Expert Advisors: Triangle Hedge
The “Hedging” Myth (based on dailyfx article)
Helping traders around the world means that I have seen many different methods to trade this market, both good and bad. One of the most damaging methods I’ve come across is the idea of ‘hedging’ a Forex trade by opening an opposing trade in the same currency pair and holding both long and short positions simultaneously. This not only incurs greater trade cost (by paying additional spread) but does not protect your position against additional losses.
Hedgers attempt to lock-in their profit or loss on a trade by opening an
opposing trade, but if the spread widens, this negatively affects both
sides of the trade. If the trader is over leveraged on these trades, a
wider spread could incur a margin call and liquidate both positions.
Worst of all, you would most likely be filled at the widened spread
prices, adding insult to injury.
So now we know, hedging is not the proper way to secure a profit or a
loss. Only the closing of a position can do that. Hedging also can be
dangerous around widening spreads and can cause margin calls, so we need
to limit the amount of leverage we are using to 10x or less.
I dont think hedging is a good strategy either. but, I guess it isnt the spread what makes hedging a bad choice, spread can only widen to a certain limit, most of the time that limit is meaningless for margin and it doesn't continues much, it has a periodical intraday pattern.
what makes hedging a bad choice is the panic, it is mostly applied in panic situations. someone with a clear mind can catch a good possibility of success with a hedging strategy.
The “Hedging” Myth (based on dailyfx article)
Helping traders around the world means that I have seen many different methods to trade this market, both good and bad. One of the most damaging methods I’ve come across is the idea of ‘hedging’ a Forex trade by opening an opposing trade in the same currency pair and holding both long and short positions simultaneously. This not only incurs greater trade cost (by paying additional spread) but does not protect your position against additional losses.
Hedgers attempt to lock-in their profit or loss on a trade by opening an
opposing trade, but if the spread widens, this negatively affects both
sides of the trade. If the trader is over leveraged on these trades, a
wider spread could incur a margin call and liquidate both positions.
Worst of all, you would most likely be filled at the widened spread
prices, adding insult to injury.
So now we know, hedging is not the proper way to secure a profit or a
loss. Only the closing of a position can do that. Hedging also can be
dangerous around widening spreads and can cause margin calls, so we need
to limit the amount of leverage we are using to 10x or less.
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Triangle Hedge:
Author: Atsushi Yamanaka