Thanks to point it out Sig. But the traders wouldn't be able to harness their skills if we spoon feed them with the required knowledge. An interest is needed to be developed in order to make them realize that to become successful in Forex is not as easy as eating a pie and hence they are needed to have comprehensive and extensive practice, which they could have in the Demo Trading.
Interested in ideas regarding hedging forex positions
- Thread starter eaglefeather
- Start date
Thanks to point it out Sig. But the traders wouldn't be able to harness their skills if we spoon feed them with the required knowledge. An interest is needed to be developed in order to make them realize that to become successful in Forex is not as easy as eating a pie and hence they are needed to have comprehensive and extensive practice, which they could have in the Demo Trading.
@Handle123
There is a lot in your post and I'm trying to digest it all. Would you say the gist of your method is as follows: keep a portfolio of relatively stable currencies, wait till one trends and convert back to your base currency. And hedge off the risk with futures options. Finally, if there is a loss, just wait because you don't mind holding that currency long term. Am I close?
There is a lot in your post and I'm trying to digest it all. Would you say the gist of your method is as follows: keep a portfolio of relatively stable currencies, wait till one trends and convert back to your base currency. And hedge off the risk with futures options. Finally, if there is a loss, just wait because you don't mind holding that currency long term. Am I close?
Hedging is one of the basic risk management techniques and it is being widely used in this virtual currency market. And it is a derivative technique where a trader enters in simultaneous buying (long position) and selling (short position) of a currency pair. So that if he faces losses in buying position he will conversely earn profit in selling position, thereby net profit will be zero. Thereby instead of entering in one position and face losses due to price change, a trader can hedge the risks.
Am sorry, didn't notice till now. Oh no, I don't care about stable anything since I use 9 year monthly charts and sometimes 50 years if I have them going back that far, not in currencies though, but like corn and wheat. And I don't wait for anything to trend, I am seeking my opening move to be within $500 of the extremes of a percentage of 9 year highs/lows, waiting for something to exceed 9 year highs/lows, you won't be trading often, so you backtest till you find a percentage you can live. When 95% of the time markets make a certain pattern at highs/lows on intra-day data it is getting ready to make a possibility of extreme, but we have no way of knowing. When everything lines up, and automation is doing all of it now, it puts on futures positions and options are bought, as far as when to exchange from U.S.dollar to foreign currency, I know I am going to be early trying to find the extreme, so I usually wait 5-7 losses in the futures and then exchange, but I never hedge the currency as I would see this as wasting funds, I will just hang onto it for more years if need be, but has only happened a couple times and still didn't take much longer of a wait. I try to find currencies where that country has exchanges so I can trade those markets as well.
You have not traded much have you? There is zero guarantee that the one you sold is going the right direction, so you can end up losing on both sides for weeks. LOL and being that many currencies move in different speed of price, one can move much faster than the other and you have a lousy hedge, I would never do this type of hedging as it spells loses eventually.
Get some books on hedging and find out through much study how to do properly.
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You quite right hedging the market is just some more old wife's tales that dose not exit - Hedging the Market simply means that you are prepared to value your position in the case of loss - Or that the trade when against you. - An example here - Is that I placed my stoploss in - Before Price Fluctuation was able to wipe my account out.
You will loss money if you are intending on trading both ways/ both directions Bud. because of the swap and interest fees you will be paying against each position.
I don't know that hedging is widely used by retail traders.
I am a long-term forex retail trader. I protect my stand-alone positions with TA-based stop-losses. These would only be hit if the trend I'm following has weakened to such a degree that continuation is the least likely outcome. I also pyramid successful trend-following trades and move stop-losses on older trades in the same pair progressively higher as new positions are added.
Can you see a way that hedging would be a better tactic for such strategies?
You mind by accumulation on ones already open position that`s another example of Hedging the position and is most widely used as traders progress into further knowledge surrounding trading entries.
Can be done, but you need to be watching two different pairs in order to get around technical restraints and take advantage of arbitrage. Even then, gains are going to be extremely small in the tenths to hundreds of a percent when watching a 24hr period. Most likely you'd be manually trading this and could only watch two pair combos (to not have cross pair interference), so this would leave you having to essentially have only 1 "position" on at a time and even then this might only set up 1 out of 5 opportunities.
But yeah, totally possible and doable.