Disliked{quote} You are right duy90 , pyramiding works in a different way and its more dangerous then hedging .Ignored
Member
{quote} Yes , read it carefully .
I set out a scenario where I have 1000 Dollar account risking 7% of the account because you said to have 7 x lot
USDJPY
Since I was bias for Sell this trade I would put
4 lot on Sell & 3 lot on Buy
Price moves to my favor of 30 pips I will close 0.4 lots of Sell (120$) + 0.1 lot of buy order (-30$) [Profit earned is 90 $ = 90 pips)
Now it depends on the next move what this currency does - It continues down, which means I have to cut my losses.
What I have left is 2 lot of Buy orders, we would want it to retrace a bit - favorable situation would be 30 pips up. However it drops like a rock
According to your logic, we should close with 50 pips loss = 2 lots of 50 pips (-100$)
Now we have traded and made a loss of 10 Dollars (90-100) = 10 Dollars
May I ask you what was the point of making it this complicated when you could have earned 20 dollars with one 0.1 lot Sell order.
I don't think this would work very favorably in strong moves. Not sure about Whipsaw markets, it might kill you in both Sell and Buy orders :/
By the way I had 6 SL for 100 TP = 1:16 RR and I could have gone for more R:R if I was around computer to check the movements. I would still be in the trade even now if I wasn't busy painting and re-constructing my new apt. Which means now it would be 1:98 RR
- #30
- Apr 30, 2016 11:29am Apr 30, 2016 11:29am
- | Joined Jan 2008 | Status: Trillion Dollar Man | 1,495 Posts
- #32
- Apr 30, 2016 12:35pm Apr 30, 2016 12:35pm
- | Joined Jan 2008 | Status: Trillion Dollar Man | 1,495 Posts
hi, I'm new here and my first post is just that one... 
if I understood hedging correctly - as an instrument used in financial industry - it was designed to minimize losses on investments and it was not designed as a tool to build profits by itself. sure , you can build profit using it (tested) but cost of losses on one position destroys profit on second one - so you must very precisely manage closing losing position, that looks simple but pretty difficult to really gain high profits. the same energy you spend on hedging is better spent on right rr+money management and very probably will bring you better result.
and one more thing : even when hedging is used properly on specific market (stock investment hedged by options or something) it is not what gives 100% protection from losses.
that how I understand that.
if I understood hedging correctly - as an instrument used in financial industry - it was designed to minimize losses on investments and it was not designed as a tool to build profits by itself. sure , you can build profit using it (tested) but cost of losses on one position destroys profit on second one - so you must very precisely manage closing losing position, that looks simple but pretty difficult to really gain high profits. the same energy you spend on hedging is better spent on right rr+money management and very probably will bring you better result.
and one more thing : even when hedging is used properly on specific market (stock investment hedged by options or something) it is not what gives 100% protection from losses.
that how I understand that.