Is it legal to hedge in another account?

C

clambill

If I wanted to be long in one account and short in another account with the same currency pair, would I be able to get away with it if I were in separate accounts?

One reason for wanting to do this is because some of my trading strategies actually conflict with each other. Like I may have a buy signal with one strategy then a sell signal with another strategy only a few hours later.

I also thought of going long and short at the same time in two separate accounts so if the price takes off in one direction, I'd be able to cut my losses in one position and just ride the profit longer with the other position. Does anybody find that dumb?

EDIT: Whoops! I meant if I had another account with another brokerage firm.
 
I used to have 5 accounts for that purpose.
Now with the FIFO I dont know but I think it's ok.
I makes sense practically and inside our head. It also controls the margin calls; when one strategy blows, they dont get all out or screw all your positions.
 
If you are hedging for tax avoidance, it's illegal. Suppose you have an unrealised win and hedge to lock in the profit but avoid paying the taxes in that year Uncle Sam wont like it.
 
Quote from total_keops:

If you are hedging for tax avoidance, it's illegal. Suppose you have an unrealised win and hedge to lock in the profit but avoid paying the taxes in that year Uncle Sam wont like it.
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It's very hard to prove intent. This whole concept only applies to forex apparently, and it's really stupid if you ask me. If you want to be hedged, close your position. Logically they're equivalent, and will save you commission. It's such a newb dilemna.
 
Quote from clambill:

If I wanted to be long in one account and short in another account with the same currency pair, would I be able to get away with it if I were in separate accounts?

One reason for wanting to do this is because some of my trading strategies actually conflict with each other. Like I may have a buy signal with one strategy then a sell signal with another strategy only a few hours later.

I also thought of going long and short at the same time in two separate accounts so if the price takes off in one direction, I'd be able to cut my losses in one position and just ride the profit longer with the other position. Does anybody find that dumb?

EDIT: Whoops! I meant if I had another account with another brokerage firm.
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You don't need to go to another broker to do this. If you have a broker that has sub accounts (like Oanda) you can go long EU in one account and short in the other. You can then easily transfer excess funds from one to the other to cover the imbalance that occurs.
 
Quote from cstfx:

only in the same account. Subaccounts are considered seperate accounts.
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I would double check.. I recall language specific to Common Ownership and Control being the criteria.
 
Well, I forgot to be a little more specific. I mean if I have an account at GFT Forex and open an account at FXCM. I think it would seem faster to go long and short at the same time if I only had to switch accounts by only clicking on the taskbar.

From a strategy point of view, I still don't have enough results from my forward testing to decide whether it's ideal or not. The problem with always doing directional trades though is that when there is a signal failure, sometimes the move is large. So, if had let's say a 50 pip stop in both directions and the currency pair moves 100 pips, then I stand to make 50 pips even if there's a failure.

But it depends of course. Heheh, I saw a situation last week where there was a wipsaw in both directions. At some point, I might have to have more than 2 accounts to try to take advantage of situations like that.
 
Quote from clambill:

Well, I forgot to be a little more specific. I mean if I have an account at GFT Forex and open an account at FXCM. I think it would seem faster to go long and short at the same time if I only had to switch accounts by only clicking on the taskbar.

From a strategy point of view, I still don't have enough results from my forward testing to decide whether it's ideal or not. The problem with always doing directional trades though is that when there is a signal failure, sometimes the move is large. So, if had let's say a 50 pip stop in both directions and the currency pair moves 100 pips, then I stand to make 50 pips even if there's a failure.

But it depends of course. Heheh, I saw a situation last week where there was a wipsaw in both directions. At some point, I might have to have more than 2 accounts to try to take advantage of situations like that.
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Give this a quick read... http://www.nfa.futures.org/news/PDF/CFTC/CR2_43_ForexPriceAdj_112408.pdf
 
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