Thank you Jules for taking the time and providing the best explanation and reason why C2 cant allow hedging.
Alot of forex brokers allow hedging, "FXsolution" for example.
Hedging in the spot forex is different, And you guys seem to have no clue about it.
As I said before, buying Eur/Usd and selling Gbp/Usd doesnt mean your hedging the dollar, this is just stupid !.. you will still be betting on the british pound single currency, and the Euro single currency, and if you have no clue on were these two currencies are hedding, then you will be in a pure Gamble.
Placing a buy to open position, then placing another Sell to open position instead of a stoploss is also a stupid way to hedge. Because then you will have to pay extra spreads and intrest to your broker over time, That doesnt eleminate risk, it only increases it. Which doesnt qualify into hedging diffenition, which no matter what the diffenition is, it always mentions eleminating position risk.
Hedging is used to secure profits, If your not sure were the next move will be, to capture a larger scale degree of the newly formed trend. Period.
Thats how hedging works in the Spot forex.
Ross - it is time for you to grow up. The example of using a hedge for tax purposes is the definition writer’s example. Hence you completely missed my point. And my point is that other people have different views than you do regarding what a hedge is. Yet you insist on trying to impose your views on the rest of the C2 community by use of obnoxious posts.
Let me take you to another site: http://www.fxtrading.com/hedging.php
Well actually, let me quote from the site since you won’t read the contents before making another obnoxious post:
"Heding in Forex is a much simpler task. To demonstrate, let’s take a trader who is long the GBP/USD on the first Thursday of the month. Because the trader is experienced, he or she is aware that the Non-Farm payroll is released the first Friday of each month. The trader’s position is long term and he or she is worried that the market may move wildly. Because of the nature of Forex, there is no long bias to the market, meaning that a trader may open long and short positions just as easily. To hedge the position and eliminate the risk of the economic release, the trader simply needs to open as many short GBP/USD positions as they currently have long. The trader has hedged their position and limited risk immediately."
To further emphasize the state of affairs I would like to leave you with a quote from one of the most famous traders of our time (let’s see if you can guess who it is):
"A trading site/forum is supposed to be about learning how to trade successfully. Instead of getting it, N B insists on weaving cluless functionality that no broker would seriously consider. That says something about N B’s level of trading acumen…“
Steve
"Don’t judge a man before you walk a mile in his shoes.”
>>To hedge the position and eliminate the risk of the economic release, the
>>trader simply needs to open as many short GBP/USD positions as they
>>currently have long. The trader has hedged their position and limited risk
>>immediately.
Or the trader could simply close his long position and limit his risk immediately.
Hedging in this case does not serve any meaningful purpose. The trader has initiated an extra trade(short) and now must time his exit in the long and short trades correctly to make a profit.
How does this give the trader any edge ? Now he as to manage two and has a negative interest roll during this hedged duration.
Could this be no more than a tactic by forex brokers to make more money?
I had a friend who did this all the time while trading forex, all I could do was shake my head in bewilderment. He believed it was a good strategy. Yeah, for the broker who gave it to him.
Matthew, If I go further in explaining how profitable hedging is, and what is hedging. Would that possibly change your mind and try to attempt figuring out away in adding the hedging feature to forex systems?
"This place has become a downright yawner at times."
Sounds like you miss Palsun.
"Hedging in this case does not serve any meaningful purpose. "
I’m not arguing over the meaningful purpose or whether it is an invention by FOREX brokers. The point is it is still called a hedge.
Steve
I am glad at least someone else sees the absurdity of this.
Somehow, the fact that it is pointless, that is not hedging and not supported by any serious brokerage seems lost on some…
Have you ever traded currencies to make your judgment? Or have any clue on how currency trading works?
Or are you just backing up your perspective based on some sort of philosophy?
N B
I think this conversation has played out. The fact is: going long and short the same instrument is identical to being flat. There can be no argument about this. It is mathematically true.
But your point, I think, is that this process – being long, but then opening a smaller short position, for example – is a common way of thinking about managing trade sizes when trading forex, that it makes it easier for humans to psychologically manage their trades, and, in the realm of forex, this process is called “hedging.” Fair enough.
As I pointed out in my earlier post, it’s unlikely C2 will add the capability to display trades in the way. However, as I pointed out earlier, you can do the exact equivalent of what you write about by simply decreasing your current long or short position. It is mathematically the same as opening a smaller position in the opposite direction.
Enough said.
14+ years currencies and futures, 23 years stocks. No options. Sorry, but your continuing request suggests you as someone 3 months removed from reading “Trading for Newbies” by I. M. Confused
I obviously understand much better how currencies work than yourself, as evidenced by the fact that you are wrapped up in your theoretical arguments, that is unsupported by the industry. They know that:
Short and long the exact same instrument = Flat.
Short and long the exact same instrument = Flat.
Short and long the exact same instrument = Flat.
Short and long the exact same instrument = Flat.
Short and long the exact same instrument = Flat.
What is hard to understand about this?
It still doesn’t seem to register with you that maybe it is not offered by C2, by brokers, or by anyone, because maybe you do not understand.
Oh please, 14 years of trading currencies !
Well, open a C2 forex account and lets see how long it will take you to blow it up.
You are claiming that you got experience in this Market even though your saying that No brokers support my strategy. Well, alot of Well known brokers support my strategy, and I just mentioned one of them, this might show that during this 14 years of trading you never researched in this Market.
The Forex Market needs alot of work and research, It is the hardest easiest money you could possibly make. And you not researching enough makes me bet that it won’t take you long to Evaporate your FX account.
How am I supposed to back up my statements? I just explained how hedging is done, and one of the strategies on how implement hedging into the chart. What else do you want? Do you want me to teach you how to trade as well?!
I got a trading statement Verified by C2 to back up every word I say, and my 7 years of experience. But you on the other hand, Got Nothing.
No Matthew, Hedging in the forex Market is not the same.
But since your saying that C2 will highly likely not add this feature, then there is no point for me of attempting explaining more about hedging.
So I rather closing this subject as well.
I’m fascinated by this. Do you disagree with this statement:
“Being long and flat simultaneously the same identical instrument is mathematically equivalent to being flat.”
…?
Matthew, Absolutely Not.
Let me give you couple of trade exampls, and if you still need further explanation, I will be more than happy to do so.
You say that being flat is the same as being hedged in the same instrument.
Lets say I am in a Euro/Usd trade, Price is 1.5400. And I entered a buy to open trade from 1.5355.
Major support on my chart is 1.5350.
Major resistances however are 1.5450, and 1.5850.
Price goes up breaking 1.5450 and my stoploss goes to breakeven, then the price keeps jumping till it hits the 1.5850 important barrier.
Now for me, I got no clue wether the Market will change the direction of the trend, or continues to go up.
So If I want to go flat, I will close position for 495 pips, then wait.
But If I can Hedge, I can sell it and still got those 495 pips - the pip spread. and take it from 1.5850.
Now, I know if the price returns to 1.5450 which is now a support, and breaks it, the trend will change long term, and will have my stoploss at 1.5355 hit at breakeven while my sell position at 1.5850 has the stoploss moved to break even a that point, and no matter how much price spikes up and down, My stoploss will still be far away, and even if it does get hit at worste case scenario, then I am out at breakeven. And that is because I entered at the best positioning scale degree on my chart.
knowing that stoploss will keep on moving forward every week or so to cover the intrest paid incase if hit, and also moved forward when breaking Major supports on a wider time frame to secure profits.
Another example for the advantage of hedging:
Lets say you buy Eur/Jpy from 150 and it goes up to 160, now lets say you see the up trend very strong, but still see it correcting to 157.
If you close your position for 1000 pips profit, then sell from 160 and your stoploss gets hit for minus 300 pips.
1000 - 300 = 700 pips
On the other hand, Lets say you decide to hedge from 160 and price continues to go up, you will still close for 1000 pips profit.
If Price goes down further than 157, you know that the strong up-trend that your system suggests will soon come into play and push the price further than 160.
Now how could Hedging possibly be same as being flat??
Hedging doesnt requier extra Margin, this means the margin you risk on one postion, will be the same on two positions when hedging.
Hedging will eventually decrease the number of times you position your self; thus, decrease risk and decrease spreads paid for the broker.
I’m really flabbergasted you continue to insist on this.
But let me show you.
First, let me paraphrase your second example:
Go long EURJPY at 150.
It rises to 160.
You think that the overall trend is upward, but that it might make a short-term correction down to 157.
So you “hedge” – that is, you open a short position at 160 (at the same time you hold your long position opened at 150).
Now the EURJPY does indeed go down to 157. Hooray! You take your 300 pip profit on your "hedge."
Finally, the EURJPY continues its rise, and goes up to 160. You take your 1000 pip profit on the first long position, which has remained open all this time.
Okay, in your example, total profit: 300 + 1000 = 1300 pips.
Now I will prove to you that “hedging” in your lingo is the same as going flat:
In my world:
Buy at 150.
It rises to 160.
(Here’s where you “hedge” by opening an additional short position.)
But here’s where I, in contrast, simply go flat. It’s the same thing, incidentally. We both SELL the EURJPY.
Now, then, by going flat my initial long position (i.e. by selling at 160), I capture a 1000 pips of profit.
Now, I’m still flat, and the EURJPY goes down to 157. Here’s where you “remove” your hedge by buying EURJPY (but you picture it in your brain as buying back your short position). Here’s where I do the mathematical equivalent – I buy the same quantity of EURJPY. But in fact (and this is the reality) I am opening a new long position.
Now we both watch the EURJPY rise to 160. I close my long position by selling it for a 300 pip profit.
In my world, I made 1,300 pips.
In your world, you made 1,300 pips.
We both used exactly the same amount of margin. We both paid the same spreads and carrying cost to the broker.
In fact, we both did exactly the same thing, …except in your brain, it made you feel good to think you were both long and short at the same time, while in my brain, I understood that being long and short is the same as being flat.
Surely you must see this.
One would ask:
But wouldnt closing your 20 lots at 160 then rebuy at 157 same as the hedging example you just mentioned.
The answer is no, hedging helps you stay positioned on a larger scal, So if 157 doesnt get touched, and Market reverses strongly from 159 and hit your stoploss at your sell position from 160 at breakeven. It will still keep your buys running
hmmm, I expected this answer from you, and wrote my reply before reading it, but when submitted my message, yours poped up.
I gave both of these examples to show that hedging will help in staying long at a larger scal
All you do, is spin convoluted descriptions. But by the time you are done, you are still confused.
I know that I probably should keep my mouth shut (keyboard silent?), but here goes anyway.
I can see how this facility would be convenient in some circumstances. Consider:
Trading system “A” is a long term system. System “B” is a swing trading system. It would certainly be possible that “A” is long, but “B” is playing a short term correction with a short trade. If the systems are both being autotraded in the same account, I know that autotrade will keep track of what is going on and in this example the account will be flat - “A” long, “B” short, account flat. No argument. The systems are being maintained separately, and what is happening within each is clear (hopefully!). The correction runs it’s course, and “B” closes out it’s short position. This has the net effect of putting the trading account back long. What happened here, of course, is that the account sat out the correction, and even possibly got better positioned in the long trade when it was reinstated.
Suppose that the systems were combined - the intent being that this would smooth the equity curve of system “A” by not having it go thru corrections. So you would have a long position, with it’s accompanying protective stop, which we now sell. The protective stop would now also have to be cancelled. System “B” - now part of system “A” - also would have a protective buy stop, which would reinitiate the long trade if hit. Now the correction runs it’s course and system “B” rules indicate that we exit, err, I mean go back to long, but now that it is part of system “A”, we are actually going from flat to long. We also have to reinstate the original system “A” protective stop and cancel the system “B” protective buy stop that we originally put on when we went flat. Whew.
All that I’m trying to say is that it would be easier (less confusing) to keep track of a temporary exit (flat) if it were entered as a separate short trade. The original protective stops could remain in place and not have to be cancelled and then reinstated. It would be a bit more clear that the system is basically long, but we are temporarily getting out (flat) to ride out a correction.
I’ve been tinkering with just such a trading system, and I find it conceptually easier to handle the situation as 2 separate trades, rather than as an exit and reenter - even tho that is actually what is happening within the trading account.
Just .02, and probably not worth that…
Hans.
