When you get to know me, feel free to comment on who I am and what I’m about. Until then, how about we stick to the subject?
It sounds like you’re proposing a long/short “hedge” strategy (some people call it a straddle) at roughly 1.0150 with about 150 pips in either direction as the break-out target once the consolidation gives way. And I’m guessing you have stops in place to exit the side of the “hedge” the market goes against when it goes. Am I right?
Assuming a 50 pip stop, for the sake of discussion, here’s what could happen.
The market goes straight up or down an hits the 150 pip target. On the way, the other stop is hit, so you net 100 pips less the spreads.
The market stays within 50 pips either side, and you end up with no profit or loss except the spreads.
The market rallies or sells off by 50 or more pips, taking out your opposing stop, but doesn’t reach your target. You’re left with an exposed directional position. If it reverses back through th 50 pip threashold you’ll end up with a loss.
Now, the point I was trying to make from the start of the post is that you can exactly replicate this without hedging. You would put a buy stop 50 pips above the market, with a 100 pip take profit limit order (150 pips from the current price), and a matching sell stop 50 pips below with it’s 100 pip take profit. If you do that you actually have a slightly better P&L profile based on the same three potential outcomes because you’re only dealing with 1 spread each time rather than 2.
The market goes directional to the full extent of expectations. That entry order is triggered, but the opposing one isn’t. The result is a 100 pip gain, but with only 1 spread because only one trade was made.
The market stays between +/- 50 pips, so neither entry order is filled, meaning also no spread costs.
The market moves more than 50 pips in one direction, but doesn’t reach the take profit point, so you’re left with a directional exposure that would turn into a loss if the market falls back through the 50 pip mark. Because you’ve only got one trade, though, you’ve only got 1 spread.
Of course the worst case scenario for both appraoches is the market moving 1 way by 50+ pips and then going the other way by 50+ pips. In the “hedge” strategy both stops are triggered, producing a 100 pip loss, plus two spreads. In the non-hedge approach, the opposing entry position would be triggered, also making for a 100 pip loss, but only with one spread.
See what I’m getting at? This is why even the brokers admit there is no economic benefit to be had by “hedging”.
I wasn’t commenting about YOU, it isn’t about YOU. You said ‘the kind of hedging we were talking about’!
I started this thread, you weren’t talking about THIS kind of hedging, not the other way around.
Yes that is right, & my hedging strategy profited last night about 30-40 pips last night. Could have been about 80-120 but that would have been on a purely Long bet instead of hedge. It paid off for me! Even though I only did low value pips for the sake of trying something new, still positive.
KEY … WORD … ‘COULD HAPPEN’!
Pigs COULD Fly, I COULD be a millionaire tomorrow, China can take over the U.S. next month.
for the sake of argument, don’t ever use could without fundamental backup.
okay, this is where I am officially done listening to you.
What brokers, what back-up do you have? give some references, anything.
Quit just spewing out opinions backed by anything.
I will counter your argument by saying "brokers admit there IS economic benefit to be had by ‘hedging’.
Sorry, to step in here again. I just wanted back up that argument. Hearsay is not good for success.
Just to backup that, there is for sure a hedging strat what works. No straddle in this instance, though:
Lets say, you want to hedge the usd in an usd account because you know you go on vacation to Europe in three months. Euro is cheaper now than what you expect in three months. That means, you buy eurusd in going long, because you expect, that you buy cheaper. Even if the Euro falls, you do not lose anything, because you can buy things cheaper then in Europe. A win win.
That’s hedging and nothing else. While you do this, you can also go short to speculate. This is just ONE example, what works in using heding of your account. Plus as I said before, I can imagine a lot more. I am just no straddler or hedger to think that far right now.
Anyways, it is the same thing as it always is: Some can’t think in a flexible way to become more successful. Used to be, they stick to a losing account or a small profit. That’s why they have to make their money while selling books, becoming a broker or advertising whatever. I do not call any particular person here. Just general speaking.
I can only suggest to everbody: Keep your mind open and don’t believe anybody, beside your own eyes and mind. If you have a good idea, try it. Whatever naysayers come in and want to pull you down. Try it for yourself!
Specifically, look to the first paragraph on page 7 where in the second sentences it says “…many of the FDMs admit that customers receive no financial benefit by carrying opposite positions…” (FDM = forex dealer member, aka broker).
the FUNDAMENTAL BACKING UP of my statement would be ‘dark sky’ ‘weather man on t.v.’ ‘spring time’, etc.
but if I say ‘a volcano is going to erupt in L.A.’, yeah it can happen … but based on what?
you are just spewing arguementive points with no foundation, for god sakes your reference to ‘brokers’ & ‘hedging’ was the CFTC, lol
LOL, you are a joke to me now, you said
" This is why even the brokers admit there is no economic benefit to be had by “hedging”."
& you are referencing that to the justification that the CFTC is using to ‘ban’ hedging, HA? is this a joke, what about all of those so called brokers you were referring to?
For someone who claims to “know far more about comprehending others statements”, you certainly didn’t comprehend mind. I wasn’t presenting a market analysis argument. I was indicating the potential movement patterns in price based strictly on the fact that price must either rise, fall, or stay flat.
" This is why even the brokers admit there is no economic benefit to be had by “hedging”."
& you are referencing that to the justification that the CFTC is using to ‘ban’ hedging, HA? is this a joke, what about all of those so called brokers you were referring to?
Since you love to parse things, how about you point out to me where exactly I said “all” or “most” or any variation on that theme.
And on the same note, the NFA put on the hedging ban, not the CFTC. Did you even look at the document? If you don’t trust the NFA to report broker responses accurately, and thus don’t accept their comments as evidence, that’s fine. Nothing I can do about it, and I won’t try, but you can’t throw out charges of not backing things up as to the source of my statement when I’ve made the effort.
So reviews of my book on Amazon (I presume that’s what we’re talking about here) are some kind of indication as to whether I’m a good trader? Hmmm…Interesting since none of them has ever actually seen me trade to the best of my knowledge.
As for the right and not right, please point out my errors. I will endeavor to correct them. I’m being totally serious. Provide the evidence you and mj keep asking for. I’m not so arrogant as to think I’m perfect, and seek to correct my errors when I note them.
Here’s the big question, though. I thought you said there wasn’t any one true way to trade, but yet there’s a true path I’m not on?
You were presenting plenty of ‘what-ifs’ & arguing as if they were fact and you were all-knowing of those facts. I can reference if you want.
We weren’t even talking about the regulation, YOU said
“This is why even the brokers admit there is no economic benefit to be had by “hedging”.”
& your reference to those so called ‘brokers’ were the CFTC! So the CFTC / NFA speaks for all brokers?
I didn’t even know you had a book, I wasn’t talking about that. if you are talking about that … get over yourself, you wrote a book! want a cookie?
I am not saying you are wrong, I am saying don’t speak of opinion as it is fact, and don’t give ‘what-if’ scenarios with no foundation, like I exampled, If I say it is going to storm … my foundation is the sky color & the weatherman.
& don’t assume what doesn’t work for you won’t work for others, MY FIRST hedge made over 30 pips. & it was not hard. It would have made a lot more if I just bet long, but I bet short & long & It worked fine, with patience, it worked fine.
Please don’t. You’ll haul up something meaningless to the point I was making that you attacked and mangle what I said as you keep doing, so it’s just not worth the time.
We weren’t even talking about the regulation, YOU said
“This is why even the brokers admit there is no economic benefit to be had by “hedging”.”
& your reference to those so called ‘brokers’ were the CFTC! So the CFTC / NFA speaks for all brokers?
No. I referred to the NFA’s letter to the CFTC in which they used the response of brokers to their (NFA, not CFTC) initial no-hedging rule language as indicative of brokers admitting no economic benefit to the customer. I did not say the NFA spoke for all brokers. I believe they used the term “many”.
I didn’t even know you had a book, I wasn’t talking about that. if you are talking about that … get over yourself, you wrote a book! want a cookie?
You didn’t pay attention there. I wasn’t responding to you. I did write a book and I would very much like a cookie, but the two are not related.
& don’t assume what doesn’t work for you won’t work for others, MY FIRST hedge made over 30 pips.
Never said it didn’t work. My earlier argument was that [B]your[/B] decisions where to buy/sell - presumably driven by [B]your[/B] market analysis - decided your performance. Hedging did not. Hedging is only a means of accounting.
