Is hedging a good strategy?

[TP89]

@darthdimsky

You’re probably the only person I’ve met who’s accounted for the losses of trades that are still open. That makes no sense at all.

If you have 1000 DOLLARS account, your equity drops to 800, you lost 200, if you ask this to a 10 year old child, he will understand.
Go trade for a institution, lose 20% equity, then tell them that it doesn’t count because the trades are still open.
Let’s see what makes sense to them,

[darthdimsky]

@TP89

You keep saying you will manage the trade at one point, but then if i give you an example, you say i keep adding weird rules.

Why can’t he close both positions at once after he’s returns to a net positive with the combination of other trades? Was that never an option for you?

Your whole argument is pointless because you’ve taken a firm stance on just one outcome. No one anywhere suggested that was the only outcome available. But you’ve only been arguing only on that premise.

@TP89

How are you going to manage your hedge then?

@darthdimsky

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)

@TP89

Go trade for a institution, lose 20% equity, then tell them that it doesn’t count because the trades are still open.

They’ll tell me they won’t care and that they’ll only worry about account balance. Don’t believe me? Hear it from an FX chief dealer from Citibank. Traders were given full capital management. Time stamped for your convenience.

Tell you what though. Go to an institution and tell them that an open trade is not a floating P/L. Let’s see if that floats their boat.

[darthdimsky]

I’m tired of this pointless debate.

Just to be clear your claim is that the open trades from the one hedging aren’t worth considering correct? That it doesn’t matter, right?

Proponents of hedging claim otherwise. There’s enough reading material out there with the proper math and examples on charts proving outlining it. If you aren’t able to DYOR then this is pointless. You can always refer to the thread TWB just posted. He’s actively participated and also contributed to the discussion constructively you’ll find.

[TP89]

@darthdimsky

Why can’t he close both positions at once after he’s returns to a net positive with the combination of other trades? Was that never an option for you?

So for

@darthdimsky

Why can’t he close both positions at once after he’s returns to a net positive with the combination of other trades? Was that never an option for you?

I’m following your rules,

@darthdimsky

You’re adding an additional variable to the scenario to give Trader 2 an unfair advantage (the option of a 2nd trade). This isn’t a valid scenario:

So for you, sl trader just opens 1 trade, sets sl and that’s it, isn’t allowed to do anything else,
But with the hedges you are allowed to do anything you want.

The guy is talking about risk not balance, your equity drops 20% it means you risked 20%.

[darthdimsky]

@TP89

But with the hedges you are allowed to do anything you want.

What are you talking about? Trader 1 & 2 had the same rules and conditions applied. The scenario ends when the price hit 134.25. That was the end of the scenario. The outcome was already spelt out twice and was determined that trader 1 had the advantage because he had trades he could manage.

What happens after that can be either a minimized loss/profit, equal loss or greater loss. But he has options. Trader 2 no longer has any. And that’s the advantage folks who hedge apply. It’s that simple.

Please DYOR.

Edit: If you’re going to modify the conditions. Say make trader 2 open a SELL at 134.75. Then apply the same position to trader 1. It’s that simple. But the SL remains because we are comparing a SL vs hedge.

[TP89]

@darthdimsky

Just to be clear your claim is that the open trades from the one hedging aren’t worth considering correct? That it doesn’t matter, right?

Yes, after you are fully hedged you closed your position.

Do you know why they call a stop loss a stop loss?
It’s because it stops your equity from going further down, it stops your loss.

When you fully hedge, it stops your equity from going further down, it’s a stop loss.

But for you, its i will manage, i will do this and that,

Nope, it just stops your loss, it’s a stop loss.

[TP89]

@darthdimsky

What are you talking about? Trader 1 & 2 had the same rules and conditions applied. The scenario ends when the price hit 134.25. That was the end of the scenario. The outcome was already spelt out twice and was determined that trader 1 had the advantage because he had trades he could manage.

No it was proved to you that they ended in the same situation, trader 1 payed extra spread.

You are the one adding things that he can manage, he can do this,

And what if he makes the situation worse when managing the hedges? What if he loses more?
You are painting the perfect scenario where you will manage and get to profit.

The scenario was buy 135.00, close at 134.50.

From 135.00 to 134.50 trader 1 didn’t get any advantage compared to trader 2.

You make a scenario where it ends for trader 2 but continues as you wish for trader 1.

[darthdimsky]

@TP89

But for you, its i will manage, i will do this and that,

Managing them is the whole point of hedging . Please DYOR. TWB didn’t cook this strategy while sitting on his porcelain throne. There’s a ton of reading material, math and charts that illustrate this. Stop wasting time.

@TP89

No it was proved to you that they ended in the same situation, trader 1 payed extra spread.

So what? My balance hasn’t taken a hit yet. Only my equity and margin are affected. Trader 2’s balance was hit.

@TP89

You make a scenario where it ends for trader 2 but continues as you wish for trader 1.

I didn’t make it end. It ended when he was stopped out of his trade.

[TP89]

@darthdimsky

So what? My balance hasn’t taken a hit yet. Only my equity and margin are affected. Trader 2’s balance was hit.

Your money took a hit, your equity is the money that you have, not your balance.
That’s why your margin is affected, because it’s based on your equity not your balance.

You don’t get a balance call, you get a margin call. There’s a reason for that.

[TP89]

@darthdimsky

What are you talking about? Trader 1 & 2 had the same rules and conditions applied. The scenario ends when the price hit 134.25. That was the end of the scenario.

Same rules same conditions, you are adding a, i can manage, i this, i that.

It either ends and it ends, or if there’s a but this, but that, it has to be for both of them.
Trader 1 can recover, and manage, it’s only fair if trader 2 also has that possibility. A stop loss getting hit is not the end of the world.

[TP89]

This is from a post i saw, maybe explains better.

“when you have a position in the market, it means your PL fluctuates when the market moves. similarly, if the market movement has no effect on your PL, you have no position”

That’s it

[darthdimsky]

@TP89

You don’t get a balance call, you get a margin call. There’s a reason for that.

You don’t withdraw your margin. You withdraw your balance. There’s a reason for that.

[TP89]

@darthdimsky

You don’t withdraw your margin. You withdraw your balance. There’s a reason for that.

Wasted hours in the afternoon with you, and you didn’t learn anything. Not even with help could you get there,
You should start looking for another hobby.

[darthdimsky]

@TP89

Wasted hours in the afternoon with you, and you didn’t learn anything. Not even with help could you get there,
You should start looking for another hobby.

Yes because arguing about and calling people idiots when you don’t know how hedging is applied makes more sense.

Probably the only person who’s ever considered open positions as closed. Forget forex, you’ll mint it if you take this revolutionary idea to the big 4 accounting firms. While you’re at it go to the banks and tell them why open positions aren’t a floating P/L. Another revolutionary idea.

You may not be able to read and DYOR but atleast you’re creative

[Dennis3450]

I sure would like to see Babypips take some action against TROLLING, What I consider trolling is someone " other than the threads creator" trying to dominate the conversation by flooding the thread with post, sometimes three at a time, being argumentative and abusive to other form members. The Political Opinion thread, ( the most posted too thread on babypips) has not had a new post in 7 days, all because a troll has taken over the thread and now no one wants to post there.

Babypips if you are reading this please take some action

[TP89]

@Dennis3450

I sure would like to see Babypips take some action against TROLLING

Maybe I’m the troll, no problem, won’t continue the hedge debate.

Months ago, i was the troll, i was the annoying guy, i got my account suspended.

All because there was one guy here, that was promoting his YouTube channel, claiming he was a profitable trader, targeting newbies. Said he liked to make YouTube videos and help other traders.

Now he sells trading courses on his site.

Guess he found out that he likes money more than helping others.

[Dennis3450]

Here is a type of hedge I fully support and do in my personal account.

Owning stock in oil companies is a great way to hedge against rising gas prices, my small holdings in Exxon Mobil has increased enough in the last 3 months to pay to fill my truck for the rest of the year

[Blue2]

@Dennis3450

my small holdings in Exxon Mobil has increased enough in the last 3 months to pay to fill my truck for the rest of the year

I like it!!

[singy1986]

As long as you know what you’re doing it can be worthwhile

[fyon26]

used to be a hedger ,it gave me countless second chance on a loser trade ,but the downsite is too much work .stop using it been a while ,miss it .if my current system fail ,might go back to that.