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.
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.
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.
No. this isn’t the case scenario for trader 2. It’s as folls:
Edit: To summarize it another way:
- Both have open buy positions @ 135.00
- Trader 1 has a sell position also @ 135.00
- Trader 2 has a 50-pip SL (@ 134.50)
You can’t give a fair example with different sl sizes.
If you said trader one buys 1 lot at 135.00 then enters a hedge sell at 134.50.
And trader 2 enters a buy at 135.00 and has a sl at 134.50.
That’s a fair example, its a similar situation.
I think there’s a misunderstanding b/w us. Here’s the edited bit for clarity.
Edit: To summarize it another way:
Both have open buy positions @ 135.00
Trader 1 has a sell position also @ 135.00
Trader 2 has a 50-pip SL (@ 134.50)OK. I think I understand now. Trader 1 is basically opening the sell position at the same position as the SL for trader 2, which is why you’re claim is they have a net 50 pip loss both in that case.
Why would you pay 2 spreads to be net flat? Are you crazy???
That’s what im telling you, you gain nothing from buying and selling at the same price.
You are giving an example where trader 1 is net flat, trader 2 is net long, of course the trader 2 will have a loss, but what I’m saying is that you become net flat at 135.00 and stay net flat until price drops to 134.50 and you gained nothing, you payed 2 spreads for nothing, why won’t you not enter the trade and wait for price to get to 134.50.
There’s no option of staying away from the trade. You’re adding a new variable.
The goal of the example was to establish both parties entering at identical buy positions. One hedging and the other employing a SL.
Well, here’s the result at 134.25
- Trader 1 incurs loss of spread for 2 trades
- Trader 2 incurs loss of 50-pips worth in quote currency
In trader 1 example, if he buys first at 135.00, and then he sell right after at 135.00, that second trade is is stop loss, he stopped himself out of the position.
Then they would also have to exit at identical positions to be a fair example.
But that’s the point isn’t it? Trader 2 had a forced exit as a result of the SL.
Trader 1 still has the option of managing his exit.
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.
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No trader 1 choose to enter a trade and close the trade practically at the same time.
Trader 2 choose to wait for 50 pips, if he wanted he could also close is trade right away, same as trader 1.
I don’t know how this is soo complicated for you to understand
TBF the example I provided contained buy & sell at same price just to simplify the hedge. So he was answering in that context
No, there are two open positions.
No, he gets stopped out at 50-pips. That’s how the SL functions.
Trader 1 is still free to manage both positions to minimise losses or gain in profit. Trader 2 has a confirmed 50-pip loss.
What part of this math didn’t you get?
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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)
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@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…
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Much thanks. I already had it bookmarked though because you’d included that in another thread for another member.
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Forget hedging, forget sl.
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?