MACD...always trading hedged doesn't sound particularly easy either, unless someone shows you how...like you did with your friends. Are you going to show any newbies a good place to start with so called hedge trading? BTW, are you talking about option or futures spreads? Anyways, does your $10,000. offer apply to directional trading of treasury futures as well? And when you say...not even one loss, do you mean the entire year? I know directional trading works, but only for the minority. With that said, I agree that a unique alternative would be wise to investigate. I very much agree with staying away from anyone "selling stuff"!
Let see if I can be of some help, Mr. Bonecrusher:
Googling some keywords may be of some value. "Delta Neutral Trading", "Gamma Scalping", "Statistical Arbitrage"; perhaps may produce a lot of some useful info to you -- but beware, as with everything (including posts (maybe even mine) could be a very tedious pursuit with little gained as the writers are presenting information from their own perspective and hence it may not apply to the so-called undercapitalized retail trader. It will be interesting and give a basis of what the heck trading hedged is all about. I did that years ago -- not recently -- and it resulted in confusion for me at the time.
Here is an analogy of what I see as trading non-directionally. Horse Racing. Say you are witnessing a race of only 2 horses. Only one horse will win and to decide which one it will be (if evenly matched) will be difficult. (Interesting our current upcoming election for President is in Fact "A 2 Horse Race")
Either Mrs. Clinton or Mr. Trump will be our next president -- having one the 2 horse race. OK so we are wagering on a two horse race in the markets for this example we have Horse One in the race and Horse 2 -- we do our homework; we check the racing form for information as to the recent workout times, how each horse faired in there last races, which jockey will be up for this race. We look at what track conditions the horses favor. We check how much rest the horses have had. We may look at how much money each horse has won in the past -- etc. etc. So a very experienced handicapper may calculate by numerically weighting each of the criteria above. Horse 1 may end up with a rating of 12 while Horse 2 may be an 11 numerically rated with points having been assigned to all the available criteria, Even making it more difficult perhaps the 1 Horse is carrying extra weight in the saddle.
However what if we could find a way to bet on both horses to win. We get paid for the win and we lose on the horse that came in second. If the payoff on the winning horse is enough to cover the loss on the losing horse we net a profit. Now we have to find a way to get some favorable odds so that our payoff on the win covers our costs and leaves us with a small profit. This is not an easy problem. I will get back to that problem later on. Consider what one might do it this situation. Could we possibly find bookmakers who had different odds on each of the horses -- if so would that help?
OK BoneCrusher, you got the picture. You asked. are we talking about "options or futures spreads." There are so many different ways to hedge that yes you could go long a future and the go short calls. By doing so you have "both horses in the race -- one side (the future) goes your way -- Long or Up in price so you win on that. Your other horse (Calls you sold) lose value maybe at the same amount as you made on the option. So maybe that means you have a breakeven -- one trade offsets the other. But what if you had a way to weight the outcome in such a way that you will end up with a profit? Mysterious or perhaps e I am talking in circles now. I am presenting this as if the reader has little or no knowledge of the methods used to hedge and believe me it can get complicated -- not in the actual trade by how to select the correct hedge and when to hedge. No worries we shall look eventually at some real trades. Now some traders trade pairs. Like Long Gold, Short Silver or Long Pfizer and Short Merck -- that could be labeled as a non-directional play. To do it consistently successfully one need to know the hedge ratio as to how many shares short and how many long. Another trader may trade Crude Oil (CL) and go long a futures contract against short calls and then further hedge when necessary with the mini crude contract (QM) . Sounds very complex, yet with a little knowledge of nominal values of the underlying instruments. it becomes just another 2 horse race.
I will try and explain with some exhibits but first. for a so-called "newbies" I want to get some basic understanding of what I am doing. When one decides to get serious about how to trade non-directionally, then you may find that you are really "buying some insurance" to offset possible losses.
(More complexity ?) You are in effect betting both horses in a 2 horse race. (Large political lobbyists may back both Clinton and Trump in the race for the Whitehouse with donations to both) .
I might point out that I have nothing to gain by spending so much time and effort writing this out and therefore I will try to cut to the chase and figure out the best way to suggest a way to become profitable as a non-directional trader. For now. it is getting late at night and I must rest before doing battle early tomorrow morning. (Most of what I trade trades night sessions as well as day) --Let's see if we are able to make some progress and determine how those on this thread have some experience at trading other than strictly directionally. Once that is known then we can tailor this discussion to include both the traders who are well versed in using hedges and those who consider themselves newbies. I doubt that many who may read this know a lot about hedging or they would not be on this forum but would rather spend their time with either managing money for themselves or their firm. For those who want to pursue this further, I will attempt to offer a bit of guidance on how to get from Point A to Point B and then even C and D. (Maybe a quick look at Sheldon Natenberg's book which is required reading for most brokerage firms and banks -- as in Goldman Sachs -- for any new hires. "Option Volatility and Pricing Advanced Trading Strategies and Techniques" -- 2nd edition. Don't go out and buy it -- but once you get the gist of the hedge aspects you probably will have a better understanding. I want to leave now with one last thought which I made in earlier post: That is for sure you will be a "Mushroom" unless you can work hard to understand that which all profitable traders eventually realize and that is how to correctly sit comfortably in your Ferrari having mastered the shifts and drifts...
Now, as in the past some here will start feeling the need to start throwing stones. Thas's O.K too.
Also, please note that I just do this from the top of my old head and do not proof read before posting.
