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Hedging vs Stop Loss

  • #281
  • Jun 4, 2014 4:30am Jun 4, 2014 4:30am
Ah ok, thanks, I thought that it might be the same idea as hedging long in stocks with buying PUT options for an offset of position in the case the stock falls..
  • #282
  • Jun 4, 2014 4:32am Jun 4, 2014 4:32am
I didnt answer your DD question. I try to keep my DD at less than 10%........... once it gets bigger than 15% I have made some mistakes in either long term trend direction or over traded with too many positions. (The 2nd one is usually the case) I then start strategically closing losing trades using my winnings to close them out. If I get to 20% DD I will close 3-7% of my losing trades to get myself back under. If I hit 20% I am on a stubborn streak on some currency and dont want to take the hit. So I force myself at that point to do so. When you run 25-50 trades at any one time you always have some in profit to close out against the losers. Once I get those out of the way I can continue trading back into long term trends again.
  • #283
  • Jun 4, 2014 4:37am Jun 4, 2014 4:37am
Finally got the pic to load. I just highlighted the areas on the monthly chart that showed DT. Range and UT areas I left unmarked but you should be able to see them. I have been trading JPY weakness for 1 1/2 years now and will continue to do so.
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  • #284
  • Jun 4, 2014 6:45am Jun 4, 2014 6:45am
Quoting nanningbob
Finally got the pic to load. I just highlighted the areas on the monthly chart that showed DT. Range and UT areas I left unmarked but you should be able to see them. I have been trading JPY weakness for 1 1/2 years now and will continue to do so. {image}
Dear Nannnigbob,

Thanks for your reply.Pls find below image & i explain below what i understood from your post & picture
Pls advise me if i'm wrong.

I choose a currency pair which trend above or below 2MA(Simple moving averege 2/ shift 1 /Apply to open).I think Swap charges is + trend is better.
Then I open a trade on D1 chart according to the trend By using my method.(ex-sell Trade)
If my trade go to my side
If my trade go to my side I let it to go until it give me a reversal signal on D1 chart.When price give me a signal to trade opposite direction on D1 chart I open a BUY trade but don't close my original sell trade but Put a stop loss on Entry point(BE point).I let my newly open buy trade to run until price give me a sell signal again.When price give me a reversal signal I close my Newly open Buy Trade With Profit.Then Again I open a sell trade according to the main Trend.Now i have Two trade according to the main trend.I do this again & again Until my main trend is change on monthly candle.If my monthly candle give me a reversal signal I close my all sell trades & let run My last opened buy trade.If my main trend is change to buy i have already open buy trade & i can do again what i do before.

Pls advise if I 'm Wrong...

If My 1st Trade Go against me from the beginning :- Pls advise me what should i do...

Thanks
Helanka
Attached Image (click to enlarge)
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Helanka
  • #285
  • Jun 4, 2014 8:40am Jun 4, 2014 8:40am
Quoting Helanka
{quote} Dear Nannnigbob, Thanks for your reply.Pls find below image & i explain below what i understood from your post & picture Pls advise me if i'm wrong. I choose a currency pair which trend above or below 2MA(Simple moving averege 2/ shift 1 /Apply to open).I think Swap charges is + trend is better. Then I open a trade on D1 chart according to the trend By using my method.(ex-sell Trade) If my trade go to my side If my trade go to my side I let it to go until it give me a reversal signal on D1 chart.When price give me a signal to trade opposite...
Sounds good to me. I trade the 4H chart so I am profiting and reentering more often. I have there the 240, 60 and TMA. I try to start at the bottom of the TMA and profit at the top with several entrances. My entrance point is usually the DP. I then wait for a retrace and go again. So I dont spend as much time in a trade that you propose but it would still work.

The negative trade. Remember I dont start with a full position but 1/3 of one. If I decide it is just a bad trade and I got it wrong my losing trade is 1/3 of a normal trade. However, if I think I have it right then I look for my best next entrance and place 2nd position. Many times if the 2nd profit is greater than the first loss I will close out and start the sequence all over again starting with one trade and seeing if this time I move up. Then I will go with multiple trades.
Moving your SL up to BE is good, I like +5 because if it hits I still want to pocket a profit. I have a rule never let a winner turn into a loser so I pick up those extra pips along the way. If I still like the trade then I go again. I am not afraid to restart the sequence if I dont get it right the first time. Forex likes to jump up and down so it sometimes takes several trades to get it. Once you get it then you can play that trade into the trend. The last several months the market has been ranging tightly so I am getting very few 2nd or 3rd trades into the trend because there simply hasnt been one or it hasnt lasted that long. SO in ranging markets I dont make as much since I only get 1/3 or 2/3 of my position in.

Here is my trading chart using TMA, STO7 for entrances with Daily Pivot. The bars on the right show the daily open, weekly open and Monthly open. Except for the strong buy and sell of last week it has been a very ranging month for the aud/usd. I did not catch this move but missed it.
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  • #286
  • Jun 4, 2014 9:37am Jun 4, 2014 9:37am
Quoting nanningbob
{quote} Sounds good to me. I trade the 4H chart so I am profiting and reentering more often. I have there the 240, 60 and TMA. I try to start at the bottom of the TMA and profit at the top with several entrances. My entrance point is usually the DP. I then wait for a retrace and go again. So I dont spend as much time in a trade that you propose but it would still work. The negative trade. Remember I dont start with a full position but 1/3 of one. If I decide it is just a bad trade and I got it wrong my losing trade is 1/3 of a normal trade. However,...
Dear Nanninggbob,

Pls advise me what is the meaning of DP & TMA
And also pls tell me what currency pairs do you enter Normaly.
If my account have 1000 USD what is the best Lot size to trade.
Your advise is highly appreciated...

Thanks
Helanka
Helanka
  • #287
  • Jun 4, 2014 7:21pm Jun 4, 2014 7:21pm
Quoting Helanka
{quote} Dear Nanninggbob, Pls advise me what is the meaning of DP & TMA And also pls tell me what currency pairs do you enter Normaly. If my account have 1000 USD what is the best Lot size to trade. Your advise is highly appreciated... Thanks Helanka
The TMA is the Triple Moving Average. It is basically the 60 MA with ATR lines. I use the one that is fixed in its position or referred to as the non-painting TMA. DP is daily pivot. Many of the older stock traders use DP with resistance and support lines. I like the ATR lines better.
  • #288
  • Jun 4, 2014 11:02pm Jun 4, 2014 11:02pm
Quoting nanningbob
{quote} The TMA is the Triple Moving Average. It is basically the 60 MA with ATR lines. I use the one that is fixed in its position or referred to as the non-painting TMA. DP is daily pivot. Many of the older stock traders use DP with resistance and support lines. I like the ATR lines better.
Dear nanningbob;If you can pls share that TMA indicator.And also pls tell me when My 1st trade is profit & I enter oppsite side to protect the profit.that is the method you teached me.So pls tell me when I enter that oposite side trade & it not work and again price move to oroginal side from the begining of that trade.in that time what should i do.should closed that trade with a loss ? Pls advise...ThanksHelanka
Helanka
  • #289
  • Jun 4, 2014 11:45pm Jun 4, 2014 11:45pm
Quoting Helanka
{quote} Dear nanningbob;If you can pls share that TMA indicator.And also pls tell me when My 1st trade is profit & I enter oppsite side to protect the profit.that is the method you teached me.So pls tell me when I enter that oposite side trade & it not work and again price move to oroginal side from the begining of that trade.in that time what should i do.should closed that trade with a loss ? Pls advise...ThanksHelanka
Google nanningbob 10.7 and you will find the entire system. It is free and has been developed with the combined wisdom of hundreds of traders.
  • #290
  • Jun 5, 2014 12:42am Jun 5, 2014 12:42am
Quoting nanningbob
{quote} Google nanningbob 10.7 and you will find the entire system. It is free and has been developed with the combined wisdom of hundreds of traders.
Bob,

Your wisdom is much appreciated. I guess what I fail to understand is your strategy for closing toxic trades. There are plenty of great ways to make a profit without a stop loss. However, it's those trades that go sour and need to be closed that always cause a problem. Could you please elaborate on this point a little more?

I've dabbled with trading without a stop loss; relying on the principle of mean reversion to take all my trades to profit. However, it is inevitable that there will be a few times a year where a position will not come back and suffer massive DD. Even trading small lots I could not overcome this dilemma when two, then three, then four pairs suffered from DD the same way.
Remember, Red. Hope is a good thing, maybe the best of things...
  • #291
  • Jun 5, 2014 2:42am Jun 5, 2014 2:42am
Quoting ForexFury
{quote} Bob, Your wisdom is much appreciated. I guess what I fail to understand is your strategy for closing toxic trades. There are plenty of great ways to make a profit without a stop loss. However, it's those trades that go sour and need to be closed that always cause a problem. Could you please elaborate on this point a little more? I've dabbled with trading without a stop loss; relying on the principle of mean reversion to take all my trades to profit. However, it is inevitable that there will be a few times a year where a position will not...
One way to avoid this is to keep your baskets in line. Watch your correlation. If you can hedge, just takes trades in the opposite direction of the DD because you should be getting signals in the opposite direction. If you stack then the mounting lot size in the correct direction will overwhelm the initial losses.

Another way if you cannot hedge in the same account is to trade negatively correlated currencies, and keep the basket balanced. Again, stacking will overwhelm the bad trades. Using EU as an example UC is nearly perfectly negatively correlated. All you have to do then adjust pip value to volatility. This I will leave as an exercise for you. xxx/usd vs. usd/xxx will give negative correlation. You can substitute any currency in the middle.

If you think of position size as different from trade size, you are well on your way. Bob has worked his arse off, has not charged a penny, and every indicator is open sourced. Lots of thinkers here at the Factory.
If you are good at something, never do it for free--Joker
  • #292
  • Jun 5, 2014 3:22am Jun 5, 2014 3:22am
Quoting ForexFury
{quote} Bob, Your wisdom is much appreciated. I guess what I fail to understand is your strategy for closing toxic trades. There are plenty of great ways to make a profit without a stop loss. However, it's those trades that go sour and need to be closed that always cause a problem. Could you please elaborate on this point a little more? I've dabbled with trading without a stop loss; relying on the principle of mean reversion to take all my trades to profit. However, it is inevitable that there will be a few times a year where a position will not...

OK My final line in the sand is 20% DD At that point I close trades. OK but I never want to get to that point so I am closing trades out earlier than that.
1. I enter a trade and it goes nowhere after a couple of sessions, I just close it and try again.
2. I enter a trade and goes against me but I still like the direction of the trade so I look for a 2nd entrance, remember i like to play only 1/3 of my total lot size for my initial entrance. If after a time I dont get a good 2nd entrance and my first entrance is just a bad trade I close it. My MM of only playing a third of my total lot lets me have a lot more room than the average trader.
3. I enter trades 1 and 2 and still not going in my direction. I have read the tea leaves wrong and I plan on my best exit, most likely there was a surprise change of direction. If I still like the long term trend though I will play my third entrance.
4. The market has truly changed from the long term trend. I close out take my loss and move on.

I dont believe there is such a thing as accurately placing trades using 1/100 th of a penny and then using 30/100th of a penny SL. Those that teach that are guaranteeing you lots of SL on trades that would go in your direction with some patience. If you read about traders who play with millions of dollars they use multiple entrances and play long term trends. You can get the trend direction right most of the time but Forex is very volatile at the hundredth and thousandths of a penny. You have to remember you are trying to predict direction on fractions of a penny and that is like a dog chasing its tail.

If you dont believe me go to this thread where institutional traders talk about trading. You wont find the head bashing, chest thumping, name calling of these arrogant so.so's who only yell about losing your money. That is what you expect from a broker mole not a true professional trader. You can tell a true trader because he will talk individual trades with you a broker mole wont. Anyway go here and learn from guys who have won and lost millions working for banks or trading institutions. You will see a whole different attitude about trading from them and how they treat others.

http://www.forexfactory.com/showthread.php?t=486128
  • #293
  • Jun 5, 2014 3:50am Jun 5, 2014 3:50am
My lot sizes are based on my goals. I trade 1-3 penny lots for every 1000 of account. If you have 10K account that would be a 10 cent to 30 cent lot size. Depending on the broker that would be .10-.30 lot or a .01 to .03 lot. If you trade one penny lot size to 1000 you would have to loss 100,000 pips to wipe out your account. Now if you are that bad you dont belong in Forex. My goal is to get 5-10% a month. 5% a month will equal 7x your original investment in 3 1/2 years. Those types of goals are both reasonable and doable. My favorite motto is:

Trade in such a way that you live to trade another day.

I am very conservative with my money and I am not ashamed of it. I am 3.5 years into my plan and have 3-5 years left to retire doing this. Several years ago I stated my goals and got laughed at but I reached them.
1. Pay off all my debt. -------- DONE
2. Take a vacation and then paying off my credit card with Forex winnings ------------- DONE
3. Pay cash for my vacation and not use my credit card ---------------- DONE I went to Sanya for Easter for 5 days, paid cash for everything and my credit is still at 0 balance.
4. Next goal -------------- Pay cash for a house, I am 20% on my way there.

I made these goals doing what I proposed. You do not have to trade high leverage, big lots, one in one out. You can trade small lots, low leverage, and grow your account slowly. And the only money my broker makes off of me is the spread. Thats it.
  • #294
  • Jun 5, 2014 6:22am Jun 5, 2014 6:22am
Quoting Adal
Trading xxx/111 and 333/xxx together is the same as trading just 111/333 (or 333/111). The math says so. But of course, some people here believe that math somehow doesn't apply to forex, that forex transcended basic math


Interesting
  • #295
  • Jun 5, 2014 6:26am Jun 5, 2014 6:26am
Quoting Rap Skallion
{quote} Bingo! Now this is not a true hedge, someone pointed out because it is not of the same currency. It is only a 98% true hedge. That's pretty much a hedge to me, compared to Fixed stop loss. I'm willing to bet one acknowledgement no one out there can match these results with a "True" single pair hedge. Somebody prove me wrong: I will be grateful to be steered out of an erroneous path. Most of the people posting here do not believe that the "True" hedge is the best way to go, do they? They just despise fixed stop loss so much they...

What's the stakes and i'll prove you wrong...ensure the stakes are very high so you see something incredible, otherwise I won't waste my time!
  • #296
  • Jun 5, 2014 7:19am Jun 5, 2014 7:19am
Quoting nanningbob
{quote} Google nanningbob 10.7 and you will find the entire system. It is free and has been developed with the combined wisdom of hundreds of traders.
I shall do this!
  • #297
  • Jun 5, 2014 8:11am Jun 5, 2014 8:11am
Quoting tradability
{quote} What's the stakes and i'll prove you wrong...ensure the stakes are very high so you see something incredible, otherwise I won't waste my time!
Tradeability this is not directed at you but I used your quote for my rant. So forgive for using it but this is ridiculous.

The whole problem with this hedging debate is they think if you buy and sell at the same time you have the same thing. You dont. You have two different trades, one buy and one sell. The whole math thing is only valid if you close both at the same time. If you dont then the math thing is not valid. I trade one for one day like the sell and get a result and then close the buy 3 days later and get a result, the result is two separate trades. As long as you take them as two separate trades the math thing is garbage. Trying to treat them as one trade is the whole problem with the math thing. Of course you got swap costs, you have two trades, of course you have spread costs, you have two trades. So the dog keeps chasing the same cat around the tree, around and around the argument goes.

The bottom line truth is the math people would never trade the way the math goes, so it is a useless argument. Unless you actually trade buy close, sell close, buy close at each point, (which by the way is rarely if ever done) the math thing is totally useless. WHY? Because no one trades that way. However, there are many traders who will hedge their winnings and take the short, then close the short and continue their long. How do I know because people who do it showed me the technique. They do it in real life in real life trading.

The math people, do they ever actually trade that way? Buy, close, sell immediately at the close, close that trade and then buy at the same prices they closed at? NO. So the argument is just that, a lame argument over something they dont even practice themselves. You will find no one here at FF or any other forum teaching to trade buy, close, and reopen at your close a sell, close it, and then at that close do another buy. No one does that, and no one teaches that but these one dimensional thinkers try to teach it as a fact. It is silliness.

Do I use SL? no. Do I take losses? yes but I will play that 70% chance that price will come back to BE or go into profit. What about the other 30%? I will place a 2nd trade if I think the trend is still valid. If not I will close and move on. Do I really care about what a pencil on a piece of paper means? no Do I care about my account balance that keeps going up year after year? yes Account balance going up is the only measure of success. Not math, not pips, not SL, hedges, silly forum debates, or anything else. This is a bottom line business and if you are a one in and one out one dimensional trader, I dont give a ..................... I have found the most consistently profitable method of trading that has the best success is multiple level trading. If you one dimensional trade buffs dont understand or comprehend it. That is your problem not mine.
  • #298
  • Jun 5, 2014 12:24pm Jun 5, 2014 12:24pm
Quoting nanningbob
{quote} Do I care about my account balance that keeps going up year after year? yes Account balance going up is the only measure of success. Not math, not pips, not SL, hedges, silly forum debates, or anything else. This is a bottom line business and if you are a one in and one out one dimensional trader, I dont give a ..................... I have found the most consistently profitable method of trading that has the best success is multiple level trading. If you one dimensional trade buffs dont understand or comprehend it. That is your problem...
Well said Bob Making bank IS the only thing that matters if you are trading Full Time for a living. And thankfully there are a lot of ways to do this without utilizing the strategies that most traders do and get stopped out time and time again!
  • #299
  • Jun 5, 2014 12:25pm Jun 5, 2014 12:25pm
Well said Bob. I believe, one of the underlying assumptions of these one dimensional guys are about timing the market correctly. That is why, as you already pointed out, they will not trade those multiple open and close type of entries. For multidimensional type of traders, time in the market is more important than timing the market. We are nearly always in the market, whereas the one dimensional guys are in and out the market. There are times they are not in a trade at all, as they wait for all their indicators, patterns or whatever other "edge" to line up before a trade is entered.
Much depend on luck, but the more you practice the luckier you get! NT & GP
  • #300
  • Jun 5, 2014 12:27pm Jun 5, 2014 12:27pm
Quoting yonnie
hi nanningbob, would be interested in your experiment hedging E/CH. once the DD is fixed, how much profit % per month would be possible? the swap brokers charge can differ considerably and it would also be good if the broker takes long and short trades in account and charge swap on the balance. for margin purposes also take long and short trades in account and margin only applicable on the balance. do you know of broker(s) having these? thank you
The problem I am having is getting an EA to work doing this. Getting the bugs worked out. The problem I am having is once a to is taken is refilling the spot with anew pending order. So I have to solve that problem first
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