Preventing drawdowns - page 3
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Hedging the same symbol (start trading in the opposite direction without closing your losses) is actually worse than simply closing your loss on that symbol, because ... in addition to locking your losses, you would also be paying double commission and bid/ask spread. And if you just keep hedging, you could easily end up with all your positions being getting closed and a negative balance when the spread widens. If your positions are kept open over-night, then you also need to take swap into account, which could also be negative in both directions.
You only pay double if you close not using CloseBy (Some brokers do not allow CloseBy. Avoid these!).
That said, hedging same security is like Chris and Nelodi stated useless.
Further reading: https://www.mql5.com/en/forum/167337
I guess you are talking about the case of a long position on a hedging account.
This doesn't work, because basically you're just hedging the same symbol. Yes, you are locking your loss, but you are also locking potential profits. It's a net zero position, which is just as good as simply closing the position.
I don't agree on the argument that it's "giving you time to decide...", because it just equally gives you time to decide wether you want to reopen a position "once the price finds support again" (or any valid entry signal).
The net benefit is zero. All you get is blocking margin on a position that you might not want to keep.
[edit:]
Because the topic is about preventing drawdowns, then yes, you are right that you can hide the loss a little longer from your balance graph and if you're lucky and price turns back in your favor, the balance graph doesn't look that bad at all and doesn't reveal the temporary loss. In other words: there is less balance drawdown, but equal equity drawdown. And in the end, only equity is real, because balance doesn't account for floating liabilities. This might be seen as concealing the actual drawdown with borrowed money and is no real improvement on your drawdown.
I agree with you in general about the so called "hedging" (this has been already discussed numerous times on the forum, with all technical details and examples).
However, I would like to add that contrary to what you said it's NOT a net zero position "which is just good as simply closing the position". It's WORST, because having open positions in opposite direction and a low free margin can lead to blow out your account if the spread increase seriously.
You only pay double if you close not using CloseBy (Some brokers do not allow CloseBy. Avoid these!).
That said, hedging same security is like Chris and Nelodi stated useless.
Further reading: https://www.mql5.com/en/forum/167337
Nothing Guaranteed in the Market. try to lower the volume size, don't over leverage your account, control your emotions/feelings.
and the most important is to put SL in each order you open with risk of no more than 2% of your total Equity.
Prevening drawdown means using always stop losses (that can be SL on orders or stop equity based ALWAYS on a little % of capital, that will never exceed 1,2%).
And also study markets a lot in order to catch some inefficiency of them, getting a statistical edge on the market.
If your Win/Loss ratio and profit/loss ratio is in your favour, you will get some profit from the market.
I agree with you in general about the so called "hedging" (this has been already discussed numerous times on the forum, with all technical details and examples).
However, I would like to add that contrary to what you said it's NOT a net zero position "which is just good as simply closing the position". It's WORST, because having open positions in opposite direction and a low free margin can lead to blow out your account if the spread increase seriously.
I'm aware of what you're saying and completely agree. You may interpret my sentence as "the position is net zero (mental note: but the risks and disadvantages aren't)". Anyways... has been discussed already ad infinitum. I only wanted to point out that it's a bad idea against drawdowns.
I'm aware of what you're saying and completely agree. You may interpret my sentence as "the position is net zero (mental note: but the risks and disadvantages aren't)". Anyways... has been discussed already ad infinitum. I only wanted to point out that it's a bad idea against drawdowns.
Got almost 15% profit of my capital today. Didn't stop the trade. Next time I will. To get profit from the market.
15% in a day?! soon you will have bad disappointments, my friend...
15% in a day?! soon you will have bad disappointments, my friend...