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Hedge trading
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Author:  kwanann [ Fri Jul 12, 2013 3:54 pm ]
Post subject:  Hedge trading
Bored of trending systems? Ranging systems?

What if there was REALLY a way to trade that puts you at almost ZERO risk to ALL market conditions.

All you need to worry about is swap, commissions and spread?

And guess what you don even need to face your comp HALF the time.

Of course the drawback is.... Don't think of 10% roi per month, maybe you can, who knows..

Now problem is.. I.m trading this purely off my iPad, so if Someone knows how to put this up on say myfxbook i would appreciate. Problem is I lost the password... Or perhaps Jeremy can help with this, the demo on gp has acc no 1568393463

Will be trying this out on my live account in the coming weeks. If this works, I can really get a living off this! No more massive dd, news events and what's not anymore!

And best part the strategy is soooo simple, you would be laughing your pants off. Oh yes and as per my love for naked trading, NO INDICATORS
Author:  kwanann [ Fri Jul 12, 2013 4:05 pm ]
Post subject:  Re: Hedge trading
So... Who's interested?

Jem, will be finally funding my gp account, I realize you guys got the lowest swap for a pair I wanna play this out with
Author:  Jeuro [ Fri Jul 12, 2013 7:27 pm ]
Post subject:  Re: Hedge trading
kwanann wrote:So... Who's interested?

Jem, will be finally funding my gp account, I realize you guys got the lowest swap for a pair I wanna play this out with

Probably a few interested... so, we are ready for you to explain the simplicity of it.

J.
Author:  hannele [ Fri Jul 12, 2013 8:37 pm ]
Post subject:  Re: Hedge trading
kwanann wrote:So... Who's interested?

Jem, will be finally funding my gp account, I realize you guys got the lowest swap for a pair I wanna play this out with
Hi Kwanann,

I am interested

Cheers,
hannele
Author:  kwanann [ Fri Jul 12, 2013 11:12 pm ]
Post subject:  Re: Hedge trading
Ok here it goes. We all know price will go up and down, sometimes in the span of a day sometimes over a few months.

Take gbpusd for example. If say you had a wrong trade, took a sell about 2 months ago at 1.49, excluding the crazy dd, you would have broken even a few days back.

Now of course the sensible thing would be to buy gbpusd, buy you never know right?

So now imagine you take out a buy and sell hedged position. You have just lost some money on spread, swap and commission. Of course choose a pair with the smallest of all 3 especially spread.

Let this position move say 50pips. Then add another, and another .. For up to say 10 trades.

By now you would have a negative balance of 10xcomm + 5xspread and some loose swap.

Since price moves up and down you will now have a buy and sell position that is both in profit

Now I the tricky part. Clear out a buy and sell which gives you an average return of 50pips. At the same time enter a hedged trade.

What this gives is, you have taken some profit ff th table and cleared some losses. And hedged your position again. If we think back to the first trade of buy sell gu at. 1.49, it could mean I TP off the buy. Now I can either wait for price to go back down to 1.49 and clear the sell at be, which gives me the profit from the buy, or take out that loss with another hedged position. Either way I will always profit somehow.

Think of this along the lines of the market maker or fox. Why you buy they sell and vice versa. Sooner or later they will have to balance their books right? This is exactly what this strategy is about.

It is quite fuzzy talking this out. I will try to create a myfxbook to show the actual workings of it. Still a work in progress but it's all making sense to me
Author:  kwanann [ Fri Jul 12, 2013 11:15 pm ]
Post subject:  Re: Hedge trading
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
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

Repeat 3 and 4 as many times as you like
Author:  FlyHighDrifter [ Sat Jul 13, 2013 10:03 am ]
Post subject:  Re: Hedge trading
I suppose the obvious danger is when does all the hedging end... but if you're first set of hedge trades were at a significant level that price often visits (eg 1.3000 for EU) then the odds are in your favour for an opportunity to get out 'safely'.

While naked trading I've often considered such a strategy as a way to take the risk out of stop hunts but never got around to trying it. In theory I suppose it would give you the opportunity to take profit from one of those stop hunt spikes and then ride another hedge safely back to your entry/BE.

Like you say, price often revisits levels so I guess as long as you're willing to ride the hedge(s) for an undetermined amount of time then you are highly likely to be able to exit safely and all you have to worry about is wether you can bag enough dosh to cover commissions/swaps/spreads etc....

I'll be watching to see how this one pans out Kwannan!

Cheers
Fly
Author:  Jeuro [ Sat Jul 13, 2013 10:49 am ]
Post subject:  Re: Hedge trading
kwanann wrote:
Now I the tricky part. Clear out a buy and sell which gives you an average return of 50pips. At the same time enter a hedged trade.

What this gives is, you have taken some profit ff th table and cleared some losses. And hedged your position again. If we think back to the first trade of buy sell gu at. 1.49, it could mean I TP off the buy. Now I can either wait for price to go back down to 1.49 and clear the sell at be, which gives me the profit from the buy, or take out that loss with another hedged position. Either way I will always profit somehow.

Think of this along the lines of the market maker or fox. Why you buy they sell and vice versa. Sooner or later they will have to balance their books right? This is exactly what this strategy is about.

Out of the top of my head I would think that the balance would increase but the equity will always be losing due to spreads and swap. No real gain at all. But I will take a second look and do detailed calculation.

The part of "balancing books" I do not understand. Brokers that are Market makers balance their book tick per tick. I you buy, they also buy (cheaper then the price they quoted you) and sell it to you profiting the difference...

In the event a MM Broker hold a portion of unbalance orders, they also hold it only for a few ticks.
Say you are the only customer and enter a buy Eur/usd .. they will sell it to you with the 1 or 2 pips profit without buying from the market.... but if "the market" next few tick are up... at that point they unload the position right away. They either replace their position with and incoming sell order (usually they would slip that new order to maintain the original profit) or they would buy from the market and balance their books.... still made some money.. Either way Nothing to balance later.

J.
Author:  kwanann [ Sat Jul 13, 2013 12:28 pm ]
Post subject:  Re: Hedge trading
FlyHighDrifter wrote:I suppose the obvious danger is when does all the hedging end... but if you're first set of hedge trades were at a significant level that price often visits (eg 1.3000 for EU) then the odds are in your favour for an opportunity to get out 'safely'.

While naked trading I've often considered such a strategy as a way to take the risk out of stop hunts but never got around to trying it. In theory I suppose it would give you the opportunity to take profit from one of those stop hunt spikes and then ride another hedge safely back to your entry/BE.

Like you say, price often revisits levels so I guess as long as you're willing to ride the hedge(s) for an undetermined amount of time then you are highly likely to be able to exit safely and all you have to worry about is wether you can bag enough dosh to cover commissions/swaps/spreads etc....

I'll be watching to see how this one pans out Kwannan!

Cheers
Fly

I actually got it to work and am in positive territories after 1 week of trading, up about 3%. At that juncture I can close all my positions and that 3% is all mine. That is already considering negative swap, commission spread and what not. Will be creating a new demo to test this out.

Quite good results considering
1. I spent less than an hour the whole week trading this
2. I can sleep well since there is never the risk of mc or trade going against me
3. It is consistent, the market conditions doesn't matter

Actually it doesn't matter even if you enter at the end, chances Are you won't since your entry point is at a non news event and when spread is low. Think eu with zero spread.

The entrance and exits are the important points, or rather the exit. I.m still trying to nail it down to specific rules, but chances are it will be fuzzy. Primarily cos I.m still a gut feeling trader and more importantly we don't want thm to figure out what we are doing.

I also need to figure the lot size %. On a 10k demo I enter with 1 full lot and have dd at approximately 40% on weekends
Author:  kwanann [ Sat Jul 13, 2013 1:37 pm ]
Post subject:  Re: Hedge trading
screenshots off my ipad.

notice that my equity is actually more than mystarting amount
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