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| Hedging - how to trade with hedging on Forex ? https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=3510 |
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| Author: | hiredwhip [ Wed Mar 19, 2014 12:37 am ] |
| Post subject: | Hedging - how to trade with hedging on Forex ? |
Good Evening, This Text File might be of some help...........Steve and I both gave this young man a vouch over at FF for this prose.....Hope you like it .....Read it twice...... whip |
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| Author: | Over60 [ Wed Mar 19, 2014 8:34 am ] |
| Post subject: | Hedging - how to trade with hedging on Forex ? |
@all There are a lot of individual and contrary point of views about hedging. Originally hedging is used by large and commercial traders instead of using a stop-loss, because they have big pockets to run orders (futures) longterm. Retail-traders think in terms of pips in reference to high-leverage. The commercials deals with cents. That means e.g. 200-400 pips of price-floating (2-4 Cent of any future-currency) in the long run by balance does not influence their accounts dramatically. The disadvantage for retail-traders during daytrading occurs, not only in reference to the high-leverage, if the hedge-order get filled, because we have to consider afterwards a temporary and constant floating loss. It might be an advantage not to generate a definite loss by SL, waiting for a better chance to unlock the active hedging order-pair, resp. floating loss. Sometimes hedging works and the hedge-order can be adapted or removed, if the initial order after entry performs into profit, considering that the initial order can be protected at BE or by trailing stop. Should be mentioned, that hedging is also used in similar manner by breakout-traders to cover and trade the breakout-area-levels long or short with stop-orders. Hedging multiple orders might be dangerous, if trades will move into loss. This kind of order-, risk- and money- management has to be well calculated by worst case scenarios in advance. For further discussions, please refer to: http://www.forexfactory.com/showthread. ... 191&page=4 Kind Regards Over60 |
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| Author: | Over60 [ Wed Mar 19, 2014 12:43 pm ] |
| Post subject: | Hedging - how to trade with hedging on Forex ? |
Amendment @ Zalesny as far as the chart shows, there are some huge beginners mistakes. Did you consider RR 1:2 or R-multiple regarding TP and SL concerning the buy-order? I do not see any SL in the chart. A sell-order at the bottom-level of the movement, taken into consideration, that the price did already retrace twice in that bottom area makes no sense. Without SL to trade short at the bottom level its like Harakiri. Buy cheap and sell expensive, that is trading. I would have decided to close e.g. the short order and scale in as long as the price will move again long, as it did in the meantime, to compensate the loss of the closed short order, but it depends on your money-management and the future price-action. Money-management calculations tells you, what you can risk to avoid and run in such a worst case scenario. Regarding the scenario, hedging will not solve in generell the problem and I cannot explain it with few statements. With patience and watching the future price-action, I would scale in, but it has nothing to do with hedging-strategies. Missing experience with EAs, I would try to trade at first safety and discretionary, but never without SL. Just for fun: http://livewithoscar.com/Stocks/DailyVideo.aspx Kind Regards Over60 |
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| Author: | Jeuro [ Thu Mar 20, 2014 4:29 pm ] |
| Post subject: | Hedging - how to trade with hedging on Forex ? |
. The ideal in forex is to hedge same as the hedge funds do. They never do it with the same instrument. But in spite that in forex when you long a symbol or short the same symbol we are buying 2 different currencies, it does not meet the criteria of hedging in general. Which is to cover one positions but not becoming lacked up. For example long the EURUSD buys euros, if later on you short the EURUSD you buy Dollars, but due the Brokers gave you credit in USD for buying the euros and credit in Euros to buy the Dollars, the loans in the different currencies lack the positions up. So, hedging with the same symbol makes no sense. Unless you have a good strategy for the EURUSD and use hedging instead of SL. After, if your strategy signal a buy, and your sell is in profits, you close the sell and you remain long as your strategy call for. ..etc. In many occasions it is possible to close all position recovering all the loses. (usually they everage them self out) But is not a strategy by itself. It is to use with any decent strategy. So, to do a more sensible hedging must look into changing the credit currency. For example if you buy Euros with credit in USD (Long EURUSD) you could short EURGBP so, now you have a real hedge position that is not lacked up. In any case this type of hedging requires some knowledge in pairs price equations and so forth to be effective and not be killed. J. |
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