You can do “triangular hedging” where you open three positions using three currency pairs that each have two of a list of three pairs. e.g. AUD/NZD AUD/USD NZD/USD. By buying/selling the right pairs you end up being both long and short on each currency.
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You said hedging soaks up your margin. I was simply correcting that statement. Sometimes what is not so obvious is real
UK spreadbetting brokerages allow this. At least mine does.
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Wow!!! That’s amazing!! You’ll never be wrong!!
I’m in Canada and hedging is allowed. My broker offers accounts where you can enable or disable hedging. But, hedging has its challenges and can be costly. For the most part it’s usually just better for us retail traders to take the loss and move on.
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This hedging topic comes up over and over and over again in these forums… A yet not one member ever bothers to do a search on what has gone before… Astonishing or simply by design?
And as has been shown in this thread, most have absolutely no idea on why to apply it, how to apply it, when to apply it… Yet, are all certain it doesn’t work… Simple Hedging can be used in many risk mitigating strategies in markets as I displayed years ago.
An example of trading in both directions which can be applied to curtail losses in the retail markets for traders outside of the US… Maybe people should be thinking why this strategy is banned in the US??
Seriously, so many here would fall into a barrel of t*t’s and still come up sucking their thumbs…
Edit. Here is a thread from even further back that covers Hedging in greater detail including the math!! Worth the read if one is serious about applying hedging in the retail markets… As always, trial it on a Demo first… DYOR… It’s worth it.
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Not so simple as it seems. Being both long and short in equal sized positions means no loss but no profit
The best way to make use of this facility is a zone recovery strategy. These are fine when they work but when the market situation goes wrong the risk levels are very high and difficult to cap.
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When done precisely, hedging strategies decrease uncertainty and limit losses without decreasing potential earnings. Traders generally trade assets that are inversely correlated with weak assets.
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Hedging is quite a risky strategy and beginners should stay away from it. If you can handle risks and your risk management skills are good then you can definitely go for it. Else not only it is expensive but also it may push you to losses.
Hedging in forex is a money management technique. But only good in the hands of an experienced trader.
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Yes, it is a very good strategy to minimise losses but in order to carry it out successfully, you must have a profound knowledge of the market trends.
honestly speaking i never found any good result by hedging. sometimes i feel its a trap to lose your equity , nothing without it.
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1.6k posts and you still haven’t figured out how this markets work? Still didn’t get the basics? And still came here with " most have absolutely no idea on why to apply it, how to apply it, when to apply it… Yet, are all certain it doesn’t work". Got news for you, you are the one who’s wrong.
Your example is stupid there’s no other way to say it, you tried to make it look nice but it’s stupid, let’s get in to it.
You buy, market goes against you 4 pips you sell, you closed your buy position, that’s what you done, you called it hedging, but you closed your buy position that’s what happened.
Next marked drops 60 pips, panic? No. You have no positions, you are net flat, why would you panic?
Next you say you close position for 26 pips profit, ■■■■■■■■, explain to us how you got from -4 pips to +26 pips? You didn’t, you had a 4 pip loss at that moment, there wasn’t any 26 pips profit. You had a 26 pip profit but you also had a 30 pip loss, -4 pips.
It was your last trade that made you money, the rest didn’t do anything to your account.
It will also minimize gains as you are playing both sides of the market
Only way I would hedge is if I was confident of a prolong down turn in the market and selling would result in unacceptable capital gains taxes, then taking a short that would neutralize my account, that might be acceptable in some cases
Here we go once again… Another that doesn’t bother to read, do we… @TP89
Where did I say I closed the BUY? The original BUY is NOT closed… At the bottom of the cycle… We have a -32 pip BUY loss (Trade 1) and a + 28 pip SELL gain (Trade 2) which equate to a -4 pip (plus spread) situation…
HEDGED!!!
You and the rest of the Stop Loss crew got wiped out at your 100% Guaranteed SL Level?
I don’t have to panic or rush a decision on what I should do next… The HEDGE will remain at -4 pips even if price drops another 200 pips… I have time to plan a way out of the position going against me!!!
Now, on the retracement, we close the SELL (Trade 2), bank the 28 pip profit and open a BUY (Trade 3) and we still have a -4 position (-32 pips + 28 pips banked = -4 pips ) …
Pay attention @TP89… Now the retracement continues up over and above our original position (Trade 1 BUY) for a 12 pip gain… But we also have a 32 pip gain from the Trade 3 BUY…
Close ALL equates to a 12 pips (Trade 1) + 32 pips (Trade 3) = 44 pip profit from a potential loss.
The only error in this diagram is the +80pips… It was 44 (rounded down) pip profit… I think the 80 was the daily result and was therefore an error, a mistake, misinformation, disinformation… Although Close all states +45 pips!!
In summary… The risk was always 4 pips on a position that went over 30 pips against me, no Stop Loss like you and many of the traders resort to playing in these forums… Do I use this strategy all the time… No, if you read through more of my posts you would see I explain this many, many times…
Read the post again, do the math yourself, maybe get Mum or Dad to check your working out and you’ll see what was posted is factual and can be applied in certain circumstances in these markets.
Exactly as I also stated in the original post…
Most have absolutely no idea on why to apply it, how to apply it, when to apply it… Yet, are all certain it doesn’t work…
Also exactly as I also stated in the original post…
So many here would fall into a barrel of full of t!t’s and still come up sucking their thumbs…
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The strategy I displayed above is just one of many risk mitigation tools I use in these markets… I don’t use a Stop Loss each and every time. I have demonstrated removal of risk strategies in dozens of threads and posts throughout these forums.
Using a Stop Loss each and every time is a 100% guaranteed way of destroying an account, trade by trade… It would also be in the top 5, maybe even 3 reasons that retail traders lose their accounts…
Why is Hedging (trading both directions) banned ONLY in the USA?.. They cannot close your position, they cannot take your money… Skewing or whipsawing price in both directions has minimal gain (Spread/Commissions and SWAP) for the markets…
The retail FOREX Market is totally reliant on emptying your account and you topping it up and coming back for more… They know that they only get a few runs at our accounts before we walk away in disgust… And then churn the next Johnny come lately with dreams and ambitions… And so on, and so on, and so on… Just like the tables in the gaming industry…
The Dodd Frank act has done more to protect the Banks and Hedge Funds than protect the average US retail trader, as I’m sure you are more than aware of during this administration.
The 90/90/90 rule (90% of traders lose 90% of their money in just 90 days) works because of Stop Losses, Margin Calls and Price Action. How many times does the market rise dramatically before crashing into a downtrend, how many times does price crash down prior to a dramatic uptrend… On a daily basis!!
Edit +12 hours: Anyone else notice how price on these 4h Charts all finished the week at what appears to be exact critical levels… Just saying.
And while I fully understand these patterns are simply grasps for liquidity by the markets, it is a phenomena that happens with over 85% of trends.
Correctly and effectively applying this Hedging Strategy in these situations as have displayed in the FX market negates 2 of the 3 main account killers, Stop Losses and Margin Calls.
As I state on all of my strategies posted in these forums… Always, always always trial on a Demo…
Vanilla Forex Education is not enough to guarantee success in these manipulated markets… Just as a normal College Education not enough to guarantee an entrepreneur.
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Ok i see the problem now, you suck at maths. And your mom and dad realized long ago that it’s pointless to try do do anything.
Check with your broker, or as many brokers as you like, if you’re lucky they will have more patience than your mom and dad.
So check this,
This is a fact, not an opinion, if you buy 1 lot and place a stop loss, when the SL gets hit, your broker will enter a 1 lot sell position and close the position for you, check with them, see what they will say.
So, you end up with a 1 lot buy, and a 1 lot sell.
If you hedge, you open 1 lot buy, you hedge with 1 lot sell position.
So, you end up with a 1 lot buy, and a 1 lot sell.
If you can’t get to the conclusion that both situations are exactly the same, then you really need some help, you are really, really stupidd.
You can make the twists you want, it will always be a 1 lot buy, and a 1 lot sell in both situations.
This is why i said you closed your position, and you did. That’s why it doesn’t matter if the market drops 60 or 1000 pips, you are out of the market.
Now before you get all nervous read this 10, 100 times or as many times you need to understand this
IN BOTH SITUATIONS THERE IS A 1 LOT BUY AND A 1 LOT SELL, THE END RESULT IS EXACTLY THE SAME WHETHER YOU USE A SL OR HEDGE THE POSITION.
Take your time.
Exactly, you have -4 pips (-32 pips + 28 pips banked = -4 pips ) the same as if you used a stop loss.
You say you bank 28 pips, but that never happens, there was never a time where you had 28 pips profit, you where always on a 4 pip loss,
i understand what you mean when you say i bank 28 pips, you mean you close that sell trade.
But if you look at the reality, nothing is banked, you where at a constant 4 pip loss those 28 pips never existed at any point.
Your balance doesn’t matter, you can bank your balance as much as you like, your equity will always slap you in the face and bring you down to earth with some reality. And the reality is that your where always in a 4 pip loss. SAME AS IF YOU USED A SL.
@TP89, I’m not going to waste anymore time arguing with a simpleton like yourself… I had a look through your profile and 80% of your posts are spiteful rubbish…
This boys and girls, is why I no longer maintain my threads or post strategies and/or trade and risk management ideas in these forums anymore…
Too many angry, negative little f#$kers that have no idea what they are doing… Posting nothing of value and spend most of their time in these forums attacking, belittling and posting drivel…
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Take your time, read it again.
If it’s challenging for you ,read it as many times you need.
Go call for mommy, ask her for help.