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Hedging/Nedging

  • #21
  • Apr 22, 2017 2:03pm Apr 22, 2017 2:03pm
Quoting nubcake
It makes me smile to think some of you dumb dumbs will get a nice surprise one day when you have your genius nedges on, and then the spread widens and takes you out of both sides. Because that's the key here, it's not actually equivalent to being out of the market. You are still exposed to a number of issues that simply don't exist when you don't play stupid games. Of course, you'll just blame the broker for "cheating" you, like usual. Carry on, kids.
Hey Nobcake, I knew the sewer gates were open the minute you offered your initial ignorant perspective. Perhaps I have been dreaming every time I have hedged my position in order to limit drawdown before managing to close both trades for profit? Or maybe I somehow manage to pull off some kind of miracle? No I don't think so; the truth is that same pair hedging is a strategy that I have learned to use successfully when I need it. It is just a tool.

In my opinion, to achieve this takes a certain understanding of market structure and personally I couldn't do it without studying volume. I would go as far as to say it takes some skill. Perhaps that is why you struggle to see that someone might possibly be able to use this strategy successfully?

Anyway I hope you will do me the pleasure of adding me to your huge ignore list with all of the other arseholes who obviously infuriate you for having a different opinion. On the other hand if you would like to learn something I will be happy to provide a detailed example of how I make same pair hedging work for me.
Indentify > Plan > Accept > Execute
  • #22
  • Apr 22, 2017 2:07pm Apr 22, 2017 2:07pm
Quoting wizlon32
{quote} Hey Nobcake, I knew the sewer gates were open the minute you offered your initial ignorant perspective. Perhaps I have been dreaming every time I have hedged my position in order to limit drawdown before managing to close both trades for profit? Or maybe I somehow manage to pull off some kind of miracle? No I don't think so; the truth is that same pair hedging is a strategy that I have learned to use successfully when I need it. It is just a tool. In my opinion, to achieve this takes a certain understanding of market structure and personally...
" On the other hand if you would like to learn something I will be happy to provide a detailed example of how I make same pair hedging work for me."

Wizlon32, I would love to know how you make hedging work for you...

Great if you could even include an example with an explanation...

Thanks
  • #23
  • Apr 22, 2017 2:10pm Apr 22, 2017 2:10pm
Quoting kprsa
{quote} Not really: 1. it may be useful to have entered at the more advantageous positions (bottoms/tops of prior pullbacks). It is difficult to know what the market would do in the future so your after-weekend trade may take a loss whereas the long term position can accept one more eventual pullback. 2. It has a psychological advantage IMHO. 3. Also if one has the money to move the market (or expect that people who do would be trapped in losing positions by the gap) one can get rid of a losing nedge without loss. Cheers, k
Thanks Kprsa for your thoughts.

"or expect that people who do would be trapped in losing positions by the gap) one can get rid of a losing nedge without loss."

Could you please help me better understand it.

Thanks
  • #24
  • Apr 22, 2017 2:28pm Apr 22, 2017 2:28pm
Quoting aaven
{quote} " On the other hand if you would like to learn something I will be happy to provide a detailed example of how I make same pair hedging work for me." Wizlon32, I would love to know how you make hedging work for you... Great if you could even include an example with an explanation... Thanks
Ok here is what I will do...
I will "manufacture" an example this week if I can. The reason I will have to manufacture it is that I actually try to avoid it. I only do it when I feel I have to or really want to for the purpose of protecting my account (I trade high volume relative to account size which is probably another can of worms).

I will provide this example using low volume (2 x 0.01 lots) because I wouldn't put myself in an overly risky position on purpose.

How will I do it?

I will try to identify an order accumulation zone and I will purposefully place my trades to replicate a real life situation and I will provide screenshots of each stage as I see it.

I work full time so you may have to bear with me but I will do my best. I hope that afterwards naysayers like Nobcake will at least understand that this might work for some of us. Live and let live.
Indentify > Plan > Accept > Execute
  • #25
  • Apr 22, 2017 2:33pm Apr 22, 2017 2:33pm
1. using eurusd and usdchf as simulate eurchf is about the same, but not really the same. you need to calculate in both methods how much money/volume you have in your trades: in EUR,CHF and USD currency and you will see very easy the difference. the difference is not big, but will be there. of course also 2 times spread and commissions.

2. hedging in same currency is always stupid (compared to simple closing an order and reopen later). there is really no advantage for a good trader (without 2 little advantages for beginners: orders are seperated and so more easy visible for some in some trading stations, programming an expert is more easy).
you pay more fees (rollover, often more spread in grid systems,...) and you have with extrem big used margin/traded amount in ratio to the account an extrem risk in the market (and so easy to avoideable risk is stupid) in time with extrem spreads (because the buy order and sell order have same time the big loss in this time and you can get margin call, remember the flash crash some months ago in gbpusd , the spread was extrem high for a short time). the second part depends from calculation of orders in same pairs from broker to broker, but fees are always there. you pay each time for using hedge, so you have 100 % some wins lost for this.
"hanover" had good posts about this topic already , you can use this to find out the details.
  • #26
  • Apr 22, 2017 2:41pm Apr 22, 2017 2:41pm
Quoting nubcake
It makes me smile to think some of you dumb dumbs will get a nice surprise one day when you have your genius nedges on, and then the spread widens and takes you out of both sides. Because that's the key here, it's not actually equivalent to being out of the market. You are still exposed to a number of issues that simply don't exist when you don't play stupid games. Of course, you'll just blame the broker for "cheating" you, like usual. Carry on, kids.
If a trader "hedges" then there wouldn't be a SL as the hedge is the protection so doesn't matter if the spreads widen.
Of course you could use a SL on both positions but I don't think that's the way it's usually done but could be wrong.
  • #27
  • Apr 22, 2017 2:43pm Apr 22, 2017 2:43pm
Quoting srt
{quote} If a trader "hedges" then there wouldn't be a SL as the hedge is the protection so doesn't matter if the spreads widen. Of course you could use a SL on both positions but I don't think that's the way it's usually done but could be wrong.
taking out both sides by margin call dont need any SL! extrem spread widen is closing sell order for high ask price and closing buy order for low bid price. so your loss is same value then spread.

hedging is for the beginners or bad traders (you dont will see this happen by more advanced traders), brokers best friends. hedging its free money for the brokers in best way.

hedging is best way for increasing risk without having too, and best way for throw away 100 % sure extra wins or having extra loss/costs - however you value it.
  • #28
  • Apr 22, 2017 2:49pm Apr 22, 2017 2:49pm
Quoting dukas_trader
{quote} taking out both sides by margin call dont need any SL! hedging is for the beginners or bad traders (you dont will see this happen by more advanced traders), brokers best friends. its free money for the brokers in best way. hedging is best way for increasing risk without having too, and best way for throw away 100 % sure extra wins or having extra loss/costs - however you value it.
Did you try it and couldn't pull it off? No shame mate, it can be tricky. But can you not accept that it works for some? Surely that is not so hard to accept?

I see a pattern from the naysayers; words like "beginners", "bad traders" and "dumb dumbs". Come on no one is insulting you because of your opinion.
Indentify > Plan > Accept > Execute
  • #29
  • Apr 22, 2017 2:54pm Apr 22, 2017 2:54pm
Quoting wizlon32
{quote} Did you try it and couldn't pull it off? No shame mate, it can be tricky. But can you not accept that it works for some? Surely that is not so hard to accept? I see a pattern from the naysayers; words like "beginners", "bad traders" and "dumb dumbs". Come on no one is insulting you because of your opinion.
hey, i dont say it will not work, i only say its "beginners" way, because it is! you can do so, and you can win, but you win more with doing other way, point! and you cant say anything against this. its simple math.

its same like this: you can win with 2 point spread, but in my example you can win more with 1 pip spread. simple math comparing 2 results, and no results by luck or what ever, this results are fix and anytime. so this rule "being flat (close orders or use netting brokers) is better then hedge" is always true.

try to find any pro trader who used hedges, and i show you his mistakes in thinking he is an pro trader. avoid hedging by simple closing and reopen is one of the simple math solutions you learn in your way to a good trader, because its free extra money win. and no good trader avoids free money win. there are many trading rules, and not without a reason "dont hedge for being flat" is one of the bigger rules.
  • #30
  • Apr 22, 2017 2:55pm Apr 22, 2017 2:55pm
Quoting dukas_trader
{quote} taking out both sides by margin call dont need any SL! hedging is for the beginners or bad traders (you dont will see this happen by more advanced traders), brokers best friends. its free money for the brokers in best way. hedging is best way for increasing risk without having too, and best way for throw away 100 % sure extra wins.
From a pure math perspective, it's lower cost to just close a trade when wrong as you're adding commission costs by hedging but there are times when hedging makes it easier to "follow" your trades.

As an example, if I have a long swing trade based upon the daily chart but then wanted to scalp short the same market, it's easier to just ignore the long swing-trade that's open & just focus on trading the scalp. Some traders also like to leave a long-term swing trade open & hedge if they feel a retracement is about to take place. Remove the hedge when retracement is over. Easier for them to "follow" the trade.

***BTW, one of the best traders on FF uses hedges. The additional spread cost doesn't matter much when trading the daily charts for several hundred pips.
  • #31
  • Edited 5:34pm Apr 22, 2017 3:01pm | Edited 5:34pm
Quoting aaven
I found a video that may be conveys what i am trying to achieve.......
(1) I am only an amateur trader, so take my view accordingly; and (2) RR is not necessarily important in my own approach. I think and trade unconventionally when compared to the textbooks; my goal is simply to be long while I believe price has a higher probability of is rising, and short while it has a higher probability of falling. But I'll attempt to answer your question, using conventional RR-based thinking, at least as I understand it.

IMHO the presenter is correct when he says that you can potentially be profitable with a 50% win rate (if your ave RR trade > 1:1). Profit factor is the product of both win rate and average RR. But what he fails to mention is that, everything else being equal, shooting for higher RR trades will tend to decrease your win rate. (If winning was as simple as taking high RR trades, everybody could use an EA that does this, and we would all retire rich quickly -- actually impossible, as FX is quasi-zero sum). You need to find situations where you can justify having the tighter SL, i.e. around areas where price is more likely to reverse (S/R might be one possible example).

Secondly, being short AUDCAD and long USDCAD is mathematically the same as being short AUDUSD (assuming the correct lot sizes to achieve exact balance). That is often termed "triangular equilibrium", and is mathematically bulletproof, from the way the prices are calculated. If you doubt this, multiply the current AUDUSD and USDCAD rates (0.75425 x 1.34945 = 1.0178) and you should get the current AUDCAD rate (1.0178) -- see screenshot below. And again, if such a loophole existed, everybody would exploit it and retire rich.

Thirdly, in his example, one trade reached the TP and the other the SL, so he was profitable on that occasion. To state the obvious, one winning scenario does not prove long term profitability; he could have cherry picked it. If, for example, at the time his USDCAD trade got stopped out, his AUDCAD trade might have been well short of its TP, and, depending on what the market did subsequently, it could have turned north and hit its SL also. Of course much depends on what AUDUSD does in the interim, also.

IMHO it is not merely using presented techniques mindlessly that will make you make you profitable, it is having the necessary knowledge and experience to know WHEN and HOW to employ them. Every situation in the market is potentially different.

Just my 2 cents.
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  • #32
  • Apr 22, 2017 3:05pm Apr 22, 2017 3:05pm
Consider this...

1. Trader studies the volume and knows that long orders are being accumulated - price will be going up eventually.
2. Trader decides now is the time to buy so he buys 1 lot......price drops.
3. Trader hedges to protect his account by selling 1 lot.......price drops more.
4. Traders sees more buying volume coming in and closed the short for profit.
5. Price rises and his initial long order goes in to profit (maybe big profit)
6. Trader closes his long. Result is profit from 1 x long and profit from 1 x short.

This is a very simplistic example of how hedging can work. Please, is this not a possible scenario?
Indentify > Plan > Accept > Execute
  • #33
  • Edited 3:30pm Apr 22, 2017 3:08pm | Edited 3:30pm
Quoting srt
{quote} BTW, one of the best traders on FF uses hedges. The additional spread cost doesn't matter much when trading the daily charts for several hundred pips.
1.who is this? when he is good he has a prime netting broker ,so i will be netted by automatic,mabye thats why looks this way? for holding hedges many days its most expensive way hedging, this would be very stupid and he would throw away money (most rollovers) with out any reason. i cant see why he is then good? but trading daily charts should be very easy to seperate trades in the brain or on a paper, so i cant understand him, if you really are correct with him.

2. your reason was also my reason, why some beginners use hedging, because they can seperate trades more easy. later you have own frontends where you seperate it more different and dont have to use hedging for doing this. but even with metatrader is possible by simple expert writing , trading journal/book writing, even a simple paper with open trades noted... no need to throw this rollover away.
  • #34
  • Apr 22, 2017 3:12pm Apr 22, 2017 3:12pm
Quoting wizlon32
Consider this... 1. Trader studies the volume and knows that long orders are being accumulated - price will be going up eventually. 2. Trader decides now is the time to buy so he buys 1 lot......price drops. 3. Trader hedges to protect his account by selling 1 lot.......price drops more. 4. Traders sees more buying volume coming in and closed the short for profit. 5. Price rises and his initial long order goes in to profit (maybe big profit) 6. Trader closes his long. Result is profit from 1 x long and profit from 1 x short. This is a very simplistic...
ok, then i tell you the better/cheaper way:

1. same
2. same
3. close buy
4. open buy again
5. same
6. close buy

same result, when not done over rollover time. cheaper when done over rollover time, less risk for extrem spread widening, less positions open,.....
  • #35
  • Apr 22, 2017 3:15pm Apr 22, 2017 3:15pm
Quoting dukas_trader
{quote} ok, then i tell you the bether way: 1. same 2. same 3. close buy 4. open buy again 5. same 6. close buy same result, when not done over rollover time. cheaper when done over rollover time, less risk for extrem spread widening, less positions open,.....
No it is not the better, it is just different. The main difference however is that you took a loss and I did not. I accept your methodology, can you not accept mine?
Indentify > Plan > Accept > Execute
  • #36
  • Apr 22, 2017 3:18pm Apr 22, 2017 3:18pm
Quoting wizlon32
{quote} No it is not the better, it is just different. The main difference is however is that you took a loss and I did not. I accept your methodology, can you not accept mine?
why?
accepting loss you had too? do you dont count your equity, only your balance? my loss is no difference, you have same loss in equity same time. maybe your are at starting or want show other people results for managing money? go away from having not many losses is one of the importanst steps you will make in step up the ladder to target as pro trader. and in this example you even dont have to mention this a loss, when you have same loss same time in your trades. hiding equity is not very smart. balance is completly unimportant, only equity is worth calculating and mention.

my method is cheaper or same allways, your is same or more expensive always. i cant see any plus in your method, and you did not say any. you need to tell me whats your advantage in doing it!
  • #37
  • Apr 22, 2017 3:22pm Apr 22, 2017 3:22pm
Quoting dukas_trader
{quote} why? accepting loss you had too? do you dont count your equity, only your balance? my method is cheaper or same allways, your is same or more expensive always. i cant see any plus in your method, and you did not say any. you need to tell me whats your advantage in doing it!
I don't really need to tell or prove anything to you. I just ask you simply if you can see that what I do works? Can you not admit that it has merits, even if it doesn't suit you?
Indentify > Plan > Accept > Execute
  • #38
  • Apr 22, 2017 3:25pm Apr 22, 2017 3:25pm
Quoting wizlon32
{quote} I don't really need to tell or prove anything to you. I just ask you simply if you can see that what I do works? Can you not admit that it has merits, even if it doesn't suit you?
of course it can work, you throw away some money (if done not all intraday) and have bigger risks, but why not , you can have maybe wins with it. but by simple math less win then the other method, so simple is math. simple comparing a method against an other better method. if one method is always better or same , this method is much superior to the other. you dont need to do so, when you have wins with it, its your trading system what wins, not the hedging.
  • #39
  • Apr 22, 2017 3:33pm Apr 22, 2017 3:33pm
Quoting dukas_trader
{quote} of course it can work, you throw away some money (if done not all intraday) and have bigger risks, but why not , you can have maybe wins with it. but by simple math less win then the other method, so simple is math. simple comparing a method against an other better method. if one method is always better or same , this method is much superior to the other. you dont need to do so, when you have wins with it, its your trading system what wins, not the hedging.
Ok well I will take that as a win as you at least acknowledged that same pair hedging can work. Was like getting blood out of a stone though

All I can say is that I do it and I do it successfully. It works for me!!!

I try to keep all my hedging to intraday but ultimately the markets have the final say there.

I encourage everyone reading this to avoid hedging if at all possible but it doesn't hurt to be aware of a workable hedging strategy.

Enjoy the rest of the weekend folks
Indentify > Plan > Accept > Execute
  • #40
  • Edited 3:50pm Apr 22, 2017 3:37pm | Edited 3:50pm
Quoting wizlon32
Consider this...... This is a very simplistic example of how hedging can work. Please, is this not a possible scenario?
Sure, you can make money "hedging". No argument there. But you can also make exactly the same pips in your example, without the hedging.

-- I've retained your comments in normal typeface.
-- I will trade without hedging (my results in blue typeface).
-- You trade with hedging, exactly as you described (calculations in red typeface).

No insults, just straight math.

1. Trader studies the volume and knows that long orders are being accumulated - price will be going up eventually.
Same analysis = same conclusion.

2. Trader decides now is the time to buy so he buys 1 lot......price drops.
I also buy 1 lot. ....... OK, let's say it drops 50 pips.

3. Trader hedges to protect his account by selling 1 lot.......price drops more.
I exit my long position for a 50 pip loss. ....... OK, let's say price drops another 75 pips.

4. Traders sees more buying volume coming in and closed the short for profit.
You closed your short for +75 pips (but your open buy trade is currently -125).
I likewise see the same buying volume coming in, hence I open a long trade. (We are both net long now)

5. Price rises and his initial long order goes in to profit (maybe big profit)
OK, for a big profit, let's say price now rises 300 pips. Your buy trade is now +175 pips. My buy trade is now +300 pips.

6. Trader closes his long. Result is profit from 1 x long and profit from 1 x short.
Indeed, you have a +75 from your short and +175 from your long, for a net gain of +250 pips.
I close my long also. I have a -50 from my first long, and a +300 from my second long, likewise for a net gain of +250 pips, and with no hedging.

All I did was maintain the same NET position as you, at every point along the way.

You can change the amount of the price rises and falls, the two outcomes will still be equal. Hence the question being asked is:
If it's possible to make the same pips without hedging -- and with slightly lower br0ker costs -- where is the mathematical advantage (as opposed to operational convenience) in hedging?
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