 2nd trade. You must clear the first trade and open a new risk. Your trade is at risk, not mine. I locked in the profit. That is the issue you ignore and your math does not bear out this risk factor. You come up with a math formula that encounters your extra risk factor then you have a true comparison. Right now you do not have this risk factored in and until you do your math is faulty. Your increased risk is not part of your math solution. I have taken the risk out by locking in the original profit and can gain without the close and open of your math. So what you call nonsense is a big benefit. Basically its a free trade, like taking a technical foul shot in basketball. You can gain the point plus get the ball out of bounds again. That is not part of your math formula, that risk factor you have added is not part of my formula.
  • #252
  • Jun 3, 2014 8:23am Jun 3, 2014 8:23am
Quoting nanningbob
{quote} SHEESH video, who would watch a video 24 hours a day 5 days a week. That is not even feasible or worth the time. In fact I really dont have to prove anything all I have to do is make money. I cant hedge in the USA so I cant use it. When we were allowed I used it as a time-out so I could plan my next set of trades. That was a useful tool at times. If you are paper trading one in one out, yes you will not find any useful use for a hedge trade. If you multi level trade then you will find it useful. Here is the math theory of multiple level...
No no a 5 min clips would suffice whit an explanation of what was done and why ...anyway as I see you are talking about hedging when you are wining right? What about when you are losing? That is where people have issues..when the trade goes against them, they don't use SL they open a trade in different direction..
  • #253
  • Jun 3, 2014 8:29am Jun 3, 2014 8:29am
Quoting nanningbob
{quote} Silly, one in one out does not run simultaneous trades, I know your math unless you increase your lot sizes which is what happens when your run multiple trades you cannot match it. Trade 2 for you must also include the lot size of trade 1, plus the lot size of trade two to equal it. You have increased your risk. The issue is not the math, the issue is you wouldnt trade this way. My example can be done in real trading, yours is not. I keep my profit without risk and chance an increase with the 2nd trade. You must clear the first trade and...
More nonsense. I've already established that there is no more risk. Spyder brought up that point and I showed it wasn't true. Can match it with exactly the same risk without hedging.

Either put up or shut up! List those 6 trades and I'll match it with exact same risk taking less trades, so technically cheaper.
  • #254
  • Jun 3, 2014 8:29am Jun 3, 2014 8:29am
Very interesting discussion here. I have not read the whole thread but just wanted to add that I have been trading full time for almost 2 years now and never use a SL. A large part of my strategy is hedging divergent positions in highly correlated pairs such as EUR/JPY and GBP/JPY. AS one pair is in profit you take profit at varying levels and then open another trade going the same way. I will caveat that in my opinion you need to have a large account to handle the drawdown of the other pair and be able to ADD to your position in the other pair at wide levels to average in. This is NOT Martingale. If you know the ranges of the pairs you do this in and have a large account to handle the ranges then this works. It has been working very good for me
  • #255
  • Jun 3, 2014 8:39am Jun 3, 2014 8:39am
I have enterd 2 sell trades on EURAUD & GBPAUD.I haven't set stop loss.Now both trade are in -50 pip.
Any one can expalin what should i do By using this method...

Th,anks
Helanka
Helanka
  • #256
  • Jun 3, 2014 8:42am Jun 3, 2014 8:42am
Quoting Helanka
I have enterd 2 sell trades on EURAUD & GBPAUD.I haven't set stop loss.Now both trade are in -50 pip. Any one can expalin what should i do By using this method... Th,anks Helanka

If you don't have a sensible strategy that you have proved to yourself works, then stop trading. There's no need to lose money, just stop. Do some research and find a strategy. You won't find that strategy here.
  • #257
  • Jun 3, 2014 8:48am Jun 3, 2014 8:48am
Quoting SupraSense
{quote} More nonsense. I've already established that there is no more risk. Spyder brought up that point and I showed it wasn't true. Can match it with exactly the same risk without hedging. Either put up or shut up! List those 6 trades and I'll match it with exact same risk taking less trades, so technically cheaper.
Factor in your risk of taking a new position as soon as you enter. In real trading you second trade can be loser, mine cannot. You stand to lose to a SL and decrease your winnings. I do not, I can only face more profit by adding the hedge without the risk of a SL of a new position so quit ignoring the reality of a losing position which every trader knows you can get with what you are trying to say.

Your math goes like this we both enter at the same time. I hedge and lock my profit and see if I can profit from a 2nd trade in the opposite direction. I keep at all times my 200 Pip profit. You take your profit and then enter your sell. You lose 30 pips. Now its 170. You enter again and lose to a SL now you are at 140. I am still at 200. That is the true reality of trading and how Forex really works. Never at anytime does forex run linear. It is always an up and down movement about as jerky as it can get. What you do is called increasing your risk, I dont increase mine. If you dont understand that, its not my problem but that is the real Forex world, not one written down on a piece of paper saying 1-1=0. Show your increased risk in your math formula or step aside.
  • #258
  • Jun 3, 2014 8:56am Jun 3, 2014 8:56am
Quoting nanningbob
{quote} Factor in your risk of taking a new position as soon as you enter. In real trading you second trade can be loser, mine cannot. You stand to lose to a SL and decrease your winnings. I do not, I can only face more profit by adding the hedge without the risk of a SL of a new position so quit ignoring the reality of a losing position which every trader knows you can get with what you are trying to say. Your math goes like this we both enter at the same time. I hedge and lock my profit and see if I can profit from a 2nd trade in the opposite...
You put up a chart with 6 trades. List those trades with actual numbers and I'll do it and show no increased risk. Otherwise, you're just another troll, who can't trade and wants to spew nonsense so you can drag others down to your level.

There is no increased risk, as I showed to Spyder yesterday. Put up the trades and you'll be proven wrong. Otherwise, just shut up.
  • #259
  • Jun 3, 2014 9:03am Jun 3, 2014 9:03am
Quoting SupraSense
{quote} You put up a chart with 6 trades. List those trades with actual numbers and I'll do it and show no increased risk. Otherwise, you're just another troll, who can't trade and wants to spew nonsense so you can drag others down to your level. There is no increased risk, as I showed to Spyder yesterday. Put up the trades and you'll be proven wrong. Otherwise, just shut up.

AWWWWWWWWWW what's wrong did I mess up your pretty little math world. Every trader here knows when you enter the 2nd trade you have added risk. You dont want to face that issue that is fine with me. But take your math paper in throw it in the trash because unless you also factor in the open risk you just did with that 2nd trade then you can have a loss with that trade. Factor in your risk, but I have exposed your logic and how it fails in real live trading.
  • #260
  • Jun 3, 2014 9:08am Jun 3, 2014 9:08am
Quoting Helanka
I have enterd 2 sell trades on EURAUD & GBPAUD.I haven't set stop loss.Now both trade are in -50 pip. Any one can expalin what should i do By using this method... Th,anks Helanka
Fundamentally eur and gbp are weakening and the aud will be strengthening. I would hold those trades and look for a better entrance for my 2nd trade. Also you must understand I do not play my full position on my first trade. If it goes my way I add into the trend. If it doesnt I double check my logic which in this case are fundamentals and plan my 2nd trade. This is a true fundamental almost all the time. When JPY weakens aud and nzd strengthen. Since Euro and gbp are also on a long term weakening I would want to set a second trade when I see price action move back into the trend downward.
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