I have been trading using hedging strategy for several weeks from now and my balance is getting larger and larger :13: but i dont know when will be the sudden losing moments …
how exactly do you apply a hedging strategy and get your balance bigger? I’ve never been able to understand hedging properly
Before you enter a hedge, you should analyze first the market using your own analyses. for example, the price of EUR/USD reach 1.2800 after buying position of 1.2850, you already loose 50 pips, if you think that the price will go lower after that, you should now hedge the position by selling same lot volume at 1.2800, so that when the price reach even as low as 1.2750 close the sell position and wait untill price jump back to 1.2800, your loss was not increasing and when the price going up again to 1.2850 or more, you may close your buy position at a small profit … here you were actually making profit in both positions…:59: … but what i was asking can that continue for ever or price might go mad like reversing me whenever i hedge then that will act uctally start to hit me bad and will start losing …
I fail to understand your strategy, first of all you said if you were Long @ 1.2850 and price @ 1.2800. You then “hedge” by selling the same volume at 1.2850. Which is basically Break even for your original long position if price retraced to that original entry point. So you basically just got out at break even. Then you say if price reaches 1.2750 close your short, so now your flat. So you basically just closed your Long at BE then got short and took a target, this is how i see this anyway. now if your still long (which from my reading you aren’t ) you take profits again at 1.2850. I am super confused.
Lets break it down into 2 positions your long at 1.2850, then you hedged when price went against you to 1.2800. All you did was freeze your 50 pip loss, cause now you are net neutral if you sold the original size of the trade. So it actually doesn’t matter what you do at this point if your short position comes into profit say by price dropping to 1.2750, your long position is - 100 pips, which is countered by the +50 from the short. Still frozen at -50 net loss on the total position. However if you take that short off, now your holding the bag for a -100 long on paper. So then you say you want price to move back to 2850 or more to get out at Break even or profit. So your assuming that price after removing the “hedge” on the short price will retrace to your long entry. this is not really the case, but then wouldn’t your original trade worked out then anyway? You would have at worst gotten out at BE or at a profit, which is totally fine.
Where are you going to blow up? Every time price never retraces to your original position, and you removed your “hedge” to lock down the “hedges” profit. Sounds like a newbie strategy to me, the portfolio risk management doesn’t make sense, how your coming from directional trading to neutral and then back directional with a paper loss is confusing. Why would I lock down a loss. your hedging your losers it seems. Which guarantees that your going to hold a paper loser once you remove that “hedge” even if its at a profit. So you just basically hope that you take off your “hedge” at the bottom and then it immediately retraces to your point of entry. So that your original position will get out at break even or better.
Excellent analysis. Throw in the minor spread on those “frozen” hedge positions and the doom and gloom increase a bit more preventing the break even from being fully realized on those original positions.
I know that Every time price never retraces , what i meant that balance keep growing but equity will lose some gain some … by keep on hedging the losing position untill price gets near by … were market may reach again so i can close that remaining positions … and about what i have said before there is some mistakes but yes it is working … and what iam asking how can i keep that and in what sitiuation i will start losing … well iam a newbie … i started trading 2010 … and iam not saying that this will work every time … so if you know a bit about profitable hedging please share …the way i trade -only trade using hedge- never had a position open without hedging it … thats my way of trading so tell me yours Doctor:18: and by the way thats not a strategy thats what hedge means…:33:
Yes I would have to agree with the responses. I can see as to why you would want to do this but if you really analyze what you’ve stated it doesn’t make sense. It’s very difficult to call tops and bottoms and if you could I’m sure you wouldn’t need to hedge. In theory it sounds lovely you hedge your trade with an exact counter and price moves in your favor then moves back and both trades close as a profit. The inherent problem is you cannot avoid risk completely in this game. Eventually you need to remove the hedge and will be exposed to movements that will only be 1 of 2 favorable or negative. My advice would be discontinue your strategy. Hedging is a great tool and a good example of “proper” use would be say you entered the market with a buy on Eur/usd at 1.28 and it moves up to 1.29 your up 100pips and this wonderful. There is a lot of high impact news scheduled to come out in an hour and on a longer move you feel that Eur/usd will be at 1.32 so instead of closing your trade you hedge. You’ve now locked in 100pips and no matter which way the market moves its there assuming you keep both positions open and were to close them at the same time at some point. You are now protected against the news release volatility. The news comes across the wire poorly and you let the markets analyze it and settle down. Now you choose your directional bias. If your still confident that price will increase you close you hedge as it reverses or set your short to break even. Price theoretically returns to 1.29 the short closes and your left with a long still up 100pips or to the flipside price travels back to 1.28 your long is break even, closes and you continue with the short. Regardless until you you close one trade you still have that profit secured indefinately. This is a scenario where your unsure where price will go and you just want to secure a win. You miss a small profit or loss by avoiding a news release entirely in hopes of catching a larger move. The only time you strategy would prove useful would be during a period of range bound trading in which you may employ hedge to scalp very small profits. Otherwise hedge when in doubt or during volatile conditions. If you are getting down 50 pips and become worried so you hedge it because a 50pip loss is making you nervous which I think is likely the case perhaps rather than hedging losses you need to reduce position size or set specific stop perimeters. I hope my long drawn out answer was useful and Goodluck! 
I was with you right up to that point.
… and a good example of “proper” use would be say you entered the market with a buy on Eur/usd at 1.28 and it moves up to 1.29 your up 100pips and this wonderful. There is a lot of high impact news scheduled to come out in an hour and on a longer move you feel that Eur/usd will be at 1.32 so instead of closing your trade you hedge. You’ve now locked in 100pips and no matter which way the market moves its there assuming you keep both positions open and were to close them at the same time at some point. You are now protected against the news release volatility. The news comes across the wire poorly and you let the markets analyze it and settle down. Now you choose your directional bias. If your still confident that price will increase you close you hedge as it reverses or set your short to break even. Price theoretically returns to 1.29 the short closes and your left with a long still up 100pips or to the flipside price travels back to 1.28 your long is break even, closes and you continue with the short. Regardless until you you close one trade you still have that profit secured indefinately. This is a scenario where your unsure where price will go and you just want to secure a win. You miss a small profit or loss by avoiding a news release entirely in hopes of catching a larger move.
You’ve basically just described the exact same scenario as if you closed your original trade for your 100 pip gain, then re-entered the market when you decided what you wanted to do next. The difference is that your “hedge” has just cost you the spread completely needlessly.
The only time you strategy would prove useful would be during a period of range bound trading in which you may employ hedge to scalp very small profits.
Read my fingers as I type this (since you can’t read my lips 
) … there is NO TIME when a so-called “hedge” strategy gives you any edge at all in the markets. It is a mathematical impossibility. The only thing it can do is cost you money.
Otherwise hedge when in doubt or during volatile conditions.
I’m not the first to say this, but here goes - When in doubt, get out. Hedging will do you no good.
By the way, yes, one can see their cash balance increase due to “profitable” “hedges” being taken off, but the account equity - which is what matters - will not see that growth because any gains on one leg of an offset position will be totally negated by losses in the other leg.
I can of coarse see your point as you could simply close the trade in a loss or profit in any scenario getting out when your especially uncertain is an idea I would certainly promote. Having said that consider this. Eventually you will wish to re-enter the market. So you are going to pay the spread whether you close the trade (say again back to my theoretical scenario) up 100pips and re-enter at the according time you feel is appropriate or you hedge it with an apposing trade and pay your spread there. Here’s the thing I’ve always found that even when you think your at proper entry levels and you have you directional picked out, you like your set up and all of the pieces fit… Sometimes you just don’t want to pull the trigger and you need a moment. If you pull the trigger via hedge you are doing nothing other than closing the trade but you are in fact inside the trade where else wise you may wait wait wait and miss it all. No matter how we spin it we are still going to pay the spread regardless at some point. I admit it doesn’t serve a purpose much other than a piece of mind knowing you have a break from the market which never stops for us to figure things out but yet maintain open trades. A counter scenario quickly, would be you close the trade +100 it dips 45 quickly reverses back to where you were and well beyond. We didn’t hedge we left went home with 100pips. Now the next day the same thing happens but we’re not in the trade and it keeps us unsure over and over until we’re at extreme levels and don’t want to touch it. If you had hedged with your secondary position at break even you would’ve still been in and potentially caught something much larger. We will always come back to the same point that we are deadlocked and paying spreads. The point I’m mumbling through is that a hedge is more emotional than I guess practical but it can prove to be beneficial based on your mindset. Again I can truly see your point as to it’s useless literally speaking but on my side I can see the confidence booster giving you a moment to assess. It will all eventually come down to the trader’s decision process and how they want to deal with the scenario. Are they happy at 100 or do they scope for more and how will they consider the correct way to proceed. I would say many hedge for the wrong reason like fear. If that’s the case they probably need quite a few steps back and a reduction of risk. But if they just want to be in the trade while they decide where to go as appose to leaving and coming back when they decide I think it would ultimately be a matter of preference as in both cases we pay spreads for 2 positions and we have to make a choice and be exposed to risk inevitably.
I hope this long speech somehow what I was trying to say I had to argue against myself as I wrote this as well lol. Both arguments hold water in my opinion
again … and again thats my opinion and my way that iam sharing if no one likes it just consider it as if you did not read it … i actually never closed a losing position because i always wait untill the right price pops … and about placing a stop loss orders … never … i always hedge my losing position … again if both hedged positions is losing i will open a new position on same pair to gain some pips … because i wont just wait for other positions without trading … and for those of you who thinks i pay a swap … i have applied for a swap free:32: account to avoid any intrests against my hedge positions … anyway just to clear things up , ok i admit that i have over exaggerated in the above example … here is a more clear one … for example i have 1000$ in my account and i bought EUR/USD 1 lot @1.2800 market went down to 1.2780 i hedged the position so equity now 800$ … market went even more down to @1.2730 … by analysing the market and the fundementals and and … i was happy to close the short position on profit 500$ balance now 1500$ equity is the same 800$ … if market reverses to higher than 1.2730 for example to 1.2750 i will hedge again … and guess what equity now 1000$ (break even) -balance 1700$- … now iam happy if market went up or down … ok for those of you who says what if market did not reverse and it kept moving downward when i closed my short position … it does not matter because i will hedge again and apply same thing untill iam happy … are you happy now:33: … before you guys post any… please if you tried this tell me and if not please dont just post with no knowledge… Thank you
Well I certainly have knowledge and not to at all disrespect you in terms of trading I would say mines much higher. The other person who spoke is an honorary member so I would consider what he has to say knowledgable as well. The inherent problem is I definitely misunderstood what your original post meant. Now it is clear and I hate to say this but what you are describing IF I understand correctly is not at all trading. You are simply betting and gambling. If you make a winning trade that’s great if its a loss you immediately hedge and hedge again placing trades over and over until the price finally stops moving against you and brings you back to even or hopefully above. You will make cash doing this assuming you have enough money to back it up. Unfortunately it doesn’t appear that you have any knowledge of the forex market and are mostly relying on a series of trades when your wrong you just enter again at a lower price over And over until it evens out? I guess you could go on do this the only time it would blow up is when your account is out of funds and you can’t open the next trade? Correct me if I’m wrong here but is this your main strategy and how you intend to profit in this field forever? You do realize how it sounds? Basically it sounds like you stack your positions until you pull a win. Lets say your playing blackjack 10 dollar hands. You lose so you play again for 20 and 40 and 80 and so on each time until you win that original 10 dollars you would’ve won if you had won the first time. I don’t want to sound mean I swear I have the best intentions possible here I really do. I just think by my assessment of how your playing the market that you have very little time experience and understanding into this. If I am completely wrong here… The market opens in 5minutes please let us know when you enter your next trade and the exact moves you make through it and logic behind each trade if your using logic so I may better understand why this “strategy” would be appealing to anyone other than an online better who hopefully has a very large account to essentially play games until it goes right.
thanks stamp for the replay … well Iam new to forex … and that -hedging- I was just experementing … I have other account tradin S/R … both accounts making about the same gains/loss … i will continue my way untill … if you go back to first post i was asking if this is possible and when will i start losing … and yes you guys answered my question but it doesnt matter if i lose … because after that eventually I will learn something … so thank you guys … and please no heart feelings:57:
Absolutely no hard feelings. I just want to help any trader new or old meet their goals and see satisfaction in their trades. It’s worth trying anything but perhaps you may want to work on the basics a little more and get yourself in a position where you are comfortable taking just one trade per pair and trying to achieve a target price to start you off. I wish you the best of luck and I really hope whatever strategy you settle in with works well.
I have to agree with Stamped here. It looks like your using “hedging” to avoid taking a loser and basically doing a more complex way of averaging down. Hedging reduces both upside and downside potential in its truest form, reducing alpha risk. If you could show live examples with charts and notations that would give us a better idea of whats going on. But for me, i am sticking to my guns.
I use hedging but not with same pair but a correlated pair. It is working pretty good since i started on may. It is the statarb thread on this forum.
40% profit and growing at about 10% monthly.
Thank you medisoft … for sharing experence … i use EUR/USD and USD/CAD sometimes but mostley same pair which is EUR/USD …
Based on what I understand why you’re taking the opposite direction of the same pair, its not the right approach because you do not want to take a losing trade. If you are caught in the wrong direction in a trending market, you will be wipe out soon enough.
However, each to their own. If it’s working for you then it’s all good for you.
Mate … i dont just hedge if iam gaining … i hedge when the position are losing and then … as i said before
This is the crux of the issue for so many people I see talking about using “hedging” strategies. It’s an emotional crutch because either they cannot make a decision or can’t handle taking losses (or both). Whether they are paying extra spread or net negative carry, aside, this is my bigger concern. The development of the mental side of trading is being stunted.
It also can badly mask the trader’s true performance and the effectiveness of their analysis/strategy. I have had people swear up and down that is was only once they started “hedging” that they began making money. That, of course, is in no way correct because “hedging” is nothing more than an alternative way of accounting and any “hedge” trade one puts on can be exactly replicated in a non-hedge way. These traders who thought “hedging” made them better traders completely missed the point that their profitability was coming from better buy/sell decisions. Likewise, as I noted before, traders can be misguided by seeing their cash balance rise through “hedging” when in fact their overall equity is falling, and probably won’t realize the problem until it’s too late.
Well said stamped…