There is no direct financial benefit to being long and short the same pair at the same time. Actually there is a negative aspect because you will always have a net negative roll over fee. However, if you are trading two or more different strategies with the same account, it is possible that you will be both long and short the same pair at the same time, so hedging can make it psychologically easier to deal with this. In futures it is FIFO, so this option is not available. Actually, in the US spot FX market this option is also not available anymore as it was recently outlawed.
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Benefits of FX Hedging
- Thread starter livermoreorless
- Start date
There is no direct financial benefit to being long and short the same pair at the same time. Actually there is a negative aspect because you will always have a net negative roll over fee. However, if you are trading two or more different strategies with the same account, it is possible that you will be both long and short the same pair at the same time, so hedging can make it psychologically easier to deal with this. In futures it is FIFO, so this option is not available. Actually, in the US spot FX market this option is also not available anymore as it was recently outlawed.
Hi guys, basically I am talking about arbitrage and involves taking advantage of temporary price inefficiencies but that is not the subject here.
I heard about what's going on with the Metatrader people, I don't really get what they are trying to do anyway.
To the thread starter, if it doesn't make sense to you, then don't do it.
regards
I heard about what's going on with the Metatrader people, I don't really get what they are trying to do anyway.
To the thread starter, if it doesn't make sense to you, then don't do it.
regards
Quote from Eric215:
There is no direct financial benefit to being long and short the same pair at the same time. Actually there is a negative aspect because you will always have a net negative roll over fee. However, if you are trading two or more different strategies with the same account, it is possible that you will be both long and short the same pair at the same time, so hedging can make it psychologically easier to deal with this. In futures it is FIFO, so this option is not available. Actually, in the US spot FX market this option is also not available anymore as it was recently outlawed.
This is what I thought it was but better worded
Typically require 2 subaccounts to long and short trades for one instrument.
If you are trading a sequence of trades or algo trading it is common to trade both sides.
ie. eur/usd market @ 1.40000 / 1.39980
Account A: Long
Open 1 @ 1.40000
Step 1 OCO #1
Add 1 @ 14050 or Exit -1 @ 1.39950
Step 2 OCO #2
Add 2 @ 14100 or Exit -2 @ 1.40000
Step 3 Reverse
... per your trade plan
Account B: Short
Open -1 @ 1.39980
Step 1 OCO #1
Add -1 @ 14050 or Exit 1 @ 1.39950
Step 2 OCO #2
Add -2 @ 14100 or Exit 2 @ 1.40000
Step 3 Reverse
... per your trade plan
If you are trading any type of step/reversal system you need to hold the positions open to realize the gain. If you trade in 1 account the positions offset and closeout.
You can trade both long and short and have both sides closeout profitable depending on your trading plan. You are margined on the Overall net position of the 2 accounts.
ie Acct A: Long 20, Account B is short 24 lots. Net position is -4.
The two accounts "hedge" one another in terms of reducing net position but do not cover one another.
If your plan trades agressively inside a range of 500 pips. You can use options to reduce the losses of an inevitable runaway/breakout. Hedging is insurance that comes at a cost which you need to take into account.
I
If you are trading a sequence of trades or algo trading it is common to trade both sides.
ie. eur/usd market @ 1.40000 / 1.39980
Account A: Long
Open 1 @ 1.40000
Step 1 OCO #1
Add 1 @ 14050 or Exit -1 @ 1.39950
Step 2 OCO #2
Add 2 @ 14100 or Exit -2 @ 1.40000
Step 3 Reverse
... per your trade plan
Account B: Short
Open -1 @ 1.39980
Step 1 OCO #1
Add -1 @ 14050 or Exit 1 @ 1.39950
Step 2 OCO #2
Add -2 @ 14100 or Exit 2 @ 1.40000
Step 3 Reverse
... per your trade plan
If you are trading any type of step/reversal system you need to hold the positions open to realize the gain. If you trade in 1 account the positions offset and closeout.
You can trade both long and short and have both sides closeout profitable depending on your trading plan. You are margined on the Overall net position of the 2 accounts.
ie Acct A: Long 20, Account B is short 24 lots. Net position is -4.
The two accounts "hedge" one another in terms of reducing net position but do not cover one another.
If your plan trades agressively inside a range of 500 pips. You can use options to reduce the losses of an inevitable runaway/breakout. Hedging is insurance that comes at a cost which you need to take into account.
I
I am new in Option, however many years in Spot.
Mind if I ask you what is "OCO"?
Mind if I ask you what is "OCO"?
I think it is very possible...but...let's forget about the for example: EUR/USD short in one account and EUR/USD long in another account...the real deal is to check this out:
http://www.mataf.net/en/tools/correlation-table
it all begins here as far as understanding true forex hedging and profiting from it...
...there are combinations of trading one cross long and one cross short that actually play off of divergences...eaxmple:
EUR/USD is soaring...GBP/USD is lagging...short EUR/USD and buy GBP/USD and there should be profit run in there somewhere...
yes, this is almost like trading Sept Oil vs Oct Oil spread...or August ES (SP 500) vs August NQ (nasdaq 100)...I think what I have presented blows this converation into new levels...
..but, I have not even actually done any trading this way...has anyone?
http://www.mataf.net/en/tools/correlation-table
it all begins here as far as understanding true forex hedging and profiting from it...
...there are combinations of trading one cross long and one cross short that actually play off of divergences...eaxmple:
EUR/USD is soaring...GBP/USD is lagging...short EUR/USD and buy GBP/USD and there should be profit run in there somewhere...
yes, this is almost like trading Sept Oil vs Oct Oil spread...or August ES (SP 500) vs August NQ (nasdaq 100)...I think what I have presented blows this converation into new levels...
..but, I have not even actually done any trading this way...has anyone?
You can use it to enter a straddle (long volatility) before a news event. The reason why you would do it before the news is to take advantage of the relatively tight spread available before the news comes out.
an interesting thought/twist on it would be to trade any noticeable divergences off ok all say, GBP or EUR crosses...hmmm