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Hedging - Not with Alveo

 
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robunited

Hedging - Not with Alveo

Hi Everyone,

Just a heads-up/tip in advance for everyone who things hedging a loss position is a good idea/strategy.

In Alveo, with the rule of "not more than 2% of capital per trade", it doesn't matter whether you have hedged 

your captial with another position.

As soon as the 2% for any specific single trade "2% loss rate" is hit, it will close this position for you.

Hedgeing is anyway a bad idea, but I see frequently people talk about it and include it in a strategy.

In any case, not with Alveo, good thing! ;-)

All the best,

Rob

 

Tue, 10/24/2017 - 1:50am
 
michaelsedgley

Hi there -

I agree hedging to protect a growing loss doesn`t make any sense but theres hedging and theres hedging, if trading in one direction then in the other as the direction changes and the initial trades cut out with small losses then that works. I am no expert but hedging of one sort or another has got me all the way through all the levels at a reasonably good rate. I now have all trades with a 3 pip s/l and using the one click trading method set target to eight or ten pips and i find if i place a trade in both directions just before a news event which ever way it goes it will stop one at 3 pip loss and the other hits its target.
I wish i could read the market like Shawn does although his losses are just a few pips he set his stop losses much wider and i know if i were to do the same, i would not know to cut those that needed at just a few pips and would invariably keep hitting the wider stops.

Anyway happy trading.

 
gpdno

I will often hedge a position if it runs too far against me. Alveo's 2% rule is not an issue in my case. My reasoning for hedging is to give my original position extra room to turn around.

I risk 1.5% per position. I will hedge when the position runs more that 0.75% against me. Once a hedge is placed, the TP of the hedge is the SL of the original position and the SL of the hedge is moved to break even asap.

So ideally, the position turns and the hedge is removed at break even. Otherwise, the position will continue to run against me until it's stopped out. In this case, I will lose 1.5% on the position but make 0.75% on the hedge so my effective loss is 0.75%.

The other advantage of this hedge is it freezes my total account draw down at 0.75% per position so I can still manage my total number of positions and not worry about hitting the 5% limit for the account.

Peace,
Greg

 
Rookie

Gregg that is the 1st hedging system that I think is logical to follow.

 
hakchinoy

RU: I respectfully will have to agree to disagree with you regarding the merits of hedging.

"As soon as the 2% for any specific single trade '2% loss rate' is hit, it will close this position for you."

One of many ways to circumvent that issue is to use solid money/risk/trade management. For example, one could close and reopen the hedge when the prior leg is in the 1.5% to 1.8% range. Another way to circumvent that issue (also money/risk/trade management related) is to wobble out of that hedge or the entire hedged set. I could go on. . . .

"Hedgeing is anyway a bad idea, . . ."

I used to think that too--before I got into intermediate-/long-term trading. Today is NFP Friday; I think it's foolish for a trader, who has been holding a trade for several days, to not consider hedging at least part of that position prior to time of that news announcement. I realize that trader also might have other options, and their respective pros/cons might be a better fit than hedging. Yet, to categorically reject all forms of hedging without considering context, is a recipe for disaster. Please keep in mind that one doesn't have to implement hedging exclusively via a buy and sell on the same pair. Other hedging techniques also exist.

Plus, whenever a market quickly transitions abruptly from one with a moderate amount of volatility to a tight choppy-range (frequently a string of dojis), I periodically will hedge and wait patiently for the MMs to show their hand. I break that hedge as soon as I see conviction re-enter the market.

 
Martin R

I think you may have missed the real use of hedging as used by a hedge fund manager. They may be buying a pair based on the daily chart with a wide stop loss and then sell the pair based on a pull back on the 1 hour chart with a small stop loss and close it at a profit when the pullback slows down and begins to reverse back in the original direction based on the daily chart. What you are doing is trying to stop yourself having a big loss which at one point was a small loss, the key to profit is small wins / small loses which cancel each other out and big wins which is your profit

 
triguylm1

Martin makes a good point here. Think about the big players that have deep pockets, you can bet they hedge positions to make profit both ways, it's just a matter of time!

you can use small SL settings and get back in the hedge again, much like Hak is saying.

I make a consistent 2% this week and 2.5% last week per day using a hedge system in these side way markets

This weeks numbers are (3.56%, 2.57%, 1.93 %, 1.41% and 1.51%) = 11.08%

Last weeks numbers are (2.09 + 3.97 + 2.23 + 3.56 + 3.12) = 14.97%

Takes a lot of patience and enter positions in the 5 day price range. See H1 chart of you're favorite currency pair.

 
caflischmartin

Hedging makes sense in protecting a profit.
Starting with a 0.1 and being up a 50pips when it starts to conslidate and restest you can open a 0.2 in the other side and make some extra cash!With an appropriate sl thats a nice way to protect you from loosing the profit.And with a double size you can make even more than the original position gave you.
With the same risk exposed of 0.1 !

 
robunited

whoops, 2 years ago .. can't even remember posting this?

Anyways, yes, I still find hedging an extremely difficult strategy/exercise.

Not sure this has anything to do with Alveo though ;-)