thread: Can I recover trades with only 10% equity left? Please help!

quote Hi Hanover, Think I know your perspectives on hedging or locking but believe a lot of your conclusions are predicated on the assumption that if we make perfect calls

Stewrigh,

No, sorry, my remarks are definitely NOT based on the assumption that we make perfect calls, but instead that any hedging/locking/freezing #8220;egy#8221; can be replied without using the hedge. You can capture the exact very same pips, and make exactly the same P/L, all without #8220;hedging#8221;, in EVERY possible situation. All you do is maintain the same net position since the hedged trader at every stage along the way, like this:

1. Whenever the foreign exchange trader is hedged, his net position is zero. Any pips the gains on one position, he loses the contrary position. I attain the same P/L (zero) by simply being out of the market. (Also, if the foreign exchange trader#8217;s rankings are open at 1700 New York EST, he pays net swap into the br0ker, whereas I don#8217;t).

2. Whenever the hedged trader unhedges, leaving himself short or long, I simply open one buy or sell position of the same size in the exact same timerepliing his web position. Now we're both net short or long, hence we capture the exact very same pips, and make exactly the same P/L.

3. Whenever the hedged trader re-hedges, then he's effectively banking his P/L. I shut my position at precisely the same time, likewise banking exactly the same P/L, bringing us back to step 1. Rinse and repeat....

Once the NFA banned hedging, I re-coded an EA for a trader to do precisely that, i.e. keep track of the internet place, and maintain one position of the same size/direction at every point. It makes precisely the very same pips as it did before, while meeting the NFA#8217;s #8220;no more hedge#8221; guideline.

Today my argument is this. If I can make exactly the very same pips and P/L without hedging, then the egy could #8217;t exist inside the market itself. The egy is about the time of when I change my web position, relative to the turns on the market, and hedging is only a different way of effecting these changes. I gave two fully worked examples here, that tackle the exact same question you are asking. In the first example, both the hedged and unhedged traders make perfect calls, and both profit 150 pips. In the second example, both make less than perfect calls, and both profit 130 pips each. So where exactly is the fiscal benefit from the hedging? If you would like to understand my reasoning, please work through these examples step by step.

Hedged traders pay more swap, and occasionally more spread also, as explained in Merlin#8217;s example here. If you're able to save money, and still make the very same pips, surely that#8217;s good excuse not to hedge?

There#8217;another good reason not to hedge IMO, also that#8217;s it can result in bad trading plogy, i.e. an unwillingness to embrace losses. For example, suppose I sell at the top of a range, but price originally moves , so instead of closing in a loss I buy to #8220;Dollar #8221; the position. I have bought in the worst possible time, i.e. in the top of a range. Now suppose price falls into the base of the range, after which tendencies beyond it. My sell position earnings pips, but I receive no benefit from it, because my buy position concurrently loses the same amount of pips. So now I shut my sell position for an apparent #8216;profit#8217;. However, if price continues to fall, it may be several weeks/months/years before I have the chance to shut my buy position at breakeven; meanwhile, the reduction develops. Hence the hedged trader can wind up taking small profits on his winning trades, while amassing big floating losses which, he#8217;s not willing to shut them, he should continually shore up by more hedging. This is actually the antithesis of prudent trading, i.e. closing winning trades whenever they are profitable, while simultaneously accumulating big losses. Especially as I might have avoided this whole fiasco by simply closing my initial sell position for a little reduction (then re-entering when price started to fall once again).

Of course individuals will reply #8220;f--k off, that#8217;s not the way I utilize hedging! #8221; however, if I understand correctly, that's precisely the case that the OP has gotten himself he is stuck with amount of buy orders while EU continues to collapse. If he wants to profit from his sells, he should either shut the buy orders in a reduction (to depart himself web short), or include more sell orders. If price then appears temporarily, he will (if he reproduces his previous behaviour ) Dollar those sells more buys, which will collect additional loss if/when EU drops again (which seems highly possible #8212; a few pundits see it falling as low as 1.20), a process which will gradually absorb his staying margin and blow off his account.

The hedged trader can wind up getting a range of buys and sells at all different levels, to the stage he is thoroughly confused as to whether he wants price to rise or fall. The remedy would be to take losses. Keep the accounting, and your thought processes, easy! Permit your egy be dictated through an objective analysis of this market, rather than your P/L, which the market takes no cognizance of; or specifically your desire to wait for every losing trade to come back to profit, before you shut it. Hedging (at the same pair), recovery trading, http://www.trendfollowing.com/losers_average_losers/, martingale variants #8212; they are rooted in the basic human desire to prevent loss.

Whether the OP is for real or not, it#8217;s still a excellent example of the dangers of hedging #8212; just how NOT to do it. Just my opinion, of course, and no doubt I will get bashed for expressing it, LOL.

Sure, it's possible to generate income hedging, in case your analysis, along with your time, are good enough; after all, it's just another method of altering your internet position, and whatever leaves you internet long while price is climbing, and internet short while it's falling, more often than not, will probably always be profitable. And it's 100% true that hedging potentially gives you the chance to shut out both trades in a profit. However, it still doesn#8217;t change the mathematical fact which you're able to capture precisely the very same pips without any hedging, as I explained previously, and without the added br0ker costs and possible plogical pitfalls. Re the mathematics behind counting the pips, I posted links to more worked examples in post #97. Please feel welcome to study them.

David

it's nearly impossible to regain initial equity with 10% left equilibrium, without taking greater risk.

Taking greater risk(Implementing ) without the knowledge and experience will make this task straight out impossible. From what we could see, the OP doesn't possess the knowledge or the experience to recover. The existence of this thread is proof of this.
He'll require a #@! * tin of luck and many other things. Just an act of God will get this done.
I'm on his side to get the win, but I won't place any money on it.

Rgds

quote Stewrigh,'' No, sorry, my comments are definitely NOT based on the premise that we make perfect calls, but instead that a hedging/locking/freezing #8220;egy#8221; can be replied without utilizing the hedge. You can catch the exact same pips, and make exactly the same P/L, all without #8220;s 8221;, in EVERY conceivable situation. All you do is keep the same net position as the hedged trader at every point along the way, like this: 1. Whenever the hedged trader is hedged, his net position is zero. Any pips that the profits on a single place, he loses ...

Thanks Hanover and that I think hedging can be a nightmare but think if its done well it can save you from the unexpected.

For example if a commerce gaps past your stop and then you have an option of taking a huge loss or attempting to control your exit. Or in my scenario with silver - these are future contracts so there's absolutely no swap/cost and I am happy to garner some profit along the way down understanding that they will eventually come good and that I do not really have to be worried about the flip (that I might miss anyway. . Participation is also crucial - being level is a no win/ no lose place, whereas with payoff you have the”potential” to gain the two ways at zero risk.

quote That is also not real to me.

Appears pretty likely to me personally. Pimco had $1.92 trillion in AUM @ the end of 2013. Typical asset managers receive a 2% management fee 20% incentive fee. Just taking the 2% management fee will be $38 billion for 2013 so giving $290 million $230 million in bonus is a pretty small portion of this $38 billion management fee.

The amounts are only hard to believe since they are so large.

whereas with payoff you've the”possible” to gain the two ways at zero risk.

How can this job stew?
The only way you'll obtain both ways is if you exchange perfectly with every market movement. And if you can trade perfectly with every market movement, you won't want the hedge.
Zero risk. What is that?

The purpose of a hedge is to get protection/insurance, not speculation.
I visit many just getting a false sense of security/control. A hedge isn't a blanket to cover a deficiency of experience knowledge and understanding.

Before anyone yells a hedge on, they need to ask themselves . What are my objectives and what am I trying to accomplish?
Rgds

Hanover explanation of this non benefice of hedging by using a reverse position in the exact same tool is SPOT ON and o so well clarified. The only conceivable advantage I see to that type of egy would be to provide the trader the impression of never taking a substantial reduction. This sense of relaxation however comes at a price:

1. Like clarified in the comment above, you've got the swap that will automatically be negative. You are basically paying for a place to go nowhere and also not making any interest on your balance...

2. Your cash is strapped to a single place that once more, does nothing... You may have to forfeit other trading opportunities if you are not willing to shut your hedged position. In the case you're prepared to give up the hedged place you may have cover the swap and the spread/commission of this hedge for nothing.

3. It stops you from facing the humbling experience of taking a loss.

Hedging can be useful but not when the purpose is to fully kill a position until it hopefully comes back in profit. As Hanover clarified so brilliantly there is not any monetary benefit to be gained from it, at the point you'd be better off just shutting your place and buy some t-bills... Hedging is usefull when you wish to isolate and control a particular risk.

By way of example, let say you purchased a stock (or currency) and now it is reaching a significant level of resistance and you do not know if the price will break it or be refused by it.
Now, you are not certain of the future management of price i.e. the directional risk of your position is becoming a problem therefore you want to hedge against it. However you're anticipating strong volatility in the future since you think that the stated resistance may spark a rise in activity that might create unpredictable swings. You still wish to profit from volatility.
You now decide to hedge yourself by buying a put option. When price is rejected by the resistance level and goes down you eliminate money on your inventory but gain money quicker on the option since it takes in the rise in volatility at its price. Instructions becomes a non issue and you gain money from a rise in volatility. However, if the price breaks like a rocket you make money in your inventory but shed in your options because the rise in volatility absorbs a little bit of this reduction coming from the directional move. Also you do not need to use a lot of your equity doing so since the total worth in dollar of this option hedge is merely a small fraction of your initial position.

Hedging can be a useful tool for certain kind of traders/investors in some well analyzed scenarios but it's no magic bullet, you need to be exposed to risk to make money and hedging is no way around that fact.

quote How can this job stew? The only way you'll gain both ways is if you trade perfectly with each market movement. And if you're able to trade perfectly with each market movement, you won't want the hedge. Zero risk. What's that? The objective of a hedge is for protection/insurance, not speculation. I visit many just obtaining a false sense of security/control. A hedge is not a blanket to cover a lack of knowledge, understanding and experience. Before anyone throws a hedge on, they need to ask themselves . What are my objectives and what am I trying...

I am long silver and intend to maintain em.

But atm its going south and I'm in dd - so instead of realise that the loss I might as well bank some profits together with the hedges until it works, and that it will.

It's maybe not zero risk but while I'm unashamedly my dd is static at least and since it is a futures contract there's absolutely no swap.

Participation is also crucial - being flat is a no win/ no drop position, whereas using hedging you have the”potential” to gain both ways at zero risk.

Not certain how zero risk is potential. While locked/hedged there is no risk, just as there is no risk in being from the market. However, to profit you must unlock/unhedge at a certain point, after that there is always the risk that price will proceed against you. Precisely the same like a non-hedged trader only unlocks a buy or sell place: same P/L, same exposure, same margin use.

Once you mentioned participation it reminded me of pipEASY's millipede thread. That is a fantastic example of a egy that necessitates putting several orders, both buy and sell, each using their own SL, at different important levels. Therefore, it's best operated as a kind of multi-hedge, presuming that one is ready to accept the additional costs in setting the numerous orders. The only feasible alternative is to have a intricate EA keep track of everything, and keep one net position. Therefore, while I'd still pedantically contend that hedging is not a egy in itself (), there are scenarios where hedging is probably the easiest way to execute a specified egy. Hope that makes sense!

quote Not sure how zero risk is potential. While locked/hedged there's not any risk, just as there's not any risk in being from the market. But to profit you need to unlock/unhedge at some point, after that there's always the risk that price will move against you. Precisely the same like a non-hedged trader only opens a buy or sell place: same P/L, same vulnerability, same margin usage. When you mentioned participation it reminded me of pipEASY's millipede thread. That is a fantastic illustration...

Yep u r right thats where I obtained the participation reference out of and I use my version of Graemes Millipedes in my own trading. The key advantage of that is that you don't need to worry about entry cos you are swinging both ways anyway. If you are in the market(both long and short) one of them will provide you a profit and the other one will come great.

This is where I am with my silver transactions atm.

Do not alwaays trade this manner but it helps sometimes.

The monthly 200SMA is sitting around the 1.2225 area and has been supportive of price for several years now. Price may have to check in on this area before we see a significant bounce. As you can see, a very simple 8-5-3 Stochastic indior may have offered you a clue to shy away in a long position in the 1.36 degree as it had been showing overbought conditions while price was in your long entry level. I do not utilize this indior myself, but it is easy to find it is fairly in tune with all the ends at price.

That being said, we could see now that the indior is again'oversold'... and price is approaching the 200SMA. Will price bounce a time ? Will price continue into the drawback and break beneath the 200SMA? Nobody knows for sure... Offered here is a very simple example of technical analysis... a really very very simple illustration which may have helped you steer clear of the 1.36 extended... or may help you keep out of the next bad trade... eventually it may help you get into a winning trade... again, a very basic example of TA.

A stop at 1.34 could have been a big reduction, 200 pips - appropriate? Using that 1.34 degree to exit the market take your loss would have been debilitating... nevertheless, spending the next several months learning some real simple and basic technical analysis would have been much less painful expensive than the 1200 pip drawdown you now sit ...

For four, five, six months now - or so - you have spent countless amounts of plogical energy trying to figure a means out of a very very bad trading situation. As traders we have just two (2) accounts, our trading margin account and our plogical account... A trader could re-up the margin account, the plogical account may require some traders years to repair.

Now, knowing price CAN run against youpersonally, will that fear impact your next transaction? Many winning trades did you miss out on because the energy you had was directed at getting out of a situation that is bad? All these are questions you may have to deal with in the future....

I will not let you know where or when to open close your positions... I will not tell you the wrong or right way time to con...

My 2 pips worth is a suggestion of eduion knowledge in specialized analysis, margin, risk, paytience and discipline. (Yes... I spelled paytience this manner on purpose)...

Keep an eye on that monthly 200SMA while your learning... IF price will bounce from it, you are able to expect where price may rebound to - as well as how much time it may require price to get there... if it breaks below, your new eduion may help you anticipate how low it may fall.

To enter $800K to the market without eduing your self IS betting... your odds may be better in a blackjack table in Vegas.

To edue yourself, develop training a particular trading egy till you understand what to do in any outcome - like a move against you - before entering the market with $800K is placing yourself into a greater probability trading situation.

Wishing you success on your circumstance and your eduion. Best Regards