Any great idea about HEDGING positions welcome here - page 37

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Keith Watford
Moderator
14509
Keith Watford  
Seyedmajid Masharian:

you replied me several times but you are against hedging

but my goal to establish this thread was to find a group that agree with my opinion so we could start work on it focusing on just one strategy to develop that.

but maybe i made a bad decision to share my idea here.

I am not against Hedging, I can see no point in opening opposite orders in the same instrument when it achieves nothing. I have proved that it achieves nothing many times.

I actually use this form of "Hedging" myself, but I have a good reason. I don't trade forex.. I trade shares, but with no leverage. I buy the shares through a stockbroker and this incurs costs of commissions and spreads as well as stamp duty for UK shares ( 0.5%). Now, I used to trade shares when they were ranging, buying at around the bottom of the range and selling near the top. Then I discovered CFDs, so instead of selling the shares at the top of the range, I open a CFD short to "hedge" the trade. Why it is worth it to me is because the costs of holding that short was usually more than compensated  for by the savings in commissions, spreads and stamp duty when re-entering the trade.

Fernando Carreiro
4760
Fernando Carreiro  

Keith Watford: I am not against Hedging, I can see no point in opening opposite orders in the same instrument when it achieves nothing. I have proved that it achieves nothing many times.

I actually use this form of "Hedging" myself, but I have a good reason. I don't trade forex.. I trade shares, but with no leverage. I buy the shares through a stockbroker and this incurs costs of commissions and spreads as well as stamp duty for UK shares ( 0.5%). Now, I used to trade shares when they were ranging, buying at around the bottom of the range and selling near the top. Then I discovered CFDs, so instead of selling the shares at the top of the range, I open a CFD short to "hedge" the trade. Why it is worth it to me is because the costs of holding that short was usually more than compensated  for by the savings in commissions, spreads and stamp duty when re-entering the trade.

By definition then, you are not "hedging" but in fact applying true Hedging - one position with shares and another on CFD's. Even though CFDs are related and based on the underlying instruments, they are in fact a different instrument and market, making what you are doing, true Hedging and not "hedging". (Keith,) Is my understanding (of your post) correct?

EDIT: Qualified my question for better understanding!

CrisZind
445
CrisZind  
Fernando Carreiro:

Is my understanding correct?

Im only guessing among 7 billion people on earth, this question is very relative

Fernando Carreiro
4760
Fernando Carreiro  
CrisZind:Im only guessing among 7 billion people on earth, this question is very relative

My question is aimed at @Keith Watford, as I require confirmation that I understood his post correctly!

I am not asking the world if my opinion is correct!

Keith Watford
Moderator
14509
Keith Watford  
Fernando Carreiro:

My question is aimed at @Keith Watford, as I require confirmation that I understood his post correctly!

I am not asking the world if my opinion is correct!

Hi Fernando,

I don't believe it to be true hedging as such as it is not a way to limit risk, but a way to reduce costs when turning over the same shares.

When trading shares, there is commission applied both when buying the shares and when selling, as well as the 0.5% stamp duty when buying them.

Mind you there can still be risks. Many years ago, Thailand did not have great internet service and I had no internet at home. I had to travel to connect, this meant that I could not monitor positions constantly. I had a lucky accident when shares rapidly increased in price. My CFD account (with shorts) suffered from a margin stop-out, so I was just left with the net buys. I made a healthy profit from this, but if the prices had dropped after the stop-out, I could have suffered a big loss.

Fernando Carreiro
4760
Fernando Carreiro  

Keith Watford: I don't believe it to be true hedging as such as it is not a way to limit risk, but a way to reduce costs when turning over the same shares.

When trading shares, there is commission applied both when buying the shares and when selling, as well as the 0.5% stamp duty when buying them.

Mind you there can still be risks. Many years ago, Thailand did not have great internet service and I had no internet at home. I had to travel to connect, this meant that I could not monitor positions constantly. I had a lucky accident when shares rapidly increased in price. My CFD account (with shorts) suffered from a margin stop-out, so I was just left with the net buys. I made a healthy profit from this, but if the prices had dropped after the stop-out, I could have suffered a big loss.

OK, I understand now!
nicholi shen
2176
nicholi shen  
Icham Aidibe:

I made hedging my whimsy during about 8 months before obtaining something acceptable in term of profit - because we have to admit, that it's far from being the most profitable of all strategies. 

I also worked on triangular arbitrage (hedging currencies), this one has been a real headache, at first results were great on the tester but in that particular case, only the "real tick" mode is relevant because of ticks' tempo which differs in account while with the every tick mode it's all sync'd - hence the confusion. Some days ago, MetaQuotes posted an example working with a delay. But there again ... it's not very profitable.

Finally, I find "hedging" interesting only when used in a manual/semi automated trading system - for the psychological aspect but not only (edit : it's a strategy thought to cover loss not for being profitable) ; as EA, any other system, including EAs based on basics indicators & strategies could be more profitable.

@Seyedmajid Masharian, dude if you don't have already an operating system, you're losing your time & energy with hedging, it's very ingrate ; but to pass time, as an intellectual exercise it's fun : maths, logics, it's like a chinese puzzle.

(My humble opinion)

Very well said. I also attempted to roll my own tri-arb system for giggles, and I even successfully implemented asynchronous orders in MT4... If only I had my time back lol. In my experience hedging (offset orders) is only useful for the following:

  • Managing overall "net position". Always used in combination with CloseBy. 
  • Concealing the true position duration. Gaming a broker that disallows scalping and requires n hold time.  (also used with closeby, but with time offset to show hold duration)
  • Luring in unsuspecting signal subscribers with a nice linear balance curve while obscuring the draw-downs. (I don't personally do this as it is unethical)
  • Gambling. Freeze/reverse a losing trade and preserve the leverage of the original trade. 
  • Lazy programming. 
James Newman
145
James Newman  
Keith Watford:

.. I trade shares, but with no leverage...

big man Keith! 

Keith Watford
Moderator
14509
Keith Watford  

Keith Watford:

.. I trade shares, but with no leverage.

James Newman:

big man Keith! 

Not at all. The global financial crisis 10 years ago hit my portfolio very hard, wiping out years of gains. If I had been trading with leverage, it might have wiped me out completely!

Leverage can be very dangerous if not treated with respect. It can really take a chunk out of your a**  :)

James Newman
145
James Newman  
Seyedmajid Masharian:
I think always there is a solution ... but we have to think more and more to find that...all

all in all it's been a good discussion for you Seyedmajid - tons of info, you may need to reread the posts and have a good thinking... all is there for you. We deserve a big Thank You Guys from you :)

I would like to make my final contribution to this thread by mentioning that the robot you are going to program will not be of any use to us - humbled retail traders from the EU and the USA - simply because we are regulated by those Institutions wanting us to be safe (or not trade at all):  1/30 or 1/50 max leverage, this is what we have here... your strategy won't work for small $1-$10K accounts... You understand, I hope. Good Luck with your trading anyway, mate. Cheers. (and ye, learn about flash crashes - fascinating stuff... and by the way $oro$ isn't the greatest trader, Jim Simons of RenTech Hedge fund is way cooler) :))

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