You are NOT buy and selling at the same price… for FS!!
We both open a BUY position at 135.00… Price moves down against us say to 134.5… You are out of the trade with a 50 pip loss… Now @TP89 pay attention…
At the same point I open a SELL Position, a hedge at the 134.50 level… You are taken out by your SL , I’m now holding 2 position with a 50 pip loss I’ve already checked back through the chart to see if price is likely to come back to the 135 level…
Perfect example is SpotCrude’s (XTIUSD) current chart…
If you were caught in a Short position on any of these moves down, the hedging strategy would get you out of the position without taking a loss… Simple… to those that comprehend Math…
TP89 would have been taken out with a SL… I would have at worst broken even or profited.
@darthdimsky, You’re wasting your time… He has a closed mind… A Mathematical Abyss.
OK, I’m going to apply the alt scenario you provided. Correct the example if I misunderstood:
Scenario:
Both Trader 1 & Trader 2 enter go long at 135.00
Trader 2 has a SL at 134.50 (50-pip SL)
Trader 1 open a sell position at 134.50
Result @ 134.25:
Trader 1 has 2 open positions & a floating loss of 50-pips (+ 2x spreads).
Trader 2 has a closed position (+ 1x spread) resulting in a 50-pip hit to his equity.
To me trader 1 is a favorable position because he can still manage his trade by:
adding another sell if price goes south, or
closing the sell @ 134.50 if the price goes north to minimise the loss (alternatively he can simply add another buy position and just close all 3 together if they go further north for a net profit)
@darthdimsky, Here is a post from an Institutional Trader who knew a lot more than me that left these forums long ago… He was aware of how hard it was for Hedging Risk strategy to be explained to one trick ponies such as @TP89…
What you are doing is comparing someone’s who opens a trade and closes it immediately,
To someone who opens a trade and decides to wait with a 50 pips sl.
What I’m trying to explain is that there is absolutely no point in opening a trade to close it immediately, you lose the spreads, explain to me for what for? WHAT DID YOU GAIN WITH THIS?
There is no close position. There are 2 open positions. 1 Buy + 1 Sell. Edit: Refer to the graph TWB just provided, which demonstrate the 2 simultaneous positions.
This is the exact definition of a SL. You get stopped out if the price approaches or exceeds threshold.
From the math below Trader 1 has a floating loss of 2xspreads, while Trader 2 has a loss of [1x spread + 50 pips]
Conclusion: Trader1 (with the hedge) has a favorable position.
EXPLAIN TO US WHAT DO YOU GET IN RETURN FOR THOSE 2 SPREADS THAT YOU PAY?
you pay 2 spreads, if the market drops 50 pips, you are still losing 2 spreads, if it went up 50 pips you would also be losing 2 spreads
WHAT DO YOU GAIN?
It’s even more stupid when you pay 2 spreads and you have no idea off what you’re gaining? You don’t gain anything.
[quote=“TP89, post:65, topic:735161”]
EXPLAIN TO US WHAT DO YOU GET IN RETURN FOR THOSE 2 SPREADS THAT YOU PAY?
you pay 2 spreads, if the market drops 50 pips, you are still losing 2 spreads, if it went up 50 pips you would also be losing 2 spreads
WHAT DO YOU GAIN?
Stop repeating the same question like a broken record. This was already answered to earlier. What part of the math below didn’t you understand?
No, trader 2 has a realized loss. Trader 1 has a floating loss. That’s a huge difference.
A floating loss can be managed to minimize the loss or make a profit by an experienced trader. Trader 2 sill has options and is still in the game. [Edit: Trader 1 is still in the game]
