stevehopwoodforex.com
https://www.stevehopwoodforex.com/phpBB3/
Print view

Hedging strategy - buy and sell same currency simultaneously
https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=1371		 Page 3 of 4
Author:  niepce [ Wed Jun 26, 2013 10:09 am ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
Kwamann, which strategy are you referring to ?
Author:  falsedave [ Wed Jun 26, 2013 11:00 am ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
Going back to the question about a Swap Arbitrage strategy with two brokers.

E.g if Broker 1 pays $5 swap per day on a long position and Broker 2 charges only $1 on a short position you would have $4 profit effectively risk free. The money would simply 'flow' from one account to the other as the markets moved.

Can anyone explain why this is not allowed ? The only reason I can see is that swap comes out of the brokers pocket. And its in their terms and conditions. It is a great arbitrage opportunity and is just like taking a loan at a lower interest rate and paying it into a higher interest paying account.
If this swap arbitrage were to be allowed and the theory of No Arbitrage were to hold true, surely then swap rates at all brokers would eventually become equal ?
Author:  kwanann [ Wed Jun 26, 2013 1:20 pm ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
niepce wrote:Kwamann, which strategy are you referring to ?
My own strategy
Author:  kwanann [ Wed Jun 26, 2013 1:21 pm ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
falsedave wrote:Going back to the question about a Swap Arbitrage strategy with two brokers.

E.g if Broker 1 pays $5 swap per day on a long position and Broker 2 charges only $1 on a short position you would have $4 profit effectively risk free. The money would simply 'flow' from one account to the other as the markets moved.

Can anyone explain why this is not allowed ? The only reason I can see is that swap comes out of the brokers pocket. And its in their terms and conditions. It is a great arbitrage opportunity and is just like taking a loan at a lower interest rate and paying it into a higher interest paying account.
If this swap arbitrage were to be allowed and the theory of No Arbitrage were to hold true, surely then swap rates at all brokers would eventually become equal ?
I don think this is not allowed, just that you will be hard pressed to find a 2 such brokers.

Also you will need to have the margin available to hold such a position on BOTH accounts
Author:  mjws00 [ Wed Jun 26, 2013 8:13 pm ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
I've been playing with this a lot when I trade longer term. I have trained myself to take profit, and find it very very hard to let the longer trades swing against me. Very similar to what Bob described, I simply have multiple correlated trades that overlap. You still must be net long or short to make money, but at the cost of complication you have more control over timing, and increase your options.

Since I am trading FIFO style this has a few gotchas. I can only do same pair hedging in separate accounts, and HATE that style as one account gets crushed. That effects my mentality. Blech.

So I do it the hard way with correlations, and a triangle arb when I want to get flat. I find it to be incredibly useful when trading long timeframes, for me that is anything over a 3 days. I make money while the position retraces, drop the hedge when it turns. The added stability to my equity is very beneficial to mindset and confidence.

I lock profit, set it up as "insurance", ignore spikes and news, use it as a timeout. It keeps me in trades that I may have a very hard time re-entering when they are trending. I often miss set ups due to timezone, work etc. But find it reasonably easy to manage positions. With trend set ups also rarely suit my eye, so once I'm in I want to stay. The turn for the pullback is very easy for me to see. And taking the profit on that hedge is a skill I've honed.

Just another tool, with some benefits when used properly.

Mike
Author:  kwanann [ Wed Jun 26, 2013 10:31 pm ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
Ahh very interesting use!

I like this idea! Worse case u lose some of your profits from swap and comm. best case you TP both ways.

I used it previously with my bad brush with audchf, but have yet to master this particular technique, more of a miss than hit so far
Author:  SteveHopwood [ Wed Jun 26, 2013 11:02 pm ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
mjws00 wrote:Just another tool, with some benefits when used properly.

Mike
Hehe. I love it. You describe an entire trading system as 'Just another tool'?

Wouldn't care to elaborate in a separate thread, would you? Let me know if so, and I can guarantee some interest. :lol:

:D
Author:  phil_trade [ Thu Jun 27, 2013 5:05 am ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
Hi Mike !
I lock profit, set it up as "insurance", ignore spikes and news, use it as a timeout. It keeps me in trades that I may have a very hard time re-entering when they are trending. I often miss set ups due to timezone, work etc. But find it reasonably easy to manage positions. With trend set ups also rarely suit my eye, so once I'm in I want to stay.
I just trade like this, so I know what you're speaking about !
The turn for the pullback is very easy for me to see. And taking the profit on that hedge is a skill I've honed
but, saying, turn for pullback is very easy... I can't :) I can say my system is managing exit but not easily so if you can explain which precise criteria you use !

Thks

Philippe
Author:  kwanann [ Thu Jun 27, 2013 6:00 am ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
Yes agreed, i also do trade like that sometimes, BUT i cannot figure when is the best time to exit my hedge, ends up sometimes i just have to pay the loss from taking the opposite side AND then my trade decides to go the other way
Author:  falsedave [ Thu Jun 27, 2013 11:23 am ]
Post subject:  Re: Hedging strategy - buy and sell same currency simultaneo
kwanann wrote: I don think this is not allowed, just that you will be hard pressed to find a 2 such brokers.

Also you will need to have the margin available to hold such a position on BOTH accounts
O.k say I have found one that could be used. Lest be realistic and say the difference is 2. There are no withdrawal fees on either broker.

Say the monthly range on the pair is 1000 pips so we use 1.0 lots. Every day swap pays us 2 just for holding a position. At the end of each month or when margin is low in one transfer funds so that both accounts are even. I if you start with 3000 , 1500 in each. Just that one position would return just over 300 per year. After the inital commision & spread have been taken. Thats 10% - better than a current account and more importantly better than inflation here in the U.K.

Its just an idea I had, just wanted to know if it was worth pursuing before I start trying to set up a way of finding more of these swap holes? I have one at the moment.
All times are UTC Page 3 of 4

Powered by phpBB® Forum Software © phpBB Limited