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Hedging/Nedging

  • #41
  • Apr 22, 2017 3:40pm Apr 22, 2017 3:40pm
Quoting wizlon32
{quote} 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
but you have to work on 2 things:

- think about the closing and reopen method when want free money
- rethink your balance thinking, it looks like you trade with extrem drawdown only by telling me that you look so much to wins trades and balance. looking at equity is the trick, or you will be in problems with your account.
- many strategies can work, most work by math at special times only or with special management. hedging is nothing special method there, its just how to close trades, nothing special for a trading system, only a method to pay some fees against closing position and reopen (if not all intraday). hedging is by definition nothing more than being flat in most difficult way.
  • #42
  • Apr 22, 2017 3:41pm Apr 22, 2017 3:41pm
Quoting hanover
{quote} 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...
thats why there is no advantage in hedging, without the more easy to program or more easy visible, and for this you pay by more fees and more risk.
  • #43
  • Apr 22, 2017 3:47pm Apr 22, 2017 3:47pm
Quoting hanover
{quote} 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...
I get it, you are right your strategy works too. Absolutely no argument.

Another way I use this strategy is as follows..
1. Buyer identifies opportunity and buys 1 lot.
2. Price drops so buyer sells 1 lot.
3. Price continues to drop so buyer sets SL on sell to BE.
4. Buying volume comes in and price rises. It hits the short SL at BE and continues up until the long is in profit.

I think this is the safest method. I am not trying to have a "pissing contest". I am just describing something that really does work for me.
Indentify > Plan > Accept > Execute
  • #44
  • Apr 22, 2017 3:47pm Apr 22, 2017 3:47pm
Give a baby a knife and he/she might commit suicide unknowingly. Give an assassin a knife and he/she could kill a few people knowingly.

The point is, "its not the tool that is the problem, its the user" why is this so hard to accept?

Leverage, hedge, moving averages, esoteric arts, machine learning, a swinging cat..whatever. If you know what you're doing by all means carry on, if not, sooner or later your account balance and bank balance will tell you to stop.
  • #45
  • Apr 22, 2017 3:50pm Apr 22, 2017 3:50pm
Quoting dukas_trader
{quote} but you have to work on 2 things: - think about the closing and reopen method when want free money - rethink your balance thinking, it looks like you trade with extrem drawdown only by telling me that you look so much to wins trades and balance. looking at equity is the trick, or you will be in problems with your account. - many strategies can work, most work by math at special times only or with special management. hedging is nothing special method there, its just how to close trades, nothing special for a trading system, only a method...
Ok mate. I'm just saying that I do it and it works for me. Even if the benefits are actually only psychological it is a viable strategy.
Indentify > Plan > Accept > Execute
  • #46
  • Apr 22, 2017 3:55pm Apr 22, 2017 3:55pm
Quoting wizlon32
{quote} Ok mate. I'm just saying that I do it and it works for me. Even if the benefits are actually only psychological it is a viable strategy.
your strategy is then good, its not the hedging what works. would be same with other closing and reopen method. but when you have wins with this "not best" hedging method your strategy has to be even better to compensate it . so it looks good, when you are satisfied.

if you like your strategy, all its fine, you need to have low drawdown to survive, or strategy is bad over long term and can kill account and you need to be satisfied. so you can try the other method for some additionally money or much much less risk. or you stay with your method, when risk and extra money is not worth changing this winning system.

you have 6000% in live account for 1 month, so looks good, but your 80 % drawdown looks like you trade big volume , so change system method could help you much more then you will think, 80 % is very hard drawdown for hedging.
  • #47
  • Apr 22, 2017 4:08pm Apr 22, 2017 4:08pm
Quoting dukas_trader
{quote} your strategy is then good, its not the hedging what works. would be same with other closing and reopen method. but when you have wins with this "not best" hedging method your strategy has to be even better to compensate it . so it looks good, when you are satisfied. if you like your strategy, all its fine, you need to have low drawdown to survive, or strategy is bad over long term and can kill account and you need to be satisfied. so you can try the other method for some additionally money or much much less risk. or you stay with your method,...
Yes I do trade high volume relative to account size and I have had to withstand large drawdown. Need to get sharper with my hedging in fast moving markets to prevent that
My strength is that I can normally work out whether buying or selling (short term) is happening regardless of the way the market is moving. Could very well bite me in the arse though.
Indentify > Plan > Accept > Execute
  • #48
  • Apr 22, 2017 4:11pm Apr 22, 2017 4:11pm
Quoting wizlon32
{quote} Yes I do trade high volume relative to account size and I have had to withstand large drawdown. Need to get sharper with my hedging in fast moving markets to prevent that My strength is that I can normally work out whether buying or selling (short term) is happening regardless of the way the market is moving. Could very well bite me in the arse though.
do it slower and steady, no need to do 6000% in 1 month, do it with 1/12 amount, and you are more save, 6000% in 1 year would be very very very much. even 1000% so you could do 1/70 amount.
  • #49
  • Apr 22, 2017 4:17pm Apr 22, 2017 4:17pm
Quoting dukas_trader
{quote} do it slower and steady, no need to do 6000% in 1 month, do it with 1/12 amount, and you are more save, 6000% in 1 year would be very very very much. even 1000% so you could do 1/70 amount.
But I need money now, not in 1 year lol. This month I made back and withdrawn everything I ever invested in forex. Now I do plan to lower my volume. Thanks for the advice.

But we digress. Lets not change the subject
Indentify > Plan > Accept > Execute
  • #50
  • Apr 22, 2017 4:38pm Apr 22, 2017 4:38pm
I looked at the difference in Average Daily Range for the three pairs, Eur/Chf, Usd/Chf, and Eur/Usd for the last 5 days. E/CH was 26 pips, U/CH was 50, and E/U was 59 pips. I really don't see how a long E/CH can be equivalent to a long U/CH and a long E/CH?

As far as an advantage to nedging, I think it is invaluable. Despite trying hundreds of strategies and thousands of EA's, I find the market to be mostly unpredictable. We can gain some small advantage from statistics, however. The market ranges 70% of the time and trends 30% of the time. When the market is ranging, you can just about take any trade, buy or sell, set a TP, no SL, and it will probably get hit. Kind of like shooting fish in a barrel With the right broker, you can use less margin hedging to get into much bigger positions safely and even protect against black swans. As long as you buy low and sell high in a range and stay hedged against a trend, you should do well. I was trading when the CHF went ballistic and stop losses did not work ((
  • #51
  • Apr 22, 2017 4:40pm Apr 22, 2017 4:40pm
I do not see why it is so difficult to see the value of Hannover`s point regarding nudging. A hedge is a stop-loss with extra expense. Your broker thanks you. Hannover's example should be, could be considered, "synthetic hedging." The single disadvantage is that it makes management of the trade more difficult, slightly. An EA would need some way to recover it's state after the position is "flattened." Could be done by storing the state in a file, drawing objects on the chart or both.
  • #52
  • Apr 22, 2017 4:57pm Apr 22, 2017 4:57pm
Quoting wizlon32
3. Price continues to drop so buyer sets SL on sell to BE. 4. Buying volume comes in and price rises. It hits the short SL at BE and continues up until the long is in profit.
Agree, the additional orders provide operational benefits, namely the use of a TP and SL, which allows the trader more set-and-forget options, and making it easier to mentally keep track of everything. Hence it comes down to personal preference, i.e. whether the trader wants to pay swap differential to the br0ker on hedged positions, to obtain these benefits.

I don't necessarily see it as "safer", but then unlike many traders I base my decisions around my assessment of market probabilities -- i.e. whether I want to be long, short or flat at any given point -- as opposed to P/L, BE, RR, etc. Personally I dislike "hedging" not only due to the additional costs, but because IMHO it can lead to bad trading psychology (as I attempted to explain in the latter half of this post). But much depends on the individual; each to their own.
  • #53
  • Apr 22, 2017 5:04pm Apr 22, 2017 5:04pm
Quoting hanover
{quote} Agree, the additional orders provide operational benefits, namely the use of a TP and SL, which allows the trader more set-and-forget options, and making it easier to mentally keep track of everything. .
the hedged buy and sell has then tp and sl? its same like closing the buy (stay flat) and setting stoporder for the buy or sell you will reenter the market or setting limit order for your takeprofit. no difference, stop or limit orders are at same prices like tp and stoploss of hegded orders.
so this argument is no plus or minus for the methods.

but your point with bad trading psychology is good. because many dont like to close a trade in minus, this will block their mind extrem from real trading. lossed are what happen as costs for trading, it will happen and needs to happen. without near nothing is pissible to calculate. as long the system is fine and the wins are good, so many losses as possible would be best statistical save result with all best future chance of same results. systems with low set of losses have a much bigger chance of different results in future, because 1 loss can change the result extrem.
  • #54
  • Apr 22, 2017 5:04pm Apr 22, 2017 5:04pm
Quoting FXRooster
I looked at the difference in Average Daily Range for the three pairs, Eur/Chf, Usd/Chf, and Eur/Usd for the last 5 days. E/CH was 26 pips, U/CH was 50, and E/U was 59 pips. I really don't see how a long E/CH can be equivalent to a long U/CH and a long E/CH? As far as an advantage to nedging, I think it is invaluable. Despite trying hundreds of strategies and thousands of EA's, I find the market to be mostly unpredictable. We can gain some small advantage from statistics, however. The market ranges 70% of the time and trends 30% of the time. When...
Short term markets are predictable if you read the volume correctly. Add that to an understanding of HTF structure and you're on to a winner.
Indentify > Plan > Accept > Execute
  • #55
  • Apr 22, 2017 5:11pm Apr 22, 2017 5:11pm
Quoting wizlon32
{quote} Short term markets are predictable if you read the volume correctly. Add that to an understanding of HTF structure and you're on to a winner.
only in future markets at max, and only sometimes. spot forex is so much bigger then future currency market, so here you see nothing. and other markets have often fake orders to show volume to scalp some of this volume market book traders, what works extrem good, because you can predict this type of traders often.
  • #56
  • Edited Apr 23, 2017 3:08am Apr 22, 2017 5:16pm | Edited Apr 23, 2017 3:08am
Quoting FXRooster
I looked at the difference in Average Daily Range for the three pairs, Eur/Chf, Usd/Chf, and Eur/Usd for the last 5 days. E/CH was 26 pips, U/CH was 50, and E/U was 59 pips. I really don't see how a long E/CH can be equivalent to a long U/CH and a long E/CH? As far as an advantage to nedging.....
You need to balance the position sizes correctly. Back in 2009 a FF member showed me a arbitrage situation he was exploiting, by finding net positive swap using a ring of currencies across multiple br0kers. He had to weight the position sizes precisely, so that $$ gained (due to rises/falls across the different pairs) overall exactly balanced $$ lost, allowing him to profit from the positive swap. Some complex calculations were involved. Of course that type of edge would have dissipated when the br0kers adjusted their swap rates.

As for the nedging issue, in post #42 I demonstrated how it is possible to gain exactly the same pips from a nedge "strategy", but without the nedging. It requires viewing overall P/L as a whole, rather than trying to extract a profit from each individual position. I assume that's why some traders fail to see it.
  • #57
  • Apr 22, 2017 5:19pm Apr 22, 2017 5:19pm
Quoting dukas_trader
{quote} only in future markets at max, and only sometimes. spot forex is so much bigger then future currency market, so here you see nothing. and other markets have often fake orders to show volume to scalp some of this volume market book traders, what works extrem good, because you can predict this type of traders often.
All of my trading is M1 timeframe volume related on everything I trade. Seems to work for me
Indentify > Plan > Accept > Execute
  • #58
  • Apr 22, 2017 5:21pm Apr 22, 2017 5:21pm
Quoting wizlon32
{quote} All of my trading is M1 timeframe volume related on everything I trade. Seems to work for me
to be correct, where you read the volume? in metatrader?
  • #59
  • Edited Apr 23, 2017 12:26pm Apr 22, 2017 5:26pm | Edited Apr 23, 2017 12:26pm
Quoting dukas_trader
the hedged buy and sell has then tp and sl? its same like closing the buy (stay flat) and setting stoporder for the buy or sell you will reenter the market or setting limit order for your takeprofit. no difference, stop or limit orders are at same prices like tp and stoploss of hegded orders. so this argument is no plus or minus for the methods.
Agree totally, the fact that nedging can be replicated by a single net position (and with lower costs) is the point I've been making all along. But there's no law against having a SL and/or TP on the nedged positions, if your style of trading deems it necessary**. Then you can walk away from the computer, letting the SL/TP trigger automatically, rather than having to babysit the positions.

** I don't trade this way, but here's a possible example. Suppose you diversify, by running both long term and scalping strategies. You are long EU on the weekly chart, with a SL and TP, but then mid-week your scalping system tells you to short EU for a few pips. You can then create a short position with its own SL and TP, rather than closing and re-opening the other position, which would necessitate keeping track of all the different entry/SL/TP levels. I concede that it's merely operational convenience; I fully agree that there is no mathematical advantage.
  • #60
  • Apr 22, 2017 5:28pm Apr 22, 2017 5:28pm
Quoting dukas_trader
{quote} to be correct, where you read the volume? in metatrader?
yes MT4. If MT4 volume is not correct then god knows how i've made a single penny because it is the backbone of my trading.

And yes I have read all about the arguments regarding MT4 volume.
Indentify > Plan > Accept > Execute
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