Hedge trading

[kwanann]

Just realized that I closed 2 wrong positions. But yeah even if I were to close the correct positions it would still be at least 2%. Trying to see where I got it right

[Jeuro]

Just realized that I closed 2 wrong positions. But yeah even if I were to close the correct positions it would still be at least 2%. Trying to see where I got it right

yea... it seem you close 2 sells EU instead of of one buy and one sell. That probably place you with 2 lots longs and the profit came from there. (would have make a big hole in the account if the EU had drop) I still doubt of making any money if closings are done correctly as you explained before. Not even the 2% you mention.

Regarding being in a 40% dd in weekends??? How that could be possible being fully hedge all the time. DD should not be an issue at any time if fully hedged.

J

[kwanann]

Jerome, look at the screenshot, my equity is positive. So if I were to close the entire basket, it's still in profit.

As for dd, it will happen because entries and exits are not perfect. Each hedged trade entry for a full lot I.m looking at an immediate loss of at least 5pips. Same for exi, all these pile up in my dd.

Also. When I exit and TP, what happens is my balance goes up but profit goes down. I will always be in negative profit

[SteveHopwood]

This looks like fun, so I am adding it to my weekly roundup on Sunday night. There is a post-relocation problem with mass pm's, so the update will only appear in my update thread in the lounge. Hopefully, some of the SHF Brains Trust will see and throw some weight behind this.

[kwanann]

Ok seems i wasnt so dumb after all, i emailed myself the password to that account

attaching the list of trades done for SHF brains to analyze

HOW in the world did i get this hedge to work???

[kwanann]

i decided to draw those trades out and i'm beginning to see the link

Each hedged pair of trades must make a positive amount somehow or another

When one is closing, it MUST always be a buy and a sell, and the buy and sell MUST be from a different hedged pair

Ok more homework and chart analysis prescribed for myself, lets see if i can make this baby work

[Jeuro]

Hi Kwanann.

By your trade history, unlucky, it seem you made a mistake closing 2 buys on
2013.07.12 04:16 @1.30837

So.. that means you were short by 2 lots from there on.

As the price went down from there and closed at around 1.3066 for the weekend, then the account should be approx + 1700 (or less) at market close. (17 pips from 1.3083 to 1.3066)

J.

[kwanann]

Lol why are you so hung up about my positions? Yes I made a mistake so basically returned back what I.ve made. Will be creating a new demo to redo everything and lay out the rules. This account has been gut trading so no hard and fast rules. I probably got really lucky as I didn't even bother about the charts just entered and exit when the price seems right to me

[garyfritz]

So quick summary of steps
1. Hedge position a pair
2 repeat #1 every say 50 pips. Always do at low spread non news period

Other than comm/swap/etc, those hedges are exactly equivalent to being flat, having no position at all. So no profit comes from just opening the hedges.

3 close a buy and sell with nett 50pips profit, do this at low spread on news period
4 create a hedge at the same time as 3

Let's say you open hedges at 1.0000, 1.0050, 1.0100, 1.0150, and the market is currently at 1.0150. Now you could close a 1.0000 long (150 profit) and a 1.0050 short (100 loss) for a net 50pip profit. That leaves you with an unhedged 1.0000 short (150 loss) and an unhedged 1.0050 long (100 profit) for an open profit of -50 pips. Your balance has gone up and your open P/L has gone down, resulting in a net ZERO change in equity. When you close all the hedges, your equity will be unchanged. (Not counting swap/spread/etc.)

Hedging is zero-sum. As long as you're hedged, nothing happens -- it's the same as being flat. You can only make profits and losses by lifting one side or the other of the hedge. The result is identical to NOT opening the hedge at all, then (instead of lifting one side) entering a directional trade on the other side. But since you close two opposing hedge legs, it's equivalent to opening two opposing directional trades -- which is again a hedge, which can't create a profit. There is still no change in equity.

That's the math of it. Unless you can explain otherwise, I don't see how your approach changes that math. I believe the profits you're seeing resulted from mistakes in opening/closing the wrong positions.

TANSTAAFL.

[Jeuro]

Lol why are you so hung up about my positions? Yes I made a mistake so basically returned back what I.ve made. Will be creating a new demo to redo everything and lay out the rules. This account has been gut trading so no hard and fast rules. I probably got really lucky as I didn't even bother about the charts just entered and exit when the price seems right to me

LOL.
I am not.
You asked the forum to analyze the trades.

HOW in the world you did get this hedge to work???
You didn't... because during your test you un-hedged it.

J.