Adding a lot is definitely much better. Why wouldn’t you do that? Why would someone close out the one position, then re-open a double sized position like that?
That I may ask you. So, we are finally on the same page?
Regarding your answer to mj2009: No its not always this simple. If you have a system with 10 trades open and with 10 different entries, stop losses and targets, I’d like to see how you may calculate those 30 numbers if on a 5m screen your price acts like a jumping punching ball.
Please don’t forget that there are some traders with bigger accounts than just micro or mini or only a few thousand bucks. If an investor has millions in his account, it might not be a good suggestion if you tell him it all goes to accounting, it is all easy to calculate and so on.
Investors with millions in their accounts don’t engage in retail trader style hedging operations and I’d wager that they don’t trade with a pile of trades off of 5m charts either. Professional traders, as explained by Rhodytrader before, think the small retail style hedging is nuts. He should probably know as I believe he mixes with the likes of John Bollinger on a daily basis. If professional traders want nothing to do with the small retail hedging I’d say that’s probably a good clue that it’s not a wise practice. But then small retail traders aren’t exactly famous for following wise practices 
PipBandit,
even big investors might use 5m charts. Maybe not for their big picture, but for their entries.
However. What I don’t get how a thread where a thread opener just asked for advice regarding hedging possibilites in general now becomes a “don’t hedge or you are stupid” thread where ppl fold out their humble egos. Whenever that happens, and it happens often inside of forums, I aks myself:
As successful traders we often know that your ego is your own worst enemy. How can ppl with such big egos become highly successful in the markets? Not to stamp on anyones feet, but that is what I ask myself whenever I see that ego stuff developing. That is a curiosity, isn’t it?
If mj2009 or anyone else wants to hedge, then let em hedge. Holy smoke, what is the problem?
Maybe, I’m not sure what book we’re reading. 
Regarding your answer to mj2009: No its not always this simple. If you have a system with 10 trades open and with 10 different entries, stop losses and targets, I’d like to see how you may calculate those 30 numbers if on a 5m screen your price acts like a jumping punching ball.
I will again assert that it [I]is[/I] that simple. You may have 10 trades open with 10 different, but what that comes down is a weighted average entry price. If you’re long, and the market is above that average you’re in the money. Where you’re waiting SLs and TPs are is completely irrelevant to the bottom line profit or loss of the position you’re in now. They only become relevant when executed.
As for calculating stops and targets on the fly, I’d like to think you did that ahead of time before you put a new trade on.
Please don’t forget that there are some traders with bigger accounts than just micro or mini or only a few thousand bucks. If an investor has millions in his account, it might not be a good suggestion if you tell him it all goes to accounting, it is all easy to calculate and so on.
I will tell you with full confidence and no hesitation, having been in this game for a long time, that those trading forex in the size you suggest here are dealing in net positions (weighted average entry), not looking at each individual transaction as a seperate position. In other words, they aren’t using “hedge” accounting. It’s the exact same sort of account that has been used by trading houses and in individual stock and futures accounts forever. It’s only been in retail forex where the whole “hedge” accounting has been used.
I definitely don’t mix with John Bollinger on a daily basis. In fact, I’ve never personally met the man (though we have spoken on the phone), and only once or twice have been in the same room as him.
I do work with some very experienced former pro traders, though.
I can’t speak for anyone else, but in this discussion I’ve got no ego in the game. What my intention has been and always will be is to help people understand trading and the markets. This hedging thing is a minefield. There’s a reason why pros don’t use it. Depending on how it’s used, it has the very real potential to create a performance illusion.
For example, some traders use hedging to avoid booking losses. They go long, and then when the market goes against them they go short. They think that as long as they have the position open they haven’t lost any money, which is erroneous. They think that somehow hedging improves their performance because they end up with a higher win rate because they’re holding losing positions until they come back into the black. That produces a higher win rate, but the losers when they happen can be massive.
More importantly, to my mind, attributing one’s success to hedging denies the simple truth that no matter how you come at things, the bottom line determining factor in your performance as a trader is in the buy/sell decisions you execute. If someone who “hedges” is profitable, it’s not because of the hedge. It’s because they bought and sold at the right points. When they attribute the success to hedging, they deny their own decision-making performance, which stunts their development as traders.
rhodytrader,
that was a good point. I read a lot of books, lol. Have 2 open in my reader now.
Never say never. If it’s not working for you it doesn’t say it is not working or used by others.
Regarding that Bollinger or others: The only guy I feel respect is John Wayne. 
I don’t see any “humble egos” folding out, only some people discussing pros and cons of retail style hedging and expressing some opinions in general on the matter. Don’t really see the need to start calling people out as having big egos. If this level of discussion is disturbing you there’s some places on the internet you really shouldn’t visit. This is one of the tamest internet forums I’ve ever been a part of.
PipBandit,
first you come with Bollinger is your best friends friend, which turned out to be a fake. Then you stepped in my rhetoric trap. I guess it would be better for all of us if we let everybody trade as he like. We can all give some suggestions or advice, but if it becomes somehow sick insisting, then there are clear signs of egos present.
I’ve all said what I said and I am out of this thread. Have fun, guys! 
I’m afraid there’s only one ego strutting around this thread. Well, not anymore it appears.
PipBandit, I can’t read you anymore. Save your energy.
I just talked to someone close to my family {don’t want to say who to make it to personal} but they are involved on the accounting/administrative side of banking.
Plan & simple, they said in their opinion that ‘hedging’ is nothing more then insurance that will cost you 10-30% in anything {meaning stocks-options-future-forex-etc}.
So medium risk news times or 30 minutes before the news breaks would be a good time to ‘hedge’ if you want the insurance.
Hedging was also explained to me that it works for the most part only if you hedge everything and make it your standard … meaning you can’t pick & choose what bets you want to hedge.
I can’t put someone else’s words exactly as I heard them unfortunately but hopefully this gave you insight to that point of view, it cleared it up for me.
Just wanted to say thanks to mj2009! To me it makes sense too.
Lets say you are in a loooooong trade and something temporary happens like those news what you mentioned. You might just want to cover that for a short time. Makes absolutely sense!
Same sense as it makes to cover other financial transactions I am aware of outside of forex with hedging. Thank you!
In the sense accounting/administrative/banker types think of hedging where they mean “buying” upside/downside protection, that’s about right. Think of it in terms of having a long position in EUR/USD and buying a put option to limit the loss you could suffer. The put will protect you the same way insurance does, but just like insurance it will cost you.
This is not the same sort of hedging we’re talking about, nor is it the only type of hedging available. In retail forex, hedging means directly opposing positions in the same instrument. Everywhere else, hedging means taking an opposing position in a different instrument or market.
For example, if GM has a bunch of EUR from European car sales that it will repatriate in a couple of months, it has a couple of option to hedge. It could go short EUR futures or enter into an EUR/USD short forward contract. Depending on their needs, they could do a currency swap. And of course options are always a possibility, especially if they want to leave the door open to benefitting from EUR appreciation in the interim. What they cannot do is sell EUR/USD in the spot market because that would be an immediate conversion of EUR to USD on their books, getting them to an EUR-neutral position, which is exactly what they don’t want to do. But that’s exactly retail forex traders are doing when they put on an EUR/USD short to “hedge” an EUR/USD long.
Does the differentiation make sense?
So medium risk news times or 30 minutes before the news breaks would be a good time to ‘hedge’ if you want the insurance.
Generally speaking, the kind of hedging we’re talking about here (buying insurance) tends not to be efficient for use in short-term trading because it’s cost prohibative. That’s not always the case, but it tends to be.
Hedging was also explained to me that it works for the most part only if you hedge everything and make it your standard … meaning you can’t pick & choose what bets you want to hedge.
True. If you don’t hedge the whole thing you leave yourself exposed and even a small exposure can cause a lot of pain if things go really bad, especially in a business with thin margins.
Um, hate to burst your bubble … but I started this thread and this IS the kind of hedging that is being talked about!
You like hearing yourself talk don’t you?
You are what we use to refer to as “LLL” aka Life-Long-Lecture …
Seriously, I am not insulting your intelligence but you really like to try and sound like you are the word of reason!
Actually generally speaking, again, I started this thread and that is NOT the kind of hedging this thread was talking about … kk
I am sorry, i was just reading your post and you have an ‘ego’ about this, no offense, but when it comes to skills … there isn’t ‘one’ correct way to do it, I GUARANTEE that some people made alot of money hedging & some didn’t.
If you bet against the housing crisis with hedge-funds from 2007-present, you are rich, why? because the reversal of the value would have paid off.
Like I said “rhodytrader”, to tell me what kind of hedging we are talking about is WRONG since I started the actual thread and this is what I was talking about.
Everyone has a different strategy that works for them, this might work for some, I will certainly try it out in full force to see the results but I can see if news is coming up, and you hedge before the news or just based off simple ‘break-outs’, this could be very helpful.
I am going to try and hedge AUD/USD right now, because it is either going to go up to 1.0100-1.0300 or it is going to go back down to 0.9999 -
Hedging will help in this situation, If I just ‘bet’ on one side with the stop loss, I might lose, but with this, either way, it will go in one particular direction hopefully & at most I will lose the spread x2.
moving onto hedging already - thats the easy option, i thought you were better than that - its kind of like giving up.
so how does that hedge you got work, Perhaps its fine in a range bound market, but if it keeps trending when are you going let go and realise the loss -you afraid of losing
LoL, you are a joke!
I can’t do more than one task? Or is that to much for your one-track mind?
I don’t think you have been to successful with forex have you?
AGAIN… just because of your failures doesn’t mean others will fail!
I’m starting to think that all your ‘suggestions’ of what will happen has already happened to you, I am actually starting to pity you.
Personally I’m betting that it will stay between 1.0000-1.0099 forever. I guess time will prove whose analysis is more savvy…
Maybe, but you have to remember that the strength isn’t 100% of Australia’s economy but the lack of strength from U.S. & European economies.
& with the higher exchange rates & 4-5% interest in Australia, it cost
10%-20% more for Australian exporters when compared to just a few months ago.
There are good chances that this is just a ‘hot’ market right now, and as soon as USD/JPY reaches around 79.75, then AUD/USD could become a Bear Market. Looking at history, it could settle for the long term in the higher .9x.xxxx range.
I don’t think that Australia is a sound investment for the long term, & as soon as there is one day of flat movements, I am willing to bet that A LOT of buyers from last thursday will sell to make quick 1-week profits.
I personally am going to sell my position tonight, I would rather cash out now rather then take chances on what the new trend is going to be.