"Hedging" in Forex trading -Why do it? - page 5

Marco vd Heijden
Moderator
13435
Marco vd Heijden  
Attila Alp Oğuz:


Just wait for 10 pips in any direction (you, in fact, wait by opening two reverse trades at the same time), then trade for the reverse direction for 20 pips.

If I'm not missing something, this strategy will provide the exact same result with yours.


Okay so take a look at the chart on Wednesday, in stead of hitting the +100 (these are D1 boxes) we now have waited,as per your suggestion, and have made instead + 0.0, and then we open a 200 position in opposite direction which will also result in a 100% loss...

Care to shine a light on that ?

Attila Alp Oğuz
213
Attila Alp Oğuz  
Marco vd Heijden:


Okay so take a look at the chart on Wednesday, in stead of hitting the +100 (these are D1 candles) we now have waited, and have made + 0.0, and then we open a 200 position in opposite direction which will also result in a 100% loss...

Care to shine a light on that ?

On Wednesday, both targets (yellow lines) are hit as well ... am I wrong?

...

Anyway ... not so important.

At any time and in any case, you can always net your positions into a single position.

Marco vd Heijden
Moderator
13435
Marco vd Heijden  

No on Wednesday only the long position makes a profit, and the short position results in a loss.

The difference is that in the proposed strategy, we still make a +100 and in your suggestion we lose all. 

It is very important, extremely important.

When you make such a claim you should be able to back it up with a solid explanation.

I do not think that you understand the strategy, these positions are not netted into a single position,

They make a profit on the way up as well as the way down, usually.

And that is a rather LARGE DIFFERENCE.

Attila Alp Oğuz
213
Attila Alp Oğuz  
Marco vd Heijden:

No on Wednesday only the long position makes a profit, and the short position results in a loss.

The difference is that in the proposed strategy, we still make a +100 and in your suggestion we lose all. 

It is very important, extremely important.

When you make such a claim you should be able to back it up with a solid explanation.

I do not think that you understand the strategy, these positions are not netted into a single position,

They make a profit on the way up as well as the way down, usually.

And that is a rather LARGE DIFFERENCE.


Ok ... if one of the targets is hit on Wednesday, then you close one of the trade at that target.

Then what about the other position, position in loss, in your hedged version ... as there is no stop out in your strategy ... right?

Are you sure that we will still make + 100?


Believe in me, at any time and in any case, you can always net your positions into a single position ... meaning less swaps, less costs coming from spreads, and less comissions if applicable.

Good night.

Marco vd Heijden
Moderator
13435
Marco vd Heijden  

This is unbelievable.

I am just asking for the proof in the pudding.

You can get the exact same results, or you can't, there is no room for an in between.

It's a boolean, true or false.

Double spread please, no problem.

Keith Watford
Moderator
28257
Keith Watford  
Marco vd Heijden:

The strategy is simple.

  • At every new D1 bar open (the grey lines) we open 2 separate opposed (flat,hedged) orders.
  • The Take Profit levels are set at 100 (the yellow lines) for every order.
  • You can see in the chart above that we had success on 4 day's of the week since both targets were hit those day's.
  • We gained a total of +800, and we were stopped out just once, on Wednesday. 
  • Fixed strategy, solid rules, you just need to figure out how to deal with the one loss.

Now could you please explain to me how we can possibly get the same result, without the flat (hedged) entry ?

I am eager to hear your explanation, and perhaps also why this would be an unwise way to implement a strategy...

Hello Marco,

Using 4 Digits in my examples

Your strategy.....

Price is 1.2200 and there is a 2 pip spread

Buy at 1.2202 , TP is 1.2302

Sell at 1.2200 , TP is 1.2100

Both TP are hit, profit is 200pips


Strategy without "Hedging"

Price is 1.2200 and there is a 2 pip spread

do nothing

if Ask goes down to 1.2100 where your sell would hit TP, open a buy with a TP at 1.2302

If TP is hit, profit =202 pips

if Bid goes up to 1.2302 where your buy would hit TP, open a sell with a TP at 1.2100

If TP is hit, profit =202 pips

As you can see, you make additional profit equivalent to the spread by not "hedging". Commisions, if applicable would increase the difference as you are placing 2 trades, whereas I am placing 1.

Also if price is rangebound during the day and both trades are closed before either TP is hit, your strategy would result in a loss of 4 pips. My strategy would not have opened a trade and so no loss at all.

Alain Verleyen
41049
Alain Verleyen  
Marco vd Heijden:


Okay so take a look at the chart on Wednesday, in stead of hitting the +100 (these are D1 boxes) we now have waited,as per your suggestion, and have made instead + 0.0, and then we open a 200 position in opposite direction which will also result in a 100% loss...

Care to shine a light on that ?

You are wrong Marco, @Attila Alp Oğuz is perfectly right.


No on Wednesday only the long position makes a profit, and the short position results in a loss.

The difference is that in the proposed strategy, we still make a +100 and in your suggestion we lose all

False, wrong, not true !!! :-D

Firstly I don't see why you said you are stopped out on Wednesday, as per your screenshot Wednesday are both winner, maybe I am missing something. Anyway, doesn't really matter, let's talk about the second Monday (June,11) where obviously the sell trade will be in loss.

You don't make a +100, you are "hedging" damn it ! Did you forgot you other trade ? :-D  While your buy is at +100, your sell is at -100 (let's forget the spread for simplicity).

It is very important, extremely important.

When you make such a claim you should be able to back it up with a solid explanation.

You should be careful with such sentence, as it's you who are claiming something wrong without understanding completely the subject and writing false assumptions.


Let's be clear (with numbers from my broker Alpari). Let's consider spread = 0 for clarity, of course in reality it will be more complex but it doesn't change the reasoning.

  • Monday 4 : Open of the day at 145.964

You open a BUY and a SELL. You close BUY at 146.064, and the SELL at 145.864, both in profit, total + 200 points.

Attila (nice name ;-) ) and I, we monitor we don't open immediately, we monitor the prices. At 146.064 we open a SELL, at 145.864 we close it. +200 points in profit, 1 trade only.

  • Thursday 7 : Open of the day at 147.749

You open a BUY and a SELL. You close SELL at 147.649, and the BUY at 147.849, both in profit, total + 200 points.

We monitor prices, at 147.649 we open a BUY, at 147.849 we close it. +200 points in profit, 1 trade.

  • Monday 11 : Open of the day at 146.722 (unfortunately on my chart it goes more than 100 points below that but let's consider by the magic of thought it doesn't).

You open a BUY and a SELL. You close BUY at 146.822, and the SELL at .... well you don't close it ? ;-)  Let's say you close it at 147.114 (close of the day). So you have +100, -392 points.

We monitor prices, at 146.822 we open a SELL...and like you we don't know where to close it, probably at the close of the day at 147.114...in loss of -292 points. Damn it, it's the same as you.

Conclusion.

Wow, "hedging" is useless :-D. Add real spread and it becomes a bad practice.


EDIT: Keith I didn't see your post before writing.

EDIT2: Stamp one's foot, getting angry or whining are not considered as valid arguments.

Marco vd Heijden
Moderator
13435
Marco vd Heijden  

It's not the same, I just explained that to @Attila Alp Oğuz

Nobody understands this strategy.

The Chart is just for illustration, i should have known it would be taken serious.

It's just amazing to me.

You are saying the same thing as @Attila Alp Oğuz  , and others, and speak of an 'ideal' situation.

But it's not always ideal.


MY strategy.....

Price is 1.2200 and there is a 2 pip spread

Buy at 1.2202 , TP is 1.2302

Sell at 1.2200 , TP is 1.2100

Both TP are hit, profit is 200pips

Only one TP is hit, the position will not 'alternate' and the opposing position will result in a loss.


Your strategy:

do nothing.

if Ask goes down to 1.2100 where your sell would hit TP, open a buy with a TP at 1.2302 

Price keeps falling,

Target is never hit, resulting in a total loss then in my strategy where at least the one target is reached.


There is a significant difference, in my strategy, in an ideal situation, both ways get paid, regardless of the double spread.

This simply is not possible in your scenario, because you rely on double the movement, but in just the one direction that get's paid.

That is the exact thing i was trying to escape, and with a flat position, direction becomes meaningless.

It does not matter where market goes, either way is fine, what matters is that both targets are hit, most of the time,

And that you are able to handle the loss, whenever that occurs.

It seems we are going to have to take this to metaeditor.

Seyedmajid Masharian
1838
Seyedmajid Masharian  

HEDGING IS THE ONLY WAY TO MAKE CONSISTENT PROFITS IN THE MARKET NOT FOREX BUT ALL FINANCIAL MARKETS IN THE LONG RUN.

I AM A PROFESSIONAL TRADER WITH SEVERAL YEARS OF EXPERIENCE.

I HAVE TESTED TENS OF THOUSANDS OF SYSTEMS IN 9 YEARS.

BUT YOU HAVE TO START WITH A 10000 UNITS ($10000 OR 10000 CENTS) AND SELECT EACH TRADE LOT CAREFULLY.

Icham Aidibe
11969
Icham Aidibe  

Hedging consists in having for lunch yesterday's dinner. You can do it once, twice, three times, comes a point you have to let go or assume an indigestion. 

I don't understand what you don't understand.