Day Trading & Forex Forum

fayalac

Someone has a good hedging system to share?

GammaJammer

There is no such thing, at least not in the way you are most likely talking about. I am guessing you are referring to the practice, described by some retail traders as 'hedging' that consists of simultaneously being long and short the same currency pair. In the real world, this is know as being 'flat' i.e. having no position. But there is a ton of literature out there that will tell you otherwise. Question is whether or not you choose to believe it. Up to you.

And if you AREN'T in fact talking about this, my next guess as to what precisely YOU mean by hedging would be something like buying usd/chf to hedge a log eur/usd position (as they are fairly highly correlated). This is known as being long eur/chf, and isn't really a hedge at all (apart from removing some of your USD exposure - not all mind you - watch it move around on payrolls day and you'll see that for yourself).

An example of what is really meant by a hedge is to buy FTSE puts to hedge a long basket of stocks against a move to the downside. That kind of thing. The two examples of what retail traders get duped into thinking are 'hedges' are red herrings because in the case of the first example, all you have done is closed out your position (thus there's no point in paying double the opportunity / margin costs to have two offsetting positions when you don't make a bean regardless of where the market goes). And in the case of the second example all you have done is turned a position in one currency pair (eur/usd) to a position in another (eur/chf).

So take my advice - stop pursuing this avenue now - you're wasting your time

GJ

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