What if you could switch trades? | Forex Factory

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What if you could switch trades?

  • #1
  • First Post: Jun 12, 2014 3:36pm Jun 12, 2014 3:36pm
switch the direction of your trade by switching with someone holding in the opposite direction with an equal value of their trade relative to yours.

For example:

If a person is in a buy trade worth -$10

and someone else is in a sell trade worth -$10,

can't both people just exchange their trades with each other and call it a fair deal? Why isn't the system set up for this? Seems like it could really help traders out..
  • #2
  • Jun 12, 2014 4:17pm Jun 12, 2014 4:17pm
Hmmm, you mean I go long GBPUSD and you go short AUDCHF and we switch positions lol I wish for that to be true Let me see how that would work in the real life.. I buy GBP and sell USD and now I'm stuck with overvalued GBP..on the other hand you sell AUD and buy CHF and you are holding in your hand CHF.. No I can't see it working sorry
  • #3
  • Edited 4:50am Jun 13, 2014 4:38am | Edited 4:50am
Quoting FXForLife
switch the direction of your trade by switching with someone holding in the opposite direction with an equal value of their trade relative to yours. For example: If a person is in a buy trade worth -$10 and someone else is in a sell trade worth -$10, can't both people just exchange their trades with each other and call it a fair deal? Why isn't the system set up for this? Seems like it could really help traders out..
Even if they switched trades, both would still be -$10. I don't see how that would help anybody. All things being equal, price has approx 50/50 probability of moving in either direction, after the switch, hence neither is better off mathematically.

Surely you're not suggesting that the trades cancel each other. (-$10) + (-$10) = -$20, not zero. Forex is a zero sum game. If two traders are collectively -$20, then the rest of the trading world is collectively +$20.

If I owe the bank $10, and you owe the bank $10, do you think the bank should cancel both of our debts, merely because they're equal in size? Or alternatively, how would either of us be better off if we switched bank accounts?
  • #4
  • Jun 13, 2014 4:47am Jun 13, 2014 4:47am
Quoting FXForLife
switch the direction of your trade by switching with someone holding in the opposite direction with an equal value of their trade relative to yours. For example: If a person is in a buy trade worth -$10 and someone else is in a sell trade worth -$10, can't both people just exchange their trades with each other and call it a fair deal? Why isn't the system set up for this? Seems like it could really help traders out..
Reason your Q

Trader 1
bought 1,70

trader 2
sold 1,60

market 1,65

T1:-5 pl
T2:-5 pl

To net both positions, its -10, if we assume same notional

CAnt be done
  • #5
  • Jun 13, 2014 12:31pm Jun 13, 2014 12:31pm
thanks for the replies!
  • #6
  • Jun 17, 2014 2:37pm Jun 17, 2014 2:37pm
Because in order for you to make money, someone else has to loose. Now that's reality
  • #7
  • Jun 18, 2014 5:03pm Jun 18, 2014 5:03pm
Quoting Danny Maina
Because in order for you to make money, someone else has to loose. Now that's reality
Exactly. Every time you lose you're paying someone else.
  • #8
  • Jun 18, 2014 11:02pm Jun 18, 2014 11:02pm
Quoting FXForLife
thanks for the replies!
I don't know what was your intention behind this question of switching trades. You should have explained a bit in your first post to get relevant answers.

It is not legal to exchange stocks without involving the stock exchange, unless such private deals are reported to the stock exchanges. Also, no one can open a private stock exchange. Similarly, forex trading is subject to many differing local regulations. In some countries, it is even illegal.

Allowing two traders to exchange their counter positions will open up a whole new chapter in forex market. Then there will be groups and pools of traders exchaning trades. Not only brokers will be losing their spread/commission, but netting such transactions will become a huge task. It will also open new ways for money laundering and illegal transfers, etc.
The Thief of Wall Street
  • #9
  • Jun 19, 2014 2:52am Jun 19, 2014 2:52am
its a mind tickling idea but im afraid it wont work..
  • #10
  • Jun 25, 2014 1:14am Jun 25, 2014 1:14am
Could you explain it in more detail to us what you are envisioning?
  • #11
  • Edited 12:05pm Jun 25, 2014 11:54am | Edited 12:05pm
Quoting jotekfinance
Could you explain it in more detail to us what you are envisioning?
Sure. In my opinion it's exceptionally difficult to make money in forex in a consistent manner. And a few weeks ago I had a realization that maybe one of the only ways to win would be to have the ability to change the direction of my trade without realizing a loss. I'm not an expert on market mechanics so I was hoping that if I had a sell trade open on GBPUSD worth (-$100) and I wanted to switch into a buy trade, there could be some sort of matching system that would find other traders who wanted to switch out of their GBPUSD buy trades worth about (-$100), and then the system would execute the switch if certain parameters specified by the traders were met, like if the orders were X amount of pips away from the current price etc., if this makes sense.

I suppose spread would have to be fully commissioned based in this type of setup and realized on the opening the of the trade (?) if the lot sizing of the investors' trades were to be different on the switch. Changing the market a bit would be worth it if it would work though! I know most people who really like forex and have tried to trade it extensively probably think though that it can be a very frustrating market. We need to try to change that and make something more out of it.
  • #12
  • Jun 25, 2014 2:34pm Jun 25, 2014 2:34pm
Nope..but why on earth would you want to switch positions with another trader when you can take the position on the opposite side, on your own?
  • #13
  • Jun 26, 2014 10:32am Jun 26, 2014 10:32am
Options are always a good thing, imho. You never know why someone would, but someone could build it into their trading plan I guess. The fact that it doesnt exist now and therefore no one has used it doesn't mean that it could not be implemented and have benefits we just don't realize yet. Anyhow, interesting thought.
  • #14
  • Jun 26, 2014 3:42pm Jun 26, 2014 3:42pm
Quoting Forexnuts
Nope..but why on earth would you want to switch positions with another trader when you can take the position on the opposite side, on your own?
The advantage to switching trades with someone is that you can change the direction of your trade, potentially getting out of a losing one.
  • #15
  • Jun 27, 2014 1:57pm Jun 27, 2014 1:57pm
Quoting FXForLife
{quote} The advantage to switching trades with someone is that you can change the direction of your trade, potentially getting out of a losing one.
I get it, and since all traders can hedge their positions by opening opposite orders and further control their exposure to any loss, wouldn't that make more sense rather than swap positions with another trader?
  • #16
  • Jun 27, 2014 2:45pm Jun 27, 2014 2:45pm
Quoting Forexnuts
{quote} I get it, and since all traders can hedge their positions by opening opposite orders and further control their exposure to any loss, wouldn't that make more sense rather than swap positions with another trader?

OK, but then to change directions of your net position all you can do is add on bigger and bigger trades and you're going to have a bad run where your margin becomes exhausted, and then the market turns one last time of course you can't make that one last turn and your net position goes negative and you are then forced to take a big loss. I've thought about systems like these and used them but the market will always range too much eventually. This is just my opinion of course.
  • #17
  • Jun 27, 2014 6:58pm Jun 27, 2014 6:58pm
IMO none of what is being discussed here makes any sense.

Changing the direction of a trade does not reverse any losses to date, nor does it improve the probability of your now being in the right direction, following the change.

If you're net long while price is rising, and/or net short while it's falling, you make money. Vice versa, you lose money. Nothing else matters: previous trades, previous direction, previous profit and loss.

Switching trades, hedging, using your profit/loss to make trading decisions, etc etc........ none of this changes market behavior or probabilities. The market doesn't behave differently just because one insignificant retail trader is in profit or in loss. Focusing on these kinds of irrelevancy is a major reason why the vast majority of aspiring traders fail to find a winning 'edge'.

If you want to be a successful trader, study the real mechanics of the game: how and why move prices move, or at least the price patterns that the underlying mechanics create. Then find objectively provable instances of directional or behavioral bias in price movement, and build a trading system around them.
  • #18
  • Jul 1, 2014 1:22pm Jul 1, 2014 1:22pm
Quoting FXForLife
{quote} OK, but then to change directions of your net position all you can do is add on bigger and bigger trades and you're going to have a bad run where your margin becomes exhausted, and then the market turns one last time of course you can't make that one last turn and your net position goes negative and you are then forced to take a big loss. I've thought about systems like these and used them but the market will always range too much eventually. This is just my opinion of course.
Of course, if the market corrects itself post the hedge placement, you'll wind up with a bigger loss..which is why as hanover suggests, it is better to understand how the market works, how price reacts and moves..and set up an entry..
'Though I should point out that countless traders have managed to hedge their positions successfully and think there are a couple of threads in FF on this, but the strategy varies from one to the other. Bottom line, rather than try and change positions with another trader, which you cannot do, you can either hedge or try and understand the "why" about the prices..
  • #19
  • Jul 5, 2014 4:32pm Jul 5, 2014 4:32pm
Quoting Forexnuts
Though I should point out that countless traders have managed to hedge their positions successfully and think there are a couple of threads in FF on this, but the strategy varies from one to the other.
If, by "hedging", you mean being both long and short in the same pair, then here are some of those threads:

http://www.forexfactory.com/showthread.php?t=68598
http://www.forexfactory.com/showthread.php?t=163814
http://www.forexfactory.com/showthread.php?t=137836
http://www.forexfactory.com/showthread.php?t=163467
http://www.forexfactory.com/showthread.php?t=264690
http://www.forexfactory.com/showthread.php?t=174626
http://www.forexfactory.com/showthread.php?t=351191
http://www.forexfactory.com/showthread.php?t=400463
http://www.forexfactory.com/showthread.php?t=487176

Bottom line is that "hedging" in itself does not provide a strategic edge, because it's possible to make exactly the same pips by simply using single positions; no matter how you approach it, you can only ever be net long, net short or net flat, at any given point. It's all explained in the above threads (by those who understand the math involved).
  • #20
  • Jul 5, 2014 4:40pm Jul 5, 2014 4:40pm
The "hedgers" advocate the idea of two different trades which are coincidentally in the same pair You can look at it like that but it does require a good set of skills to do that...i found out that I'm better at trying to average the position rather than trying to open a "hedge" position to try to save losses...
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