Is hedging a good strategy?

Beginner Questions
24

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!!

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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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25

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.

26

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.

27

@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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28

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.

29

Hear Hear !

I don’t blame you mate - but I do know that your decision is a great loss to this forum and those of us who actually read your posts to learn and try to better our own skills.

It’s a great shame that so many skilled and able traders have left the forum and that these gobby juvenile trolls are being allowed to reduce it to a state where it is just a place for them to pretend they have something to contribute - but as you say - never anything positive - just offensive garbage criticising those who do have the ability to think outside the box !

The constant revision downwards of the standards of education to accomodate the lessening of the intelligence of those allowed to participate in education so they can get “Degrees” - allows them to come out and think they have the ability to argue with their betters !

I would point out that there still are some who are interested in what you have to say and I’m sure there are many more who are trying to understand it - but remaining quiet.

Thanks for sharing your thoughts on this one :sunglasses:

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30

Show where i am wrong? What’s a shame is idiots who spend all their time here instead of actually trying to do the work and learn something.
Dispute what i said, show where you disagree with me, what of what i said isn’t true?

People here have the habit of talking about what they don’t know and saying things that are not true, and then seem to be offended when someone corrects them, your post didn’t say anything about what you think I’m wrong at, what is it that i said that is not correct?

31

@Trendswithbenefits has published his thoughts and directed you to other threads on the subject he has contributed to - why should I waste my time trying to educate someone who has already demonstrated that he is so preoccupied with his own self-aggrandisement that he is not prepared to consider that there may be something erroneous in the “narrative” as presented by the vested interests ?

Nay lad I can’t be bothered with you until you show some signs of a thought process ! :slightly_smiling_face:

32

Maybe come back later when you are able to understand what i explained to the other guy.

If you want to debate something fine, tell me where you think im wrong, or what was it that i said that wasn’t correct.

Coming here and say you’re wrong just because i say so, doesn’t add anything to the discussion.
Your problem is that you don’t have anything to say that i am wrong. That’s why your attitude, came here to protect your buddy.

33

Yup, hedging is great and I sometimes use it in lieu of a stop loss. In a volatile market and your main bet goes in the wrong direction you can catch a profit from your hedge and hold onto your loosing position for longer. Then (if it’s volatile) your losing position swings back and becomes a profitable one, so you’ve made money while waiting and you’ve not been stopped out. That is, if it all goes according to plan…:wink: That’s how it works!

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34

Good in v up and down, zig-zaggy conditions.

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35

Stop this nonsense, what profit are you going to catch?there is no profit.
You open a trade, it goes against you, you hedge, you lost money, your equity will drop and at no point will you have a profit.
Test it for yourself, look at your equity while you do your trades and hedge them, you will always be in a loss.
You can’t close one hedge and call it catching a profit because you also have a loss, this is what I’m trying to explain, when you close one of the hedges, your balance will grow, but your equity will remain the same, and your equity will always show the true balance of your account.
If you look at the past example, he closed is hedge trade, is balance went up, but it’s irrelevant because is equity always remained with a 4 pip loss.

36

I get what you’re saying - if your position goes against you and you have a hedge bet on the other direction, even if the hedge makes a “profit” you still lose money and you might as well have just had a stop-loss.

However, in choppy market conditions I’ve found that if you are careful about when you cash in the hedge, the market will often come back and your original losing position will be back in profit again. Works for me. However, you neee to be v careful not to rack up bigger losses. It’s like throwing tourself a life-line to avoid being stopped out. However, if it works then you accelerate your profit

I think whether this works or not depends on what your trading strategy is, what market conditions are like, what you are trading and how deep your pockets are to wait for the direction to change (and if you think it’s likely to change)

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37

Or you can close your trade and then open a new one when you feel the market will come back to your ( original losing position).

Anyway, if someone prefers to hedge instead of using a sl, that’s up to them, I’m not against hedging, anyone should do it as they prefer.
It’s more of a style of doing things, i can get why some people might prefer to hedge.
Just say, i hedge my positions because i like do do things this way, there’s no problem with that.

But this thing, that someone buys, market goes against him, he hedges, then markets drops x pips and then he banks profits, this is not correct.
And there’s no advantage you can have with hedging regarding a sl.

Their heads will start to hurt by reading this, but in the market there are only two ways in wich you can make (or lose) money, you either are net long, or net short, the more you are net long the more money you will make/lose, the same for net short, it’s impossible to make/lose (excluding commissions) any money while being net flat.

So you can increase/decrease your exposure (net long/short) the same way whether you use a sl or hedge,
If you buy 1 lot and partially close your position for 0.30 with a sl, you are now 0.70 net long.
If you do the same, buy 1 lot and hedge with 0.30 sell your are 0.70 net long.
It’s this 0.70 net long position that will determine the money you make/lose.

Buying 1 lot, then selling 1 lot, and being net flat, and then telling i bank profits after a drop, it’s not just stupid, you need to be retarded to say something like this if you have some experience with the markets.

Im mt4 at least, it takes more work/time to partially close your positions, so hedging or partially hedging can be a good solution at times, can be faster to do, specially when markets start to move fast.

But yeah, that’s why people that have some experience go away from here,

There is always the idiot that wastes is time here instead of doing the work and learning something, and even gives the attitude off, look I’m leaving, that guy doesn’t agree with me. And then comes is buddy, it’s the same in every forum.

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38

Once again @TP89, you don’t read what is posted… Where did I say I was leaving in this thread… I just stated that I no longer maintain my threads or post strategies…

And while I’m on the subject of bothering to read… Here is another thread from about 18 months ago were @TP89 lost his shite over the Hedging concept…

It’s Deja vu… Almost word for word repeat… I thought this carrying on had a familiar tone to it…

You’ll see once again (right here) this spiteful little character just doesn’t understand or bother to read what is demonstrated… Enjoy

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39

I don’t understand how your version of hedging works. Why would you close the buy position?

Do the math and prove this. Because this is a net zero position.

No, this is a very false and misleading statement. Please do the math and prove this.

TWB as provided a number of sources demonstrating how people have made it work. Time to put up your own proof of work if you want to prove your point.

In fact, here’s an example:

Trader 1 has a buy and sell position for 1 lot each at 135.00
Trader 2 has a buy position for 1 lot at 135.00 with a SL 50-pip SL

When the price moves to 134.25 how are they the same?

1 Like
40

I was explaining that when you enter the sell position trade 2 you are closing the first position
Buy 1 lot= 1 lot net long
Sell 1 lot= you are now at 0 net long, net flat

That’s what im saying, yes zero net position.

Well you are giving different stops sizes so it will never be the same.
One you are giving a 0 pip stop loss, the other you are giving a 50 pip sl.

But do it this way, you trader 1 buy and sell 1 lot at 135.00,
You are net flat in the market,

Me trader 2 don’t do anything, im net flat in the market also,

Price moves to 134.25, you have lost 2 spreads, and you are still net flat

I didn’t lose anything, and am also net flat

Im exactly in the same position as you are, get it?

41

Your mom can’t help, your dad can’t help you, your broker can’t help you, i can’t help you.

Let’s face it you’re dumb and there’s nothing we can do about it.

42

This is to to simplify the example to focus on the hedging aspect of it.

How? You (as trader 2) just got stopped out at 134.50 from the 50-pip SL. Your equity is down by 50 pips worth of whatever your quote currency is, while I, as trader one, still have a net zero position.

43

What i said is if you hedged your position at 135.00, you are net flat.

I trader 2 never entered any position, i am net flat, same as you, at 135.00 and at 134.50.
But you payed 2 spreads to be net flat, while i that never entered any position will be also net flat without paying spreads once price get to 134.50.

You PAY 2 spreads for nothing, to be in the same position as i am while doing nothing.