Buy AND sell the USD...

[fifty2aces]

I can't believe you said that. I mean I don't want to insult your intelligence by explaining this.

I'll take up the torch...


Ok, so we've got two positions open, one long, one short, each with a 60pip target, 25pip stop.

Let's say the current price is 2.0000 - since you have exactly opposing positions, you effectively have no position - you bought dollars and sold pounds in one account, then sold dollars and bought pounds in another account.

If the price moves up to 2.0025, the short position is stopped out - you are now long, with a target of 2.0060 and a stop of 1.9975. You have a realized loss of 25 pips on the short trade, and an unrealized gain of 25 pips - so no gain or loss. You have made 3 trades (open, open, close).

----------------

Now, instead of putting on 2 opposing trades at 2.0000, a better way of achieving the same result would be to place a buystop at 2.0025 (with a stoploss of 1.9975 and a target of 2.0060), and a sellstop at 1.9975 (with a stoploss of 2.0025 and a target of 1.9940).

Let's work through the same example as before:

You have no trades open. Price moves up to 2.0025 - your buystop executes, so you are now long with a stop of 1.9975, and a target of 2.0060. Your realized profit is 0. Your unrealized profit is 0. You have made 1 trade (open 1 position).


So, do you see how going into the release flat is better? You are in exactly the same position, except you pay half the transaction costs, and only need one account to do it. Let me know if it doesn't make sense, but the numbers do work - see if you can come up with an example where your approach works better.

(incidently, if anyone doesn't understand this post, that's probably the reason prop firms like to give people maths tests!)

 

[£10kLoser]

You Can't Explain it!

I can't believe you said that. I mean I don't want to insult your intelligence by explaining this.

Well, I’m quite happy to insult your intelligence.

The price is 800.0 and you put in orders at 801 and 799. The news comes out and the price drops, filling the 799 order.

The news is not so drastic and it bounces back up. If it stays below 801, you’ve got one losing order of maybe 1.5 plus your 0.5 transaction costs. If it rises above that and opens the other order, add on another 0.5 and you’re in the same position as doing what I suggested except the difference between the two orders is a huge 2.00, so you’ll never recover the loss.

My way, since neither stop was hit, you’ve only lost the extra cost of opening two orders – 0.5 because the two orders cancel each other out.

What you haven’t realised is that by putting in two contingent orders, you necessarily have a wide gap between them which loses you money unless it only dramatically goes one way. You often get oscillations just before and after news. My way, the gap between them is almost nothing and we are protected against small movements or oscillations. That’s why it’s called hedging.

Your method is only better if you get a good strong move in one direction.

However, good traders don’t gamble – they cover worst case scenarios and by doing so, take less profit when it all works out well. But, they stay in business and make a long-term profit.

If your answer is to have a wider gap, then you’ve completely missed the point because the wider the gap, the greater the risk of it being hit and then retracing. It is quite usual for a bounce to happen after a news release. In fact, it often goes one way quite far then retraces the other way quite far.

Ooooh, well done fifty2aces, you beat me to it!

 

[fifty2aces]

£10k loser - you misunderstand me - I was saying that your approach is inferior to putting in two stop orders - read through my post.

 

[fifty2aces]

Just to add to my last post - you claim that if the price doesn't move far enough to hit one of the stops, all you lose using your approach is commissions for the two trades. But if you look at my example, if you use the strategy I've described (going in flat with buy/sell stop orders to enter), you wouldn't have opened any positions - so you lose nothing - not even commissions.

 

[FXSCALPER2]

Well, I’m quite happy to insult your intelligence.

The price is 800.0 and you put in orders at 801 and 799. The news comes out and the price drops, filling the 799 order.

The news is not so drastic and it bounces back up. If it stays below 801, you’ve got one losing order of maybe 1.5 plus your 0.5 transaction costs. If it rises above that and opens the other order, add on another 0.5 and you’re in the same position as doing what I suggested except the difference between the two orders is a huge 2.00, so you’ll never recover the loss.

My way, since neither stop was hit, you’ve only lost the extra cost of opening two orders – 0.5 because the two orders cancel each other out.

What you haven’t realised is that by putting in two contingent orders, you necessarily have a wide gap between them which loses you money unless it only dramatically goes one way. You often get oscillations just before and after news. My way, the gap between them is almost nothing and we are protected against small movements or oscillations. That’s why it’s called hedging.

Your method is only better if you get a good strong move in one direction.

However, good traders don’t gamble – they cover worst case scenarios and by doing so, take less profit when it all works out well. But, they stay in business and make a long-term profit.

If your answer is to have a wider gap, then you’ve completely missed the point because the wider the gap, the greater the risk of it being hit and then retracing. It is quite usual for a bounce to happen after a news release. In fact, it often goes one way quite far then retraces the other way quite far.

Ooooh, well done fifty2aces, you beat me to it!

lol, fifty2aces is saying what Arabianights was saying. Arabianights a very clever cookie and a good mate. Trust me they can add.

 

[£10kLoser]

Neither of you have got the point that it may happen that neither stop is hit and both your trades are triggered. What happens if it then retraces? the answer is you lose more than using my method.

I suggest you read my example instead of assuming you've got all the answers right.

I'm not going to bother any more because if you haven't understood what I've written, what's the point?

And your argument that Arabianights is a very clever cookie and a good mate just about sums up the limits of your ability to think for yourself and explain your point.

 

[fifty2aces]

I read and understood your example - see post number 24 for my explanation of why you are wrong.

 

[FXSCALPER2]

Neither of you have got the point that it may happen that neither stop is hit and both your trades are triggered. What happens if it then retraces? the answer is you lose more than using my method.

I suggest you read my example instead of assuming you've got all the answers right.

I'm not going to bother any more because if you haven't understood what I've written, what's the point?

And your argument that Arabianights is a very clever cookie and a good mate just about sums up the limits of your ability to think for yourself and explain your point.

Maybe I didn't understand what you are doing. Are you going into the figure with a long with one broker and a short with another at the same price for the same clip size?

 

[LearningMarkets]

You could so something similar if you are expecting a really big move by buying a currency option straddle the night before. The ISE has some that are picking up in liquidity these days. Lots of fixed losers but a few big winners could make it worth while.

 

[darktone]

Neither of you have got the point that it may happen that neither stop is hit and both your trades are triggered. What happens if it then retraces? the answer is you lose more than using my method.

I suggest you read my example instead of assuming you've got all the answers right.

I'm not going to bother any more because if you haven't understood what I've written, what's the point?

And your argument that Arabianights is a very clever cookie and a good mate just about sums up the limits of your ability to think for yourself and explain your point.

?

Price is at 500 just before nfpr datas due out. Stops (with 7pip C stops inc costs) to enter long and short are placed 20-30 pips either side of 500. Net total risk is 14 pips. At that time eur/usd was regularly gapping 100 pips, usually with another 100pips follow through. Was great untill they withdrew the guaranteed fills bit, i got slapped in the end over an order grey area. In laymans terms it was their way of saying "Ok sunshine, yer had yer fun and youve done us for some dough. If you carry on though, we'll pull yer pants down!!... So DO ONE MATE!!!"

Im a little lost as to why you taking stuff so personally? Peeps have only brought attention to where you maybe unaware of the risk. It all needs to be considered imo.

 

[darktone]

Hilarious really. What were thinking with the guaranteed fills?

Yeah crazy eh. Did they really think that people wouldnt take the pizz with it!

 

[arabianights]

If no stop is hit then we don't lose anything except the time wasted in trying to make up for our lack of trading skill by emulating lemmings. On the other hand your method will lose two times the spread. Seems a no brainer to me.

P.s. FX shall we get a room?

 

[stevespray]

Lets keep it polite!

I agree that 10k's system can be syntheticly emulated by opening less trades thus cutting comission / spreads in half.

There is a big HOWEVER.....

HOWEVER, in my own experience (and these maybe from some years back), brokers / sb firms seem more likely to fill stop orders when that order relates to an already open position rather than a 'stop to open' order which is effectively what you will have if you go into 'news time' with no actual position on either account. My guess is that when the broker manually processes the stop order (on an already open position) they will see a position which is in loss and getting stopped out which is a nice profit for them and for what ever reason they simply click it right on through without slipping it. A 'stop to open' is different because, when the dealer examines it, he could well be looking at a trade which, if accepted at the clients set stop level, will present the client with an instant cash profit.

Just my logical thoughts on the matter which dont seem covered thus far in the discussions.

Have a great weekend,
Steve.

 

[FXSCALPER2]

If no stop is hit then we don't lose anything except the time wasted in trying to make up for our lack of trading skill by emulating lemmings. On the other hand your method will lose two times the spread. Seems a no brainer to me.

P.s. FX shall we get a room?

Yeah, I was thinking how to ask

 

[brooks79]

Oh MY......