I empathise with your feelings here. I suspect your frustrations are echoed by many seasoned traders who, I have noticed, post invaluable free advice and experience, only to see it totally ignored or even sometimes trashed by those who don’t know better. I am sure that it must be very discouraging…
I am certainly one who does not understand how the type of hedging concepts being discussed here are of any benefit to the typical retail trader with relatively small, short-term, speculative positions.
My only experience with hedging techniques was as a bank trader participating in managing and adjusting overall risk and exposure across forex and interest rate markets. Commercial banks in particular, carry a lot of open risk resulting from various customer transactions, complex financial structures and commitments. But much of this hedging was time-based about managing interim exposure until deals were completed, and about simply locking in current existing prices rather than managing speculative trading. Much of this was done with financial derivatives like futures and options.
I have never personally used hedging, or locking in losses, as a retail trader. But the fact that I don’t see any benefit myself does not infer that there is no benefit there for others. Ultimately, I guess we need to understand ourselves and our emotional/pyschological make-up as much as the raw mechanics of price movement.
I have also been wondering about the “over and over again” issue. It was already years back that the financial market regulators forced brokers to state the percentage of losing traders on their websites, etc. At the time it was significant to notice that the losing percentage was consistently around 75-85% across all regulated brokers (offshore brokers with high leverage would probably be even more if they had to publish such data). What surprises me is that in spite of the vast increase in web-based “training” materials and information and general migration away from mystical indicators to PA analysis, this loser percentage level has remained remarkably steady.
I have been thinking about this a bit and I could actually see some benefit from hedging with positions that are intended to be longer term, say a week to a month, etc. If such a position is based on, say, a daily chart and a short term chart like 4h-1h shows a possible near-term decline in the opposite direction, then it could be worth hedging the core position with a view to a short term profit and thereby improving the overall entry level.
But there is always the risk that this kind of hedge is always, by definition, against the main trend and can be caught out in a swift rebound back in the main direction.
Alternatively, longer term traders may be more inclined to use these pull-backs as an opportunity to scale- in, or manage their main positions rather than take an opposite trade.
Personally, I do not take long term trades in broker-based forex, so I cannot comment on the advantages/disadvantages here from any practical experience but I just thought to post the concept here as a possibility…
@SovoS I’ll give you an example of how I have been using over the last 3-4 weeks on USOIL…
If you look at a 4 hour or Daily chart for West Texas Crude… High price is $80-$82 a barrel, low price is $68-$66 a barrel… With middle of the market (correct price) around the $72.50 a barrel mark… $9 up and $9 down… Exactly were the price is now 30 mins out from May’s Inflation data release… Strange!!
Fundamentals for Oil are weak… Russia has done a deal with Saudi’s, China hasn’t opened up as expected, the US Economy is looking down the barrel (pun intended) at slowing activity and possibly a deep recession in the second half of 2023…
Demand for Oil is falling, that’s why OPEC cut production… They know it as well and need to keep their prices up… Ok, picture is painted…
I’ve been shorting Oil since it was in the mid $80’s, it wants to go down to $64 but every time it goes below $68 it bounces out… So I have shorts open in profit…Which I will close at $64-$64.50…
I go long as soon as it breaks below $68 and close them off when price starts to stutter and reverse back down again…
So, I’m buying and selling at the same time, covering my large short position with multiple longs…
The problem is that you are not actually following Nick’s system. You need to go back and watch his vids and Take Notes!
It is not practical to trade his system on a phone. I won’t be surprised if he said that somewhere.
You clearly did not do the homework or basic TA.
He does Not simply open orders. He IS picking a direction. You are just randomly entering orders.
Yes, excellent, that kind of trading/hedging makes a lot of sense where there is an underlying longer term view combined with a timeline factor taking advantage of shorter term interim moves. Others might look at it as a range trading market and simply sell high and buy low. IMO both approaches makes sense in their own particular way.
Thanks for the input, that is a very interesting explanation that adds plausibility and credibility to the “art of hedging”!
I am having some consistency with just entering on pull backs …example enter a 0.1 trade and if it goes against me then enter a 0.2 order…
mainly wins or break even. I trade in the evening when the price is moving faster.
I thought about putting an opposing sell order in the lower band. But don’t want to be stuck in a hedge position for a long time.
Anyone trading like this ? I just need something very simple
That is not true.
There are days when the US authorities make announcements (Fundamental Analysis) and the market responds right away with some volatile movements up or down. Think Non-Farm Payroll (NFP)
Is it fair to say you may be over complicating your trades in order to overcome (or avoid) its’ psychological challenges?
If you’re demo trading just now, maybe keep recording your results, while developing your psychological strengths? Trading in the Zone by Mark Douglas (RIP) is a good place to start, Welcome to my Trading Room by Alex Elder also uses a great narrative to engage readers. More recently, Biggest Loser Wins by Tom Hougaard also really emphasizes the benefit of mental strength.
I really don’t think you’ll waste time reading these books and putting into practice their concepts, you may in fact improve your longevity in trading.
Well you are probably right but then like you have said here, how does other market participants who hear a different announcement or news reacts to it. I think one really needs to study the movement of the market before jumping in.
nice strategy.
but if only the losing trade will reverse. and also the extra fees.
Just better rather than closing your winning trade is Doing the BE or breakeven. then you manage your lose.
Ok folks … I have stepped back from my ‘Open two trades in opposing directions simultaneously’ moment.
Basically once I close the winning trade I could’nt manage the losing trade. Also it was’ent saving me time either. Just postponing having to deal with a trade … however it did help me explore how I feel about trading.
I can trade price action on a 5 min chart and have about 50 + profitable trades in a row.
I did this in Dec 2022 on a live account. It was my best week ever and I made an average $400 per day.
I know on the practice account the spread seems smaller ! But honestly I did it on a live account and it was a big deal for me. Just to prove I could make money and actually be consistent.
I would use small sizes 0.1 or 0.2 / and close when the trade is in profit. My question to you guys is …
do you ever have for example 2 x 0.1 sell trades and 1 0.1 buy trade when it’s trending down … or the opposite when it’s trading up ? The photos below are from a demo account I used this week. You can see about 27 consecutive profitable trades. I made about 100 trades and had 3 losing trades. I don’t mind trading like this, it is a bit intense, like playing s video game. What is a good defensive strategy ? For example if I had a large 0.5 stop order further above or below price just in case there is a spike ?
Something like this … I am entering on pull backs but if price goes against my 0.2 order / I could open a 0.1 order in the direction of price then close both orders a few moments later …
Also I think I can be a consistent profitable trader if I approach trading from a defensive type mindset. What I mean is cover my back or think how can I profit if I am wrong and the market turns …
I have two types of trading that I like
Scalping price action with small size trades.
Longer trades on a 30 or 1 hr chart/ when price crosses the BB band center line. Buy stop order above the line / or a sell stop order below the line. And yes I have stop losses in place in case it reverses.
I would put the stop order above the middle line but not too close as price jiggles about and dithers abit before fully crossing over….I have had success trading like this in the past too. I am not glued to the screen and what happens s is I will either get into a profitable trade or it reverses , hits my stop loss
and then enters another trade which is now in profit…
I know you can have consolidating periods, but if you have a SL and opposing stop order then you will be in profit when price eventually moves …
