Hedging - page 3
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Well for that, I'm experimenting myself. I've done some testing with correlation type systems in the past. However, correlations do sometimes break. When this happens and you have positions opened you could have both Symbols losing. Synthetic hedges seems more of a mathematical solution to avoid breaking correlations.
However, the only good example I've seen for Synthetic-Hedges is Triangular-Arbitrage. If this kind of trading is realistic, I'm inclined to say Probably_Not like most things involving trading. If someone has real-trading experience with-it and wants to comment I'll be interested in hearing.
When reading this thread, I decided to revisit the topic of Triangular-Arbitrage. The two link's I've provided (so-far) helped me understand how the Locking is formed. Before then it sounded like a complex concept.
There are two things I'll like to point out. 1) I don't think any broker would allow you to scalp off them for an extended period of time. 2) A trader has to take exposure (at some point) otherwise he'll not profit. Therefore with option #1 being off the tables, I believe the best approach for this is creating a Pip/Point_Value which is lower than what your broker may offer trading the minimum lot. In otherwords its like trading with 0.001 lotsize where a broker offers minimum_lot of 0.01 for example.
Example: if you (0.01_Buy_EurJpy) && (0.01_Sell_EurUsd) && (0.01_Sell_UsdJpy). You do-not end up with a Locked position. Reason is because the Tick_Values are not_equal. There's a small amount of exposure going_to one of these symbol. In the end, it ends up being another money management technique. But small exposure is the whole point of diversification not locking cause there'll be nothing to lose or gain ... except maybe the spreads.
I hope this helps.
Here's a link which explains Synthetic_Pairs. The cross_pairs hedges the major_pairs and the majors_pairs hedges the crosses. You can lock_them in a triangle if you trade all_3_pairs. Example: if you Buy_GbpUsd......and Buy_UsdJpy. This gives you the net-effect of Buying_GbpJpy. <==This covers creating a Synthetic_Pair. To lock/hedge GbpJpy, just Sell_GbpJpy in addition to your earlier two positions.
Use Synthetic_Pair if for example you want to trade GbpJpy but the spread is too_high. If trading the two_other pairs gives you a lower spread, then use that instead.
Triangular Arbitrage is useful for Locking(hedging) or Scalping_Arbitrage(not recommended). I personally would use it for diversification by varying the lot_sizes.
too many spread wasted for doing locked hedge in mt5, 4 pair , with the crossing pair has expensive spread. no wonder people still loving mt4
Not really, because what you do in MT4 is not hedging but locking a position (as stated by Alain). So, if you want to hedge a position in MT4, you also need another pair (its usual call this pair hedging in the stock market) or some Forex future instrument (futures contract to exchange).
But in my opinion you are totally right when talking about the advantage of locking a position in MT4 regarding spread wasting, mainly if you are a scalper.
Anyway, the use of two accounts or similar names, as pointed out before, can replicate the same locking solution to MT5 (not so easy as MT4, but with the same results).
Well for that, I'm experimenting myself. I've done some testing with correlation type systems in the past. However, correlations do sometimes break. When this happens and you have positions opened you could have both Symbols losing. Synthetic hedges seems more of a mathematical solution to avoid breaking correlations.
However, the only good example I've seen for Synthetic-Hedges is Triangular-Arbitrage. If this kind of trading is realistic, I'm inclined to say Probably_Not like most things involving trading. If someone has real-trading experience with-it and wants to comment I'll be interested in hearing.
When reading this thread, I decided to revisit the topic of Triangular-Arbitrage. The two link's I've provided (so-far) helped me understand how the Locking is formed. Before then it sounded like a complex concept.
There are two things I'll like to point out. 1) I don't think any broker would allow you to scalp off them for an extended period of time. 2) A trader has to take exposure (at some point) otherwise he'll not profit. Therefore with option #1 being off the tables, I believe the best approach for this is creating a Pip/Point_Value which is lower than what your broker may offer trading the minimum lot. In otherwords its like trading with 0.001 lotsize where a broker offers minimum_lot of 0.01 for example.
Example: if you (0.01_Buy_EurJpy) && (0.01_Sell_EurUsd) && (0.01_Sell_UsdJpy). You do-not end up with a Locked position. Reason is because the Tick_Values are not_equal. There's a small amount of exposure going_to one of these symbol. In the end, it ends up being another money management technique. But small exposure is the whole point of diversification not locking cause there'll be nothing to lose or gain ... except maybe the spreads.
I hope this helps.
Anyway, this is not real hedging, this is locking. You can hedge a trade on a currency with a trade on another currency.
If you want to do it on the same currency this is locking. There is some brokers who provide diferent symbols for the same currency, like EURUSD and EURUSD.m, try to find them.
best answer for this page
thanks