Both buy and sell positions losing?

Beginner Questions
1

First off, please forgive this stupid newbie question I am very new to forex!

My question is, in my demo account I am trading with the EUR/USD pair and just as an experiment I opened both a buy AND a sell position. Currently both are in negative.

How is it possible to be losing on both a buy and a sell trade of the same currency pair? Doesn´t either buy or sell always have to win out? I mean, doesn´t either buy or sell (one of them) have to be in the positive and the other in the negative?

Thank you for your patience with my newbie question.

2

Depends on the details. Such as spread - this only shows for a short period until price moves beyond the spread range, but if you open two opposing positions simultaneously, there will be a short period when both are immediately in the red. Then price moves and yes you’re right, one of them gains, the other loses.

3

Thanks. So is it a bad strategy to open both positions simultaneously? Of course you will have one position in the red and losing but the other will be winning.

4

…and as soon as you close the losing position, the winning position will turn against you so you can lose on that as well

2 Likes
5

If they’re both equally sized they will cancel each other out, so taking into account the spreads you will not make any money.

However, some people who want to trade a particular market but are unsure which way it will go do place a buy order above price and a sell order below price. They reckon that whichever is hit gives a true indication of which way the market is going to go, and then they cancel the other order. Not something I do but there are traders who do this.

6

thank you for the insight.

7

I believe they call this Nedging…!

if i am not Mistaken…

8

Surely you would close the winning 1 first when you believe the markets going to turn take the profit and then try and get back as close as possible to the other if not further then close that 1

X2 Profit… (if only it were that simple hey)…:alien:

1 Like
9

Hi Texan… US regulators have only recently banned US brokerages from offering Hedging…

Why only in the US…?

Research it away from Industry sponsored forums …that’s where the truth will be found.

“Nedging” (Buy/Sell simultaneously with a negative result )… :alien:, Avid FF forum reader…

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10

LMFAO… Welcome to the mind job that is THE FOREX INDUSTRY

No actually , this is a very intelligent question.
it shows you’ve experimented and found results instead of being a stupid newbie who is lazy and doesn’t do anything

mate, it’s not often that a newbie comes on and asks this
WHAT DOES THAT TELL YOU
Answer : they rarely experiment

vs

how often does a newbie say WHAT STRATEGY SHOULD I START WITH SO I CAN WIN
or
WHAT’S A GOOD BROKER
how often does that get asked

Multiple times a day, that’s how often

No, they dont’ have to be
when you start a trade (Assuming both are at the same point)
the SPREAD will affect the prices so that you will be at a loss on both trades when you start

then if the buy makes 20 pips
the sell will lose 20 pips meaning the overall profit/loss will be that you MUST ALWAYS BE AT A LOSS

try it… and let it run on demo
see what happens

then do this

Open a Buy anywhere
then wait until it’s 10 pips in profit
and open a sell

see what happens LOL

have fun

11

Did you open both the trades in same price and same lot size? Spreads also may be a factor for this. It’s a type of hedging. But for this you need good expertise as one buy and one sell cancel the profit or loss. There are other hedging strategies you will find in the forum. You can test them on your demo. But hedging is for expert traders in my opinion.

12

Wasn’t me it was @TheTexan1984 asking but i have tried hedging in and out of the market with some success.most of the time
But i Think When people Hedge There using 2 correlating currencies or stocks etc.
Buy GBP/USD and Sell USD/JPY or similar.

Yes True.timing is key as well as your analysis.!

Hoping to get there soon…:alien:

13

The first time i hedged was when i had a short On and price shot up my account had Margin Call i was really nervous cos didn’t want to lose i had just enough to place 1 trade,
so i put a buy to see what would happen it carried on up about 30 pips and was looking tired then started to fall back i took the profit and hoped it would carry on down and it did with me putting smaller shorts following it down past my original sell.
Was a good day.

Hurgh Hem… I Meant Nedged.

14

I appreciate all your feedback. thanks!

15

It’s even worse than that. Taking into account the spreads, you will lose money in transaction costs.

@TheTexan1984, the only valid reason to be simultaneously long (in a buy position) and short (in a sell position) a given currency pair, is because you are running two different trading strategies that use different buy and sell signals. Even then, it might be best to run these two strategies in different accounts, so you can track their individual performance.

If you are long and short simply because you lack the conviction to choose a direction, then you are better off being flat (having no long or short positions), because then at least you will save yourself the transaction costs.

1 Like
16

This has been dealt with so many times on BP…

There are those in favour and those against…

True hedging, however, is buying and selling

unrelated assets so that they have little correlation

and if directional bias on one proves flawed then

the other one will dampen (or “hedge”) the loss.

Hedging is a more complex form of capital

preservation than the stop-loss, and it requires

more research - diversification of long and short

positions is key.

Hedging on the same pair only works if you have

a statistical edge based on positive vs. negative

rollover, e.g. if your buy earns you three times more

rollover than the negative rollover of the sell order,

then even if you lose (in floating P/L) on the buy

order and gain on the sell side you can minimise

the loss through positive rollover (i.e. overnight

interest) and through the gains on the sell order,

although after closing everything you will have to

subtract the buy loss and the negative rollover

from the opposite trade. The profit margin may

be small, however, and you need to have a firm

grasp on your margin limit to avoid a margin call

if you overleveraged.

As some say, you would be better off waiting for

directional confirmation and then placing a strong

trade in one direction.

Happy Trading

3 Likes
17

Hey Texan, following is strategy that can be trialed using a buy and sell simultaneously.

For the exercise, let’s call it “Dredging” :slight_smile: first find a ranging pair (trading sideways), which is pretty easy these days. I used GBPUSD, USDJPY, EURJPY or XAUUSD all low spread fluid pairs.

USING A DEMO: Once you have determined that price is somewhere in the middle of the last upswing, downswing (say 1 min, 5 min or 15 min chart) is to place a buy and a sell simultaneously using small lot sizes, say 0.01 or 0.05 with a 3-8 pip TP and no SL.

Now price is going to either hit the buy TP or the sell TP and when it does, you instantly open another buy and another sell, and when it hits either TP, again place a buy and a sell, keep continuously doing this, Price will move up and down closing out previously opened positions in the process. If you keep continuously doing this for say a 30 min - 1 hour period you will find that you have maybe 11 wins (say x 5 pips) and you will be left with maybe ~3-4 open trades worth approx total of - 20 - 30 pips.

CLOSE ALL trades and you have locked a profit of ~25 pips in a reasonably short time. Now test this on a DEMO and you’ll see how it works, its ~ 80% certainty that you will come out with a profit.

This is a simplified version of the system that I use. Example, if there is more negative shorts I may start to use slightly larger Buy lots to compensate and visa versa. Or if the market starts to move in a particular direction I will increase the TP in that direction etc. etc. etc. but the simpler the better.

The beauty (Edge) of this “system” is that price direction is irrelevant…No stops being hit to erode your account, even your losses are “hedged” and it requires no Indicators, Crystal Balls, Crucifixes or Holy Water…

Check your News Calendar before commencing the system to ensure not getting caught by a news release. Using small lots will protect against major margin usage with 0.01 ~$3-4 per position and 0.05 ~$11-20 per position margin being utilised so it is safe for accounts under $500.

So give “Dredging” a try on a DEMO, it works, I have tested it numerous times with results averaging out as shown above. Don’t let some of the §Muppets here on BP tell you it doesn’t…test it!

This is one of the main reasons Hedging accounts were banned by the US…the IP’s cannot protect themselves…

Edit: If worried about the lack of a SL’s being present, then set your stops to throw a few pips outside the volatility ie: last swing high, last swing low…on the traded time frame.

2 Likes
18

You can generally tell you are on to something when a Broker weighs into the conversation…

“Always back self interest…at least you know it is trying…”

19

Hi @Trendswithbenefits,

Unfortunately, it seems your bias against brokers is clouding your judgement.

“Dredging” as you describe it is mathematically equivalent to having no position in the market at all. In fact, it’s worse because you pay trading costs without having any opportunity to profit from market moves.That’s because any profit you make on one side of your “dredge” is offset by an equivalent loss on the other side.

If you close the side that is in profit, that still leaves you with floating losses of equal magnitude on the other side. The only way to escape this predicament is to commit to one direction and profit or lose from that choice. Since that is the case, you are better off staying flat until you are ready to choose, so you avoid the transaction costs of unnecessary trades.

2 Likes
20

Read my post properly and have another go…Both your posts are “Play Book” propaganda.