Single instrument traders, how do you hedge?

drukes1234,

A lot of people on here trade intra day from what have seen, hence hedging isn't an issue as you'd simply just close out/reverse a position if something fundamentally flipped out.

Obviously, if you are trading futures, days like Sept 11 or any other 'shock' event that nullifies your prior interpretation are exactly what you want to happen in order to give you the opportunity to make a shedload. Sad that people prey off such an event but that's an undeniable truth and the maret will move whether or not you are a parasite piggybacking on it.
 
Letitrun.... what happens if you're long and there's a similar event to Sept 11. Or why not look up the thread where an INTRADAY trader was short the SPY's and on a non fed day, the feds cut rates and he lost 1,000,000.. and trust me, stops are not honored in these cases.
 
Most futures traders, me included, would accept that as part of the risk and nature of the game.

If I hedged every trade, not only would I miss 60% of the opportunities I pick up on, but you also have a negative impact on your potential/actual return.

There's guys that make the best part of half a million by trading in and around non farm payrolls- how and why would you want to hedge a position that you are in for less than 2 seconds?
 
Quote from drukes1234:

Letitrun.... what happens if you're long and there's a similar event to Sept 11. Or why not look up the thread where an INTRADAY trader was short the SPY's and on a non fed day, the feds cut rates and he lost 1,000,000.. and trust me, stops are not honored in these cases.
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I think you can't look at the dollar value.

Percentage wise, 1 or 2% is normal.

If that $1m loss equal 100% loss for his account, then he is trading too big
 
Quote from drukes1234:

Quick question here for all you one instrument traders. How do you hedge against an adverse event? I remember reading a thread back in the day about a trader who was long the SPY's in 2001 when the Fed cut interest rates and it wasn't even a fed day. He landed out losing over 1,000,000

Having said that, even if your strategy is solid, how do you protect against such an event?
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Assuming you wanted hedge with stocks: IVV or DIA. Futures ES or YM.
 
Quote from drukes1234:

So NO ONE hedges... I guess this is why almost every trader blows their account out at some point.
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You can go long and short the same number of shares at the same price if you feel something is gonna happen. I've done this before but it ties up twice as much money when I could use it to buy another stock. I guess its a good thing to do right before an ernings report so you can freeze your losses or gains. You pay twice as much in commissions also, but thats pennies to what you could lose.
 
That's interesting so you go long and short with stops on each when you know there will be a big move. Sounds like a plan, but wouldn't Market Makers make sure to swing a little in both directions to knock out both stops?

You could also go short with a small percentage of your capital in several stocks (after the market moved up) and just wait for your target stops to be reached in each stock. It seems this would work almost all the time.
 
Quote from TA4ME:

That's interesting so you go long and short with stops on each when you know there will be a big move. Sounds like a plan, but wouldn't Market Makers make sure to swing a little in both directions to knock out both stops?

You could also go short with a small percentage of your capital in several stocks (after the market moved up) and just wait for your target stops to be reached in each stock. It seems this would work almost all the time.
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I wouldn't use stops in that situation because I wouldn't lose any money either way the market went.
 
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