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Hedging is it really useful?

  • #81
  • Edited Dec 31, 2015 11:49am Dec 30, 2015 10:08pm | Edited Dec 31, 2015 11:49am
Quoting laszlo-1
Mathematically looks the same, but gambling is not about that. ..... Hedging gives an opportunity to move the bet away. Or play an other range. ....... Hedging is to stop losses. SL is to realize it.
Judging by their comments, most folk who believe that same-pair hedging offers a strategic advantage tend to think in terms of individual trades, instead of overall bottom line. The best traders take this one step further: they base their exits on market behavior and probabilities, as opposed to their P/L, which the market cares nothing about.
Quote
With sl players keep loosing.
There are plenty of profitable traders who use SLs. If you're getting stopped out repeatedly, then figure out why and adjust your SL levels (and probably your entries) accordingly. Watch hundreds of intraday price charts unfold tick by tick, study what is happening, and join the side of the predators rather than the prey.
Quote
Illustrating how to win in a losing game is not correct.
Trading is not a losing game -- if you have the necessary knowledge and experience.
___________________

@everybody: Happy new year. Many pips in 2016!
  • #82
  • Dec 31, 2015 3:38am Dec 31, 2015 3:38am
Quoting Kilian19
{quote} In my interpretation they are not the same. {image}
Killian here's my interpretation of your picture

Attached Image (click to enlarge)
Click to Enlarge Name: market_move_001.png Size: 13 KB


I apologize for the lack of any paint skill
  • #83
  • Jan 3, 2016 9:49am Jan 3, 2016 9:49am
What Hanover said and also kudos to Nubcake for the beautiful analogy of why "hedging" in to cover a losing position is useless.

Quoting nubcake
Nedging is never useful. Or should I say, nuseful. Yeah, that's it. Nedging is nuseful you nucking netards. Get it in your thick heads, please. Opening a long and a short at the same time on the same pair is like wearing two condoms to hump a Hasselhoff pillow. You've paid twice for the privilege with no actual payoff and are just embarrassing yourself when you admit it to the public.
If you want to purely hedge out a position in the spot FX market then don't user another spot FX position .... at least not in the same pair! Hedging is about reducing risk or creating scenarios (see spread trading) that allows you to benefit if the markets your hedged across both go up or down or in opposite directions.

In my opinion (appreciate we all view the world differently), if you've blown past your planned exit and are already in the hole at -100pips don't be loyal to a loser by enshrining it with a counter trade in the same pair. The only time you "add" to the position is if you are planing to average out. In that scenario you aren't looking for a "hedge" you're trading the new conditions and make your decisions accordingly. Also if your aiming to average out you need to have your mental game in check - after all it must have slipped for you to get into the mess to begin with.

Just my 2 cents.
9047

p.s.. Hasselhoff pillow cases are for sale on e-bay (http://www.ebay.com/itm/PERSONALIZED...-/261339061121) .... if your in the mood.
  • #84
  • Jan 3, 2016 10:11am Jan 3, 2016 10:11am
My experience in hedge is only useful if you make mistake in range moments. That give you changes for recover the trade later. This happened in GU last 2 months. But you have close that bad trade when you have confirmation of range break. Because you never know when market will come back. Sometimes never come back if this happends in very extremes prices ( 1.80+ in GU for example ).
Try don't lose pants never...
  • #85
  • Jan 3, 2016 1:28pm Jan 3, 2016 1:28pm
You argued and provided proof that SL and hedging mathematically produces the same result. And I agree with this.

Quoting hanover
There are plenty of profitable traders who use SLs.
If both of your statements are true, then hedging should do the same.

However, re-quote myself:
"Mathematically looks the same, but gambling is not about that. ..... Hedging gives an opportunity to move the bet away. Or play an other range. ....... Hedging is to stop losses. SL is to realize it."

You somehow can't see it, and if you are lucky, you don't have to.

Quoting hanover
If you're getting stopped out repeatedly, then figure out why and adjust your SL levels (and probably your entries) accordingly.
Because the price gets moved to the other direction.

Quoting hanover
Trading is not a losing game -- if you have the necessary knowledge and experience.
Losing for 95% - non losing for 5%. Knowledge and experience doesn't lead to success. Only luck, even if everyone likes to deny it.
  • #86
  • Edited Jan 4, 2016 6:44pm Jan 3, 2016 7:57pm | Edited Jan 4, 2016 6:44pm
Quoting laszlo-1
If both of your statements are true, then hedging should do the same.
Yes, given the same price levels, SL and and same-pair-hedging are equally profitable (if we ignore the extra swap costs). My argument has always been against the notion that same-pair-hedging can be more profitable than using conventional exits.
Quoting laszlo-1
You somehow can't see it
I don't wish to repeat what I've written dozens of times before. Each one of us believes that he can see something that the other can't.
Quote
Knowledge and experience doesn't lead to success. Only luck, even if everyone likes to deny it.
In that case, there is no point in continuing this discussion.
  • #87
  • Jan 3, 2016 11:33pm Jan 3, 2016 11:33pm
Quoting hanover
{quote} Yes, given the same price levels, SL and and same-pair-hedging are equally profitable (if we ignore the extra swap costs). My argument has always been against the notion that same-pair-hedging can be more profitable than using conventional exits. {quote} I'm not going to repeat what I've written dozens of times before. Each one of us believes that he can see something that the other person can't. {quote} In that case, there is no point in continuing this discussion.

use a swap-free account if you want to hedge , there are plenty of them, do you guys think is a good time to hedge AUD ? plan to start buying 0.01 lot @0.72
  • #88
  • Apr 30, 2017 1:54am Apr 30, 2017 1:54am
At present I am not willing to hedging at all , because I have bad experience when work using hedging , loss more wider than recover loss, hard part using hedging when should open lock hedging , this is like as dilemma, if good in analysis might possible become profit , but if wrong the way also will making loss more.
  • #89
  • Apr 30, 2017 3:26am Apr 30, 2017 3:26am
People who say that hedging is not useful should understand that there are many ways to trade.

I use 2 strategies and I often have trades open in both directions
Trades can run for minutes or for days or months.
I don't call it hedging, I call it catching trading opportunities.
Provided that the opposite trades open and close at different times, they can all be profitable.

I also do this for risk minimization.
Having trades open in only 1 direction puts our account at risk.
Ask yourself, How big a spike can your account handle?
100pips? 500 pips? 1000pips?
Are you going to be in trouble if your account suddenly goes to -1000 pips?

If your answer is yes, then perhaps you'll need to reconsider your lot size.
If there are trading opportunities in the opposite direction, and your strategy allows it, why not take them?
Something to think about.
Have a nice day
  • #90
  • Apr 30, 2017 3:31am Apr 30, 2017 3:31am
Quoting billv
I also do this for risk minimization. Having trades open in only 1 direction puts our account at risk.
Can you explain me the difference between having open:

1) 4 lots long and 2.5 short

2) 1.5 lots long
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #91
  • Apr 30, 2017 4:19am Apr 30, 2017 4:19am
Quoting michisuperfr
{quote} Can you explain me the difference between having open: 1) 4 lots long and 2.5 short 2) 1.5 lots long
Are you asking because you don't understand the difference?
The point of my post is that there are many ways to trade
Have a nice day
  • #92
  • Apr 30, 2017 5:43am Apr 30, 2017 5:43am
Quoting michisuperfr
{quote} Can you explain me the difference between having open: 1) 4 lots long and 2.5 short 2) 1.5 lots long
Yes! Double profit!;-)
Maadik Hugiis. IQ 69.
  • #93
  • Apr 30, 2017 7:27am Apr 30, 2017 7:27am
Quoting billv
Are you asking because you don't understand the difference?
Exactly. You've said

Quoting billv
I also do this for risk minimization. Having trades open in only 1 direction puts our account at risk.
And I would like to hear a logical explanation how you minimize your risk with opening additional positions in the opposite direction compared to closing the difference and having the rest in one direction open.
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #94
  • Apr 30, 2017 7:49am Apr 30, 2017 7:49am
Hedging is it really useful? yes, if you are a MM broker.

hedging your bets, that's useful for us.
  • #95
  • Apr 30, 2017 8:03am Apr 30, 2017 8:03am
I disagree that what people are referring to as "hedging" is actually hedging. What they call hedging is just locking a position in place and paying carry on it rather than "giving back" their profits. It is a totally psychological play in my opinion.

What I see as hedging is taking opposing positions through instruments which are poorly or negatively correlated where there is a >0 expected return on both trades. That is very useful.
  • #96
  • Edited May 1, 2017 4:02am Apr 30, 2017 5:29pm | Edited May 1, 2017 4:02am
Quoting michisuperfr
I would like to hear a logical explanation how you minimize your risk with opening additional positions in the opposite direction compared to closing the difference and having the rest in one direction open.
You obviously didn't read my post correctly
I said that they are independent trades, so they are not working together
BUT when they are all open, some of them will cancel each other out so the account has less exposure.

In your example 1 the exposure is 1.5 lot but the trading potential to make money = 6.5 lots
In your example 2 the exposure is also 1.5 lot but with a much lower trading potential.

I'm not suggesting that this technique is suitable for you or for anyone else so move on please.
I am out of here.
Have a nice day
  • #97
  • Edited 10:18am May 1, 2017 3:52am | Edited 10:18am
Quoting billv
{quote} You obviously didn't read my post correctly I said that they are independent trades, so they are not working together BUT when they are all open, some of them will cancel each other out so the account has less exposure. In your example 1 the exposure is 1.5 lot but the trading potential to make money = 5.5 lots In your example 2 the exposure is also 1.5 lot but with a much lower trading potential. I'm not suggesting that this technique is suitable for you or for anyone else so move on please. I am out of here.
I honestly just didn't understand it, but now I get what you mean.
If the trades are independent and one doesn't just open the opposite positions to reduce the net exposure (It's then more a side effect?) then I definitely see sense in it.
"Men Who Can Both Be Right & Sit Tight Are Uncommon" ~ Jesse Livermore
  • #98
  • Jan 6, 2026 10:46pm Jan 6, 2026 10:46pm
I think hedging can be useful depending on how and why someone uses it. For some traders, it helps them stay comfortable in the market during uncertain moves, while others prefer to manage trades in a simpler way. It really comes down to trading style, experience, and how well it fits into a personal plan. What works well for one trader may not feel necessary for another.
  • #99
  • Jan 9, 2026 2:45am Jan 9, 2026 2:45am
hedging is very useful when unpredictable news or events happen. It could protect you against big loss in the market. It's better to use hedging than not using it.
  • #100
  • Last Post: Jan 21, 2026 7:16am Jan 21, 2026 7:16am
I see a great discussion has developed here on hedging, and very good arguments have been shared. As far as I can see there is a misunderstanding between hedging and using stop-loss order.
here is my understanding of the subject, and why many people mix these two things. hedging and stop loss are not the same, even if the end result sometimes look similar on the balance. stop loss is simple: you accept that you are wrong, you close the trade, you take the loss and you move on. hedging is more like saying “not sure yet”, so instead of closing, you open opposite position and freeze the situation.
with hedging, you are not reducing the loss, you are locking it. price can go anywhere and your net PnL stay almost same. that’s why people think it’s useless. but the real value of hedging is time. it buys you time to think, to wait for news, to manage margin, or to slowly unwind positions later when market is calmer.
For sure, time is not working for you in this case, but when you still hope or believe that the price will change direction, you can act whenever the time comes.
Also, hedging is pointless and dangerous if you try to hedge every single losing position. This is where most beginners think they become pros and start using it wrongly. professional hedging is different. it’s planned before entry. it’s part of strategy, not a reaction to some position that didn’t go as planned.
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