80%??? Damn!!! That hurts. I hope you were trading mini lots at the time! Haha
But thats scary, though. Not everyone will have the same fortune of price turning around.
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Hmmmm. Never been a fan of hedging.
So whatās the advantage of hedging over a stop-loss?
Suppose you buy at 1.1000. Price falls to 1.0000 at which point you are down 2% of your account, and so you hedge with a short at 1.0000. So your loss is capped at 2%. But then price rises and gets back to 1.1000: now your long is at b/e but you are -2% on your short. So you close the short and let the long run. Price rises to 1.3000 and you are up 4% on the long and down 2% on the short for a net +2% profit.
If you had set a stop-loss at 1.0000 on the long and then re-entered when price printed the same pattern you would still be net +2%.
But you would never have had to lock up margin to fund two trades simultaneously, only one, and you would have only incurred one set of spread/fees, only one. Plus, if a better opportunity had presented itself on another instrument after the long SL was hit, you could have moved instantly into that with no further risk or loss of time or capital.
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i wasn t talking about hedging like that, hedging a spot position with optionsā¦ like i said it s a broad topic. u can google that or find more answers on utube. and about hedging the same position in forex, u d rather do that when ur in profit but u wanna hold long term, so like i explained earlier, to not give back the profits cos u never know when a market is gonna completly reverse, u open a sell if u r long term long. if that small sell hedge turns out to be taking over and the market reverses completly then u close the long and keep the short. it s all more easier to see rather then to read aboutā¦but again there is lot of learning that comes into this since u should have an idea when the market might reverse or just correct etc.
So how does hedging with an option eliminate the 2% initial loss on the long?
Well, hedging needs a lot of capital though regardless of any type. But concerning stop loss, iād prefer a trailing stop instead
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Trading without a stop loss is a kind of risky thing but traders do trade without a stop loss. Stop loss helps you to limit your losses.
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Yes trader should always rely on his skill and learning other things are just illusions . How much you can wait for luck , you have to make trading lucky for you with efforts. Stop loss will help you to mange risk it is not a guarantee of loss free trading. Always plan your trade according to your capital and take low risk until you are not an experienced trader.
it is doable but yeahā¦do it when you are wide awake and finger on your mouseā¦ its kind of a predetermined SL virtually but not set as in figure yetā¦ PLUS you really know what to do
I agree, trading using stop-loss provides you security against the random price movements.
When used correctly. Otherwise it can cause as a much of a problem as the random price movements.
I strongly advise against trading without stop loss, especially if you are new to trading. Stop loss will protect you from unnecessary and inappropriate losses. A stop loss should be part of your trading strategy, and you should use it rather than looking for a way around this great thing.
Thatās very true. My mentor always reminds me to use my SL anytime Iām entering a trade. But I blew my account the day I went scalping on gold and didnāt use stop lossā¦
Hedging can be used to trade without stops while still practising sound risk management. When you hedge, you simultaneously maintain long and short bets. A hedge effectively functions as a stop loss, but it also gives you the opportunity to make money on both the long and short sides of price fluctuations.