A lot of traders have heard about hedging, but may have never used this method. Idiotic U.S. regulators banned hedging as they always go after the wrong sectors and tools and think they have created a safer market environment. Most traders set a stop-loss level which is a sensible thing to do and there is nothing wrong with that.
I prefer to hedge my open positions, before I set a stop loss. Many may dislike this approach, but it works fine for me which is why I have been doing it for several years. There are several ways to hedge a position and it comes down to the trader’s preference.
What are your opinions on hedging positions? Those few forum members who may hedge; how do you like to hedge?
Hedging is the best plan to reduce the negative effect of a trade.In other words, to protect your position from an unexpected movement in the market. Its a good thing to hedge. Unfortunately UK and US brokers don’t like it. Perhaps they don’t like the idea of traders winning all the time.
US brokers are not allowed to offer it to clients anymore as the CFTC is a female canine, never met a UK broker who had an issue with that. A reputable broker wants clients to earn money as they earn more the more their traders earn.
USA has done a good job of taking care of people money not letting them do something as moronic as hedge in forex.
Why would you hedge in forex? If you want to reduce risk just trade smaller. There is no need to pretend smater than you are and do something this stupid.
That is your opinion and if you do not understand why people hedge open positions than that is your issue. You call hedging moronic just as others may find your opinion moronic. Different traders have a different approach and the US government has fumbled the ball as so many times over the past two decades.
From my 5 years experience in forex, I tried many systems. Since 1 year I decided to make my account managed and it is very profitable.
The manager use mostly hedge positions with a matrix based on price levels.
So my point is that hedge positions work !
I’ve often wondered if this could be a good idea. I’ve hedged a negative position once in demo and then managed to close it in positive. I could see a strategy where hedging may possibly work, but I’ve not fully entertained the idea or tested it out over a period of time.
Always a better idea to put a counter trade hedge instead of a stop loss. But, people that trade FX from their day job computers have no time to manage trades after they are set in. This is why there’s any opposition to hedge
I am interested but I wonder how you guys manage hedge trades? Suppose the market is trending and you open two positions of buy and sell and one of your trade is met. Then how you guys manage to profit with the open negative trade?
I personally do not use “hedging” in this sense, to enter a position in the same instrument in the oposit direction,
I have experimented with it in the past but I believe it can be more troubble than good,
for this to be used prooperly the positions must be entered with complex mathematics behind it,
this is beyond me and I feel it is not worth to trying to learn atm sinse I already have a profitable trading method,
my experience with this was that it can make your positions so large that your acount can’t handle it,
it is difficult to calculate risk when you have these positions on, and you will be paying comission atleast twice on the same trade, I stick to my stop losses
I think that hedging can rack up your balance quickly, but managing several trades is always more hassle than handling one or two. I did use hedging in the past which I attribute a larger drawdown towards because I was closing the hedge in the wrong place.
I think for intraday trading this should not be attempted, maybe for a long term trade,
if you know what you are doing, if the trade goes against you and you open one in the oposit direction,
ok so far so good, your risk is atm zero, but what if the market start to turn in your direction again,
now what? will you add yet another, or will you close out one in loss? ok lets add one, becaue we dont want to close out losses right? we now trade 3 lots, again the market is going against you, you again add one to balance out, zero risk again, now the market is tanking heavily and drops 100 pips, whooo, you then close out the ones going against you right? you tok a great loss there, but now look at the risk you have in the market, 9% you are trading more than allowed, if the market go against you again, it can wipe out a large part of your acount, this is the danger if you dont know what youre doing, sometime the market can just rush away very quickly, maybe at a news event, you will not have the time to enter a hedge there, you will be in heavy loss before you push the button, guys who use this thing usually combine it with correlation of other instruments, and mathematichs are involved, for them it probably work at lets say a weekly or monthly chart, they have time to think and calculate, and they have the money to spend, but we should not attemt it I think
that’s right, not for intraday trading!! Only meant for trend chasing, swing trading on weekly and monthly charts and so on. can’t use it to scalp either. Avoid news days to trade with it too. Other than that, it’s a life saver.
hedging is one of my favorite strategy, but i would not suggest other traders to use this until and unless they have good knowledge regarding the market price action.
i am using a hedging strategy for my live trading and it works well…
the only thing that can be dangerous is a long trend with few and small retracements…
it’s important that you always trade with small position sizes…
i like the advantage that i don’t have to guess the direction of the trade, as i am long and short…and nobody can predict the future/direction of trade, neither long- or shortterm…
People hedge positions in the same instrument because they know no better, and they are actively encouraged to by an unscrupulous industry.
There is no position that can’t be synthesized by using uni directional orders.
Anyone who hedges the same instrument is simply paying double the spread.
I guarantee that if you have a profitable strategy based on hedging, you could practically double profits by taking the time to work out how it could be traded without hedging.
i would not say that hedgers don’t know better…they just don’t want to guess the future direction, which is sort of gambling…
there is simply no way that anybody (anybody = retail traders) can know the future direction…no price action, no trendlines, no S/R can tell you for [U]sure[/U] where price will go…
being hedged you just take this element out of trading, paying the price of more spread and smaller profits…
yes, that’s true…but it might be an acceptable price for not having to see how your SL is triggered if you guessed the wrong direction in an one-directional trade…
are you assuming this or do you really know it from experience?
i would like to know how you would do it…
I would. When I tell professional traders and academics about how retail forex traders “hedge” they are stunned. One professor attending a recent presentation I gave was stunned at the immorality of brokers allowing that sort of thing since it only benefits them. Even brokers admitted before the no-hedging rule was put in that there is no benefit to the customers from hedging.
they just don’t want to guess the future direction, which is sort of gambling…
there is simply no way that anybody (anybody = retail traders) can know the future direction…no price action, no trendlines, no S/R can tell you for [U]sure[/U] where price will go…
being hedged you just take this element out of trading, paying the price of more spread and smaller profits…
I hate to break this to you, but the only way to make money trading retail forex is to get the direction correct. You can only make or lose money if you have a directional exposure. There is no other way.
yes, that’s true…but it might be an acceptable price for not having to see how your SL is triggered if you guessed the wrong direction in an one-directional trade…
If your trade goes against you and you put on a hedge it is exactly the same as having your SL triggered at that level. You’ve locked in your loss either way. It may not show up in your account as a “closed” loss, but your account is reduced regardless. You have to take off one side of that hedged position to get directional exposure again to be able to recover that loss, which is identical to putting on a new position.
are you assuming this or do you really know it from experience?
i would like to know how you would do it…
It isn’t about experience. It’s about math. Give me an example of a set of trades or a strategy and I can tell you how to do the same thing with just regular trades.
