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Hedge a losing position?

  • #121
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  • Oct 13, 2015 12:54pm Oct 13, 2015 12:54pm
Quoting PipMeUp
It is well known that daily can be up trending while M5 is going down. Having both longs and shorts when you trade both M5 and D1 make sense because actively netting out the exposure with market orders is a hassle, it increases the latency and you've a risk of connectivity loss leaving an exposure unattended. But in this scenario each position is open on its own right independently of the previous ones being in the green or in the red. Nedging a loser or freezing a winner can't make sense. When you open a short it is because you're sufficiently...
That's all I wanted to say.

There is no reason to close your longtime buy while you going short intraday.
  • #122
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  • Oct 13, 2015 1:16pm Oct 13, 2015 1:16pm
Quoting mvp77
{quote} That's all I wanted to say. There is no reason to close your longtime buy while you going short intraday.
Yet you don't short because the long is in profit. You short because your intraday method tells you so. You would go short the same way if the long didn't exist.
No greed. No fear. Just maths.
  • #123
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  • Oct 13, 2015 1:19pm Oct 13, 2015 1:19pm
Quoting PipMeUp
{quote} Yet you don't short because the long is in profit. You short because your intraday method tells you so. You would go short the same way if the long didn't exist.
omg
  • #124
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  • Oct 13, 2015 5:02pm Oct 13, 2015 5:02pm
Nedging is wasteful, inefficient, and costly when compared to just closing the trade. It offers no comparative advantages so it should be avoided.
  • #125
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  • Oct 14, 2015 5:48am Oct 14, 2015 5:48am
Quoting PipMeUp
{quote} My question would rather be "why isn't he opening the position at the time he releases the nedge, avoiding paying the spread twice and paying the swap while waiting to know the direction? {quote}
Yeh, that is a good point.

Short answer is I don't know, it would depends where and what he does with his stop.

He likes to be in the market all the time, he rates survive-ability of positions highly.


Quoting PipMeUp
Can you give an example? As long as you're locked in a flat position there is no gain nor loss. When you unlock the nedge at a time you think the market gives no hint about its direction you can as well flip a coin. If your point is that the market will usually revert you can also open a long/short when you consider the price is "too low"/"too high" = at the time you close half of the nedge. If you perpetually close the half in profit and re-open the same position to stay flat you'll see that the accumulated profit is the same as the unrealized...
No I wouldn't be nedging for those reasons. The only reason I would nedge is to keep an original position open so I could run it further once the nedge is closed, and to protect/freeze equity at a time of uncertainty.

Example:
The survival rate of a new positions is 33% meaning that for every 1 position that does survive 2 will die based on my entry methods.

After I few attempts I have a position established on USDJP at 100.00 believing price to move to 120.00. In 1 months time price is at 110.00 I have 1000 pips unrealized. News sensitive event is coming out, lots of uncertainty.

I don't want to close the position because I think price will move higher, but I want to protect profits because I am uncertain what the news means for future price.

Options:
1. If I close the position established @ 100.00 that position is closed forever, profits would be booked and I would have to establish a new position after the news. Remember the survival rate of a new positions is 33% meaning that for every 1 position that does survive 2 will die based on my entry methods.
2. If I nedge the position un-realised profits are frozen, you pay some extra spread and swap for the option of running that original position further at the point when you close the nedge.

I nedge. The news event is favorable, price is now @ 111.00, I close the nedge incurring a loss (which I can cover if I want, controlling drawdown if necessary), and the other position is still running.

The only benefit from nedging imo is that you simultaneously freeze equity, and never close the original position meaning you can run it at a future date once the nedge is closed. You pay for this through extra spread and extra swap for the privilege.
  • #126
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  • Nov 29, 2015 9:36am Nov 29, 2015 9:36am
Hedge vs stoploss definitely has an advantage. e.g If you take a long position on EUR/USD at say 1.0500 based on your indicator and it goes against you by 100 pips to 1.0400 (your mental SL position) you can open a short position there with a stoploss at your original point i.e 1.0500. If the price retraces to 1.0500 chances are it will go your original way. If it does not, you can always close the hedge when your indicator gives you an opposite signal. Better than a traditional stoploss, I think. Swap etc are too small to be considered here.
  • #127
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  • Nov 29, 2015 11:47am Nov 29, 2015 11:47am
Just went thru this entire thread and all I can say is, HuH?

The Need to be right (righteous) about one's position, is just about all I've seen in these pages. The sooner one gives up the NEED to be RIGHT, real life can begin.

Myself, I've never hedged or considered it. After reading, listening to, and watching several of the talking heads, in this industry, I've decided to take the bulk of all of it, and do the exact opposite. Most folks that know anything at all about trading, look at me like I have three heads and green skin. That's OK because that's Their Opinion.

Here we go:
• Price never moves in a straight line for a protracted period of time. This is one of the VERY FEW axioms we can apply to trading anything.
• By locating daily extremes in price movement, you can gain an edge, because, (sure as you will need to drink & eat, at some point in your life) price will retrace, to some extent, at some point in time.
• Find a method by which you can locate the extreme, and exploit it. This happens Every Day, on some pairs, at some point in time. Be there to take advantage of this, and your chances of losing are limited to;

° Black Swan Events.

------- & -------

° And Central Bank intervention.

Of course, during one of the two mentioned events, about half of the people with open trades will also lose.

Opinions expressed here, are solely those of me…. 8•>
  • #128
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  • Nov 29, 2015 12:30pm Nov 29, 2015 12:30pm
Quoting madmax85
{quote} yes it was 6 levels with different lot sizes on same direction , on GBPUSD it was rally against my direction.
exiting with a small loss is always better in my opinion, because when you hedge there is a possibility you can dig your self even deeper in drawdown.
and you also pay one extra comission, hedging like that is very difficult.

let's assume price go 25 pips against you and you decide to hedge your position,
ok, so now you have minimised your loss to 25 pips, but you are not getting those 25 pips back unless the market turns around compleatly,
and if it does, your hedge is going into loss, by hedging you also minimised your wins,
and if it turns around again, then you have to hedge that one too but you exit the first, so now you still have one hedge,
and then what? maybe the market turns around again, now you must exit the second hedge and hedge again.

in this repeating procedure you lose some pips here and there, plus the 3 extra commisions and spreads.
so when you finally get out off it, you have more loss that if you just wold have been stopped out.
there is also a temptation to martingale the hedge because you want to get that drawdown back.
and now you are really gettin into dangerous waters. you might lose a lot more.

let's just face it, if the trade starts to go against you, then accept that you where wrong and the market was right.
there is no reason you want to stay in if you are wrong.
Bulls are stupid Animals!especially when Im short!
  • #129
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  • Nov 29, 2015 3:27pm Nov 29, 2015 3:27pm
I learned quickly that there are about of other trading practices to master before thinking its a good idea to start hedging a losing trade. If you are losing on the trade, your analysis was wrong, which means you could just as easily be wrong again when the market retraces and you unfortunately hedged, making it I'm possible to regain your losses as it moves back to the direction you originally hoped.. if you are not willing to close a losing position and didn't set a comfortable stop, then you dont have any business dabbling with trading level 5 if you are failing to master level 1. There are excellent times to hedge, but that is not one of them. If you a down on a trade, that money is gone, not in a holding tank.. so closing the position is the better choice to hedging it. That is where you will get the time to reevaluate the market trend.
  • #130
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  • Aug 18, 2016 2:26pm Aug 18, 2016 2:26pm
What to say.
Hedge is like giving yourself or your algo another shot.


Ok there it is , your algo says - there we have an opportunity!
Then u enter .
1 lot , USDJPY for example, low spread & trending pair.
After 10 minutes position have a 10 pip loss
Then at 10 pip + 2*0.5 [spread roundtrip] loss your stop order opens up opposite position , same size.
11 pip loss.
What to do next ?

Then the market goes somewhere and .. there we have another opportunity marked by our algo.
If you leave your losing position then it affect your ballance curve,
if you wanna leave only gaining position
then your ballance curve will be smooth and shiny.

And thats the way your algo got another chance!
  • #131
  • Quote
  • Dec 24, 2016 8:07am Dec 24, 2016 8:07am
Its a mentality thing and how/if you present yourself, here is a example:
last Thursday myfxbook say i traded -164 pips, but i had 3% balance grow the same day.

once realised you can't buy bananas with pips, hedging is in a whole different light
  • #132
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  • Apr 19, 2018 12:11pm Apr 19, 2018 12:11pm
Proper hedging is not buying and selling at the same time. The right hedging is when you lose pips from your starting trade direction, put a 40% or double your lot size from the opening, to the opposite direction then TP must be the first trade TP plus the losing pips where you enter the trade. If it comes back again, then put 90% of lot size from the starting opened direction or triple it to the same direction of the first trade. Repeat the process until it hits one of your tp then close all your positions. One have losing position and the winning position can cover up all your loses. You will have a green portfolio in the end.
  • #133
  • Quote
  • Dec 2, 2018 4:34am Dec 2, 2018 4:34am
Quoting fffx
Hedge vs stoploss definitely has an advantage. e.g If you take a long position on EUR/USD at say 1.0500 based on your indicator and it goes against you by 100 pips to 1.0400 (your mental SL position) you can open a short position there with a stoploss at your original point i.e 1.0500. If the price retraces to 1.0500 chances are it will go your original way. If it does not, you can always close the hedge when your indicator gives you an opposite signal. Better than a traditional stoploss, I think. Swap etc are too small to be considered here.
instead of stop loss ,do we place one opposite trades of the existing one ,or we place 1 buy and 1 sell trades,so in both the scenario,either we will close on breakeven if it is the same lot or if it is double lot,we will make profit.
  • #134
  • Quote
  • Dec 5, 2018 1:22am Dec 5, 2018 1:22am
Quoting T4Trade
{quote} instead of stop loss ,do we place one opposite trades of the existing one ,or we place 1 buy and 1 sell trades,so in both the scenario,either we will close on breakeven if it is the same lot or if it is double lot,we will make profit.
Yes thats all there is to it, here is a example from this morning,
Attached Image

4% loss 6% gain = overall profit

usually i have a algo doing this for me, but when that happened this morning was kind of still asleep
  • #135
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  • Dec 6, 2018 9:40am Dec 6, 2018 9:40am
Hedging a losing position is like betting at the same time on “red” and “black” colors on the Roulette- no sense
  • #136
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  • Dec 11, 2018 5:40am Dec 11, 2018 5:40am
i use hedge in my trades. as all other strategies, hedging is not easy and not suitable for everyone.
golen trades
2024 lucky gold trade All Time Return: -3.3%
  • #137
  • Quote
  • Dec 11, 2018 8:41am Dec 11, 2018 8:41am
Quoting vyder
hi guys, i was curious, should you hedge a losing position to get a good idea of market direction/stop losses from mounting? I have heard someone speak of this but wanted to know if this is a great strategy or not.
Actually my opinion to hedge a losing position is a bad idea. Just accept your losses before it become something needed hedging. Don't allow losses grow and close it early and keep profits to your aim.
#Anthonywins
  • #138
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  • Dec 11, 2018 9:44am Dec 11, 2018 9:44am
my current hedging positions, using ea, cant do it manually to ensure positons are opened as planned.

Attached Image (click to enlarge)
Click to Enlarge Name: 81211 978 2235.png Size: 182 KB
golen trades
2024 lucky gold trade All Time Return: -3.3%
  • #139
  • Quote
  • Dec 14, 2018 4:14am Dec 14, 2018 4:14am
Quoting fx4money
my current hedging positions, using ea, cant do it manually to ensure positons are opened as planned. {image}
Hey fx4money, could you please share this EA? It looks interesting and I will be pleased to test it Thanks.
  • #140
  • Quote
  • Dec 14, 2018 5:36am Dec 14, 2018 5:36am
Quoting vyder
hi guys, i was curious, should you hedge a losing position to get a good idea of market direction/stop losses from mounting? I have heard someone speak of this but wanted to know if this is a great strategy or not.
I don't see the point of hedging.
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