It’s very early days for me with regard to hedging
What I wrongly did was to only partially hedge, missing the point
completely. The Hedge Lot size needs to neutralize the original
trade should it go temporarily astray. It doesn’t matter how far
away if goes if you hedge proportionally.
There may be some similarities to a Stop, for example a trade still
needs room to breath before Stop or Hedge kicks in
so the adage to place the Stop at the point where you know the trade
no longer qualifies as a set up could hold true for the Hedge, but even
So if the Stop would normally be placed 10 pips under recent Swing High/Low,
then Hedge needs to be maybe double that
If the price is just a few pips delinquent a Hedge is not necessary, but we need
to protect against catastrophe (think SNB )
Providing the SNB hedge was actually triggered, I assume the drop of 1,900 pips
wouldn’t have affected your overall equity, and eight weeks later you would be
back to the pre SNB level.
I’m nervous about hedging, I’ve got this notion I will probably lose both Long
and Short, mainly due to margin stop out. but of course, I’ve seen that
doesn’t happen as Hedge protects against that very thing.
but I’m still musing over the ramifications of both my alleged 9% monthly
profit and my subsequent -35% DD
It’s not what it appears. I used all my margin so could not hedge, which
tells me my position size was 10 x too big.
meaning, in real terms, I should consider monthly profit to more realistically
have been +0.9%, followed by -3.5% DD
both highly unimpressive but not disastrous
The problem with November’s trades was not that they were bad, on the
contrary, it was just a cash flow problem due to mismanagement
I could conceivably have had the original Lot size if I had placed pending
Hedge orders before things got out of hand
and I would now stand to possibly double my account with the Hedging
protecting from risk.
If you have the full hedge in place you don’t need microscopic cent
account Lot sizes that will never make you more than a dollar,
I listened to an entire trading psychology seminar on decision
making. it was all true
any upcoming situation that smacks of some past trauma is
not going to be treated nonchalantly as the bias would be
to move away from pain or threat of pain.
so any decision I could make that feels like it will lead to
-35% DD again is likely to meet with resistance
so I had already decided to protect my account by reducing
my Lot size to the absolute minimum
and I can do that, or I can hedge, but I obviously don’t need
to do both
I think Lot size on H4 may be based on a 100 pip distance to Stop,
if I had a Stop. with Hedge kicking in further away still. If I don’t
get a Margin Stop out, I won’t lose as the Hedge protects against that
so some of my positions with add ons drifted up to around 10 std Lots
and maybe I could get away with that now, but I will try to find a happy
balance whereby I can be content with the profit I make, and any
amount of price delinquency won’t faze me.
I really don’t want to get rich quick, even should that prove to be an option.
Slow steady profits is preferred
a record of consistency in other words is the most valuable commodity.
but I already have a ball park plan in place, maybe six D1 trades a month
yielding 6% profit, and 16 H4 trades a month yielding a further 16% profit
If in the event I could make 7% - 10% per month consistently, I would be
more than happy.
0.9% per month is of no interest to me, although 10.8% pa interest on
your savings is arguably very good