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Hedging vs Stop Loss

  • #381
  • Sep 23, 2016 3:10am Sep 23, 2016 3:10am
I do not take hedging seriously, because it can be used either in arbitration or as deferred loss. Get out of the cell at a profit is very difficult. It is possible to count, of course. But it is much easier to close loss, and reopen.
Surrealist
  • #382
  • Edited 6:24am Sep 23, 2016 5:55am | Edited 6:24am
"hedging" only means that you lose twice on dealing spreads ( or twice pay the commission, or both ) instead of once because you will need to close those two positions separately sooner or later... other than that there is no difference... generally speaking it's a scam from a dealer's side who permits hedging...
  • #383
  • Sep 24, 2016 4:31am Sep 24, 2016 4:31am
hedging is very useful....................
































to the broker. they love hedging your positions.
  • #384
  • Sep 27, 2016 7:11am Sep 27, 2016 7:11am
I have come across many traders who use the hedging concept on their day to day trading, but frankly speaking never understood the underlying exact reasons for hedging.
What those traders says to me that first they hedge the position if their trade start making the losses and once the new hedged position start making profit then they would close that profitable position and then the market rebounds and they start recovering losses in their actual or initial position.
But com-on to work this above trade, one you need the exact timing when would the market reverses or rebounds, which I believe very tough to estimate (if someone is that efficient enough then he would not have the problem of hedging at first place).
I believe the only reason many traders get involved in hedging to maintain the balance, as hedged positions wouldn’t lower down the balance however closing the position would lead to lower balance.
I am more inclined to stop loss and you get of the position when you see that trend is not in your favor.
  • #385
  • Sep 27, 2016 2:47pm Sep 27, 2016 2:47pm
Quoting olivia.forex
I have come across many traders who use the hedging concept on their day to day trading, but frankly speaking never understood the underlying exact reasons for hedging. What those traders says to me that first they hedge the position if their trade start making the losses and once the new hedged position start making profit then they would close that profitable position and then the market rebounds and they start recovering losses in their actual or initial position. But com-on to work this above trade, one you need the exact timing when would the...
you would need to open endless positions just to cover the first one and at some point, after paying the spread endless times "hope" that the price will go back. Makes no sense to me.
  • #386
  • Edited 7:02pm Sep 27, 2016 6:35pm | Edited 7:02pm
It is not the tool that is faulty it is how it is used.

-------------------------------------------------------------------------------------------------------------------------------------------------------------------
In Summary:
This is an argument of cost of SWAPS & SPREADS + SL vs. cost of STOP LOSS only.
The person who pays the extra costs of swaps and spreads gets the added option of determining his/her exit.
The person who decides NOT to pay agrees to leave her/his exit under certain conditions entirely to market forces.

This cost can only be truly quantified and weighed according to individual trading system (MM & MO) and skill level. IMHO.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------

Preamble: I do not yet use this tool (going flat) as I have not done exhaustive research on why, when and how to use it effectively.

Let us begin from the beginning

This is a discussion about being flat vs. SL not hedging vs SL

The disadvantage being argued in being flat is spread and swaps costs.

My first thought says this might not be entirely true for spreads. Why? Because being flat is just entering a second trade for a different reason.

Swaps can be argued to be the cost of business OR trades can be closed before they are charged.

Now on to WHY anyone will use the flat tool?

Taking your entry as the reference point. And a systematic method of entry strictly for the purpose of this discussion (purely discretionary leaves room for subjectivity I think)

Any trader has a reason she/he entered a buy at time & price for instance.

Once that buy (for this example) is entered. Price can do anything! Any of 3 things in a broad range.

1. It can go straight up 2. It can go straight down. 3. It can fluctuate within a range of the entry price.

No one knows 100% what it will do after this buy is entered until after the fact.

Now, you have 2 choices in this argument.
1. Put a stop*loss
2. Go flat

Scenario 3. (Price fluctuates within a range)
Put a stop loss
ADVANTAGE: Price decides to whipsaw and hit ur SL for whatever the heck reason. Its a spike. So you accept the loss, other trades out there.
DISADVANTAGE: Going by your set rules you re-enter at that same price (example: an EA logic) So if it whipsaws 10 times that way, u get 10*S.L (give and take depending on EA or manual).

Go flat
ADVANTAGE: Your Loss is SL + spread + swap. It will occur once (except for swap). Unless you WANT some extra loss.
DISADVANTAGE: Price decides to whipsaw and hit your Sell, so you are forced to pay extra spread + swap (beyond 24H) You also get the added burden to manage an added position earlier than you hoped for.

***It can be argued for this scenario that an SL is better, if reasons for entry is fixed since there is no added swap and spread to consider as well as extra trade to manage, this I think is the basis for the naysayer's of going flat.***


Scenario 2. (Price Runs downwards)
Put a stop loss
ADVANTAGE: You take your loss, other trades out there.
DISADVANTAGE (somewhat): You have no assurance if your next trade is going to offset the loss on this trade. (+risk)

Go flat
ADVANTAGE: You get the chance to hold on to the losing trade until you are assured a profit (on the 3rd trade) that covers this loss.
DISADVANTAGE: Depending on when you finally get it right, the cost of swaps and spread might become significant.
  • #387
  • Sep 28, 2016 2:22am Sep 28, 2016 2:22am
Quoting sinqua
It is not the tool that is faulty it is how it is used. ------------------------------------------------------------------------------------------------------------------------------------------------------------------- In Summary: This is an argument of cost of SWAPS & SPREADS + SL vs. cost of STOP LOSS only. The person who pays the extra costs of swaps and spreads gets the added option of determining his/her exit. The person who decides NOT to pay agrees to leave her/his exit under certain conditions entirely to market forces. This cost can only...
Question is: would anybody with some experience do that ? I had my hedging dreams too but when I was complete noob.
  • #388
  • Sep 28, 2016 5:42am Sep 28, 2016 5:42am
Quoting HeyYou
{quote} Question is: would anybody with some experience do that ? I had my hedging dreams too but when I was complete noob.
Well I have observed that an edge is more about your exits and less about an entry. That being said, you can see why someone might choose to pay to have greater control over how he/she exits a position. You said you went flat when you were a complete noob obviously that will lead to failure you were a noob, you didn't research the ramifications of going flat. I used price action when I was a complete noob, I have gone around indicators and I'm back to price action. In the end "To each their own"
  • #389
  • Sep 28, 2016 8:17am Sep 28, 2016 8:17am
Quoting sinqua
{quote} Well I have observed that an edge is more about your exits and less about an entry. That being said, you can see why someone might choose to pay to have greater control over how he/she exits a position. You said you went flat when you were a complete noob obviously that will lead to failure you were a noob, you didn't research the ramifications of going flat. I used price action when I was a complete noob, I have gone around indicators and I'm back to price action. In the end "To each their own"
If you know exactly where price will turn, then go for it. But remember, one wrong exit and the account is gone.
  • #390
  • Sep 28, 2016 8:51am Sep 28, 2016 8:51am
Ok, who is not first day in trading won't even raise this question.
Is there anyone who can prove the real benefits of the hedge?
  • #391
  • Sep 29, 2016 4:54am Sep 29, 2016 4:54am
Quoting SantaNunez
Ok, who is not first day in trading won't even raise this question. Is there anyone who can prove the real benefits of the hedge?
Of course there is someone. That is Me. I am here to entertain and inform you...

Hedging can be very profitable and it is. Simply use the close by option of closing the hedged trades against each other. You will save 1/2 commission and maybe huge portion of the spread. You can set a max spread for the close by to take place. I am talking to use hedging only for position closure (at profit or at loss). Not as a trading strategy.

Hedging as a trading strategy can be utterly profitable. Nothing can be more profitable. Many gets confused here at FF how is this possible. I get a lot of "friends" because people are lazy to think it over... It takes a lot of thinking to see how you can profit from buys and the sells into the same movement? Just close at different times. The counter trend basket gets closed at 50% of the correction (in pips is at loss, but not money wise - there is huge profit for you). The trend basket gets closed at 50% ahead or anywhere you like. I usually close the trend basket the same way the CT gets closed, at 50% from behind it's back. At that point, all one trade traders are sucking a big brown cock at it's wet end, being at loss, more genitally put...

Use incremented lot-size from behind. Open sells at the minor bottoms and buys at the minor tops, while the rate is trending. Face them one against each other. The larger buy lot should face the smaller sell lot and the other way around. Close at the same or different times. It depends on the movement.

Only 5% are the h1 candles (for example), which will deliver bad entries in a trend movement. If you hit one of these, it is possible, do not give up, open the hedge later and break it even with the profit from the second entry.

It is as simple as that.

P.S. do not take my words too seriously. I am not a good trader, yet. Lots is there to learn about hedging. The hedging approach I have described above is just the beginning...
Maadik Hugiis. IQ 69.
  • #392
  • Sep 29, 2016 5:16am Sep 29, 2016 5:16am
Quoting MoneyZilla
{quote} Hedging can be very profitable and it is. Simply use the close by option of closing the hedged trades against each other. You will save 1/2 commission and maybe huge portion of the spread. You can set a max spread for the close by to take place. I am talking to use hedging only for position closure (at profit or at loss). Not as a trading strategy. Hedging as a trading strategy can be utterly profitable. Nothing can be more profitable. Many gets confused here at FF how is this possible. I get a lot of "friends" because people are lazy to...
You say the right things. Do you think there are more questions than answers?
the second trade in opposite direction need to open at certain point to hedging made profitable.
If the market is directed, to achieve the desired correction point is very difficult.
Besides, if you set sl, you made a choice. If your trade goes to profit, you have calm at the moment. And if you have hedge, you still have to think and worry about the second trade... ?
  • #393
  • Sep 29, 2016 5:22am Sep 29, 2016 5:22am
Quoting SantaNunez
{quote} You say the right things. Do you think there are more questions than answers? the second trade in opposite direction need to open at certain point to hedging made profitable. If the market is directed, to achieve the desired correction point is very difficult. Besides, if you set sl, you made a choice. If your trade goes to profit, you have calm at the moment. And if you have hedge, you still have to think and worry about the second trade... ?
Gotta go to a meeting. So I will be short here. The two screenshots explain it quite well. It is not exactly what I have wrote, cause I am waiting for my second entry. Need more trending to take place, if it will take place, to enter properly with a second EA, same hedging approach. The pics are from yesterday and today.
Maybe later today I will put more detailed answers...
Attached Image (click to enlarge)
Click to Enlarge Name: gold-buy-round2-05.png Size: 137 KB

Attached Image (click to enlarge)
Click to Enlarge Name: gold-buy-round2-06.png Size: 101 KB
Maadik Hugiis. IQ 69.
  • #394
  • Sep 29, 2016 6:28am Sep 29, 2016 6:28am
Quoting MoneyZilla
{quote} Gotta go to a meeting. So I will be short here. The two screenshots explain it quite well. It is not exactly what I have wrote, cause I am waiting for my second entry. Need more trending to take place, if it will take place, to enter properly with a second EA, same hedging approach. The pics are from yesterday and today. Maybe later today I will put more detailed answers... {image} {image}
It'd be nice. Thanks
  • #395
  • Sep 29, 2016 12:15pm Sep 29, 2016 12:15pm
Little update here. Take a good look at the buy's opening basket price. It is 1334.82. At the time of the screenshot, the price is around 1323. That is almost 115-120 pips in loss for the buy basket. Meanwhile, the profit has been increased from +50-60 to +100 or something. And they teach you to NOT ADD trades in the losing direction?!? Is there a thing as a losing direction, in a first place? Maybe you should ask yourself this question first...
Attached Image (click to enlarge)
Click to Enlarge Name: gold-buy-round2-07.png Size: 101 KB


I will explain more tomorrow. My new baby v7.00 just arrived. Gotta bug fix it.

P.S. If you want to explore something, I do suggest you to take a good look at the dashboard of the many screenshots I have provided here. You can see the total lots for each basket. How they increase when the rate moves against the basket's direction. A small correction sends you at a completely different level. Even when one should be at loss. I also have the perfect example I am trading now, about my hedging strategy description. I have managed to capture some screenshots. I will show these to you tomorrow. Good night from me.
Maadik Hugiis. IQ 69.
  • #396
  • Oct 7, 2016 2:57am Oct 7, 2016 2:57am
Quoting HeyYou
{quote} you would need to open endless positions just to cover the first one and at some point, after paying the spread endless times "hope" that the price will go back. Makes no sense to me.
yes! thats exactly what i meant, it will lead to opening of many positions and it will become messy to get out of all those positions
  • #397
  • Oct 7, 2016 8:40am Oct 7, 2016 8:40am
There have always been a conflict about which is the best strategy to trade. Hedging or Scalping. I believe the best strategy is to change strategy time to time. Both of them could not earn you profit every time.
  • #398
  • Edited 1:06pm Oct 7, 2016 12:16pm | Edited 1:06pm
Sl Vs hadging ............. same ole same ole .....

lose anail ...........but it could be a hand ....

lose a fingerrr .......... but eventualy could lose a limp ...........

mm is only da icing .... what more impotent is ........
Attached Image
  • #399
  • Oct 7, 2016 12:23pm Oct 7, 2016 12:23pm
ooopppss ... da 2 of u will hang on the same tree ... light up each of your meat cigars ... and start blowimg ...... wich one has a better valavorrrr ......
  • #400
  • Oct 11, 2016 2:17pm Oct 11, 2016 2:17pm
Stop loss is one of the best risk management tool at the trader's disposal. This way if you must lose in your trade, you can't lose more than you can afford. When prices drop past where you set as stop loss, your position is automatically closed.
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