Hi friends. I've decided to begin a journal. Here we go:
The best thing I have learned about trading is that: You can not know where the market will go.
That is not some negative-Nancy (or even Debbie-downer, if you would rather ) talk like you will hear some people saying concerning the impossibility of trading successfully. That talk is nonsense. Lord willing, I won't ever return to corporate employment life because my trading business is currently moving along well. That means you can not be prosperous, isn't what I am saying in any way. Trading is a business like any other, and recognizing supply and demand can be profitable, as with any other types of businesses.
The point isthat folks spend as much time attempting to predict what the market will do, rather than learning to respond to what the market has done. That is a large difference. If you realize the fact of what I have said, you can not know where the market is led, then you can spend your time wisely.
Simple as this may seem, if you learn and apply this knowledge to your trading, then you may see what a powerful realization it actually is.
Seems like there has been some discussion about hedging back. In FX trading, even when hedging is said by people, they typically imply being long and short the exact same ccy pair. That is different than a hedge in investing, but that's not exactly what I intend to write about this.
With this FX hedge, being simultaneously long and short a specific pair, there are some immutable facts to consider:
You are flat (or nearly flat, based on entrance), the market.
You will not gain nor incur any capital from swap if you hold the places during rollover.
Now we tread in the less immutable, yet still factual matters. Some will say that this is unwise as you're paying double disperse for the circumstance, yet this may not be the situation. If you're halving the position you are not subject to some more disperse by choosing a complete dimensions position than you would have been. If you've halved the position, what I have said about the spread applies here too, others are going to make a similar debate about commission, nevertheless.
So because the goal of trading is to earn money, and because so far we haven't seen any advantage of performing an FX Hedge, why would it?
Folks that speak of the advantage of conducting an FX Hedge will state that there are successful systems that do this. Assuming that's correct, the factor becomes Why? Do these systems work, with all the?
Any rule based program, whether or not is executed, or mechanically handled, relies on immovable rules. Systems which contain adjustments still make those alterations based on a rule set. Let us keep it simple though:
1. Input the hedge
2. Signal condition met, depart one side of the hedge
3. Manage remaining position
Since we have said that a FX Hedge is basically apartment the market, and because we have also said that signs are accountable to the entrance into the market, the exit of half, and also the exit of remaining there's a better approach to trade such systems, while decreasing the market exposure. If you simply notice (technically or otherwise) at which the first hedge signal would have been, nevertheless refrain from market entrance until signal two at which the hedge direction conclusion signal presents, you've restricted the market exposure, and you can still achieve the same target as desired in measure 3. In fact when you've handled your risk dependent on the 3rd phase of a commerce that is hedge, you are able to trade HALF because the outcome in step 3 is the same, the size you would have entered in step 1. You limit your risk as well less of your capital.
One last thought is exactly what this sort of trading style provides you that you simply CANNOT wear paper as I have previously: relaxation. This sort of trading provides a trader comfort as the trader motives that they know accurately the direction of the market. It provides a sense of acting carefully with trading, and caution is great, right? It gives the sense of doing something since you're actually on the market, instead of just thinking about being in. Doing something is great, right?
Regrettably caution doesn't cover any bills. Abandon doesn't either. In fact, none of your emotions will. But as I have shown above, of taking signs without actually putting the market the difference, is mute. And as I've claimed, you may see it as a superior way to trade that system, based on the possible vulnerability / risk reduction.
These are some ideas for you to consider, however as always:
whatever you do is at your own risk. Do sensibly!
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