Fair Trading methods or Not Allowed?

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Zapster

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Hi

I want to know if the trading strategy I want to use is allowed or not? Is it a fair trade or unethical ?

If for example, I have an UP/BUY bet going on in an uptrend can I also place a second bet i.e DOWN/SELL (on the same product) at times when the trend seems to be going down. I think this is called HEDGING (but I'm not sure)?

If I start making too much money with this method will I be banned? Or will I be banned for simply trying to use this stagedy?

Is this called hedging?

I'm sure this has been discussed before but I need to know the correct terminology so I can search this site for other posts to read on the subject.

Thanks
 
You have to remember when you bet down you actually close your current up position. There's nothing wrong there and most of the people do it.
 
You mean will will sb firms ban you for charging you to offset your own positions/their risk? I doubt it.
 
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Arabian nights is laughing.
arabianights said:
:LOL:
Click to expand...




Perhaps I've not asked my question properly?

What I mean is can I have 2 bets in the opposite direction on the same product at the same time.

The first bet will be placed, say UPWARDS (in an uptrend) and then if at sometime the trend changes direction (down trend) I will place a DOWN bet to cover any losses I may make. Then if the trend back to an uptrend again I will close the second DOWN trade that I had made but continue with the UP bet.

I have read somwhere that SB firms don't like this because they say it SPOILS THE MARKET. Is this correct? That's why I was concerned. I heard that this method is frowned upon.

Please advise. Thank you



Also can you tell me what this technique is called so that I can make a SEARCH for this topic on this site.



Perhaps this time next year I'll come back to tell you I'm a millionaire Mr Arabiannights:D
 
Zapster said:
Perhaps this time next year I'll come back to tell you I'm a millionaire Mr Arabiannights:D
Click to expand...
Hi Zapster,
I'm sorry to tell you that he - and everyone else - will wager large sums that you won't!

Some SB even provide a facility for you to place the type of trade you outline - but I'm afraid I can't remember which ones. Sorry! Contact them and ask them. Far from being upset with you, or fearing that you'll make your fortune at their expense, they'll rub their hands together with glee. When you place the opposing trade, you'll have a neutral position in as much as one trade will make £X per point while the other trade loses the same amount. (This assumes the position size is the same on both trades.) However, you will have paid the spread TWICE, which is why your broker will be happy.

What you're doing is not hedging in the true sense of the word and, as a strategy, is unlikely to work - based on the information you've provided here. But DON't take my word for it - or anyone else's - try it out for yourself using paper money on a simulated trading platform. If you can't find a broker that will allow you to place the trades on the one platform, you'll have to open two accounts - each with a different broker. Have fun and welcome to T2W!
Tim.
 
don't listen to these idiots. Obviously not trying to give you any advice as I only trade demo atm and so should be ignored but you're obviously on to a winner. You will be able to maximise your winnings by taking advantage of the massive leverage sb firms will offer. See how much you can get and why not shoot for the stars eh?
 
To the OP, I think IGIndex allow this by default.

I think FXCM (the spread-betting account) also does, but you might have to enable it, or indicate that you are hedging specific trades. I did read about it once on their site, but I forget the details. They had some examples of when it might (possibly) be applicable. Have a look around their site and see what you can find.

There may be some other firms that do but I think the majority don't.
 
Smart Live Markets also offer this as the default behavior. With most SB companies if you place an opposing bet it will close (or partially close) your position. With SLM on the Meta-trader platform it will simply open you in a trade the other way. You have to explicitely close an order to get out of it.

Dont know why you would want to do this though. As mentioned all you will do is pay the spread twice and end up in a negative overall.
 
montmorencyt2w said:
I think FXCM (the spread-betting account) also does, but you might have to enable it, or indicate that you are hedging specific trades. I did read about it once on their site, but I forget the details. They had some examples of when it might (possibly) be applicable. Have a look around their site and see what you can find.
Click to expand...

FXCM does by default. First thing I did when I opened an account was to disable what they refered to as hedging.
 
Barramundi said:
FXCM does by default. First thing I did when I opened an account was to disable what they refered to as hedging.
Click to expand...

Is that because you sometimes like to close one trade by opening another?
(For quick reverse trades perhaps?

Or to guard against trades accidentally being left open?

I may be missing something, but I am not clear why having it enabled should be disadvantageous.
 
montmorencyt2w said:
Is that because you sometimes like to close one trade by opening another?
(For quick reverse trades perhaps?

Or to guard against trades accidentally being left open?

I may be missing something, but I am not clear why having it enabled should be disadvantageous.
Click to expand...

It's because I sometimes like to have multiple profit targets and I can't do that with the hedging function turned on.

My FXCM Trading Station II platform does not allow me to set multiple profit targets for a position at the time of entry. For example, I can't set it up automatically for it to take off half of the lots off at 20 pips, and the other half out at 40 pips.

I spoke to FXCM support early on, and they said I need to either enter two positions, with separate stops and targets, and effectively have to manage the two positions independently. That's a pain in the **** and would increase my entry time.

Otherwise, lets say you're long with two lots, you put in a new short order in the opposing direction at the place you want to take profits. This has the effect of closing a portion of the original long position when price gets there. But you have to disable the hedging function, otherwise rather than closing a portion of the original position, it will create a new short 'hedging' position, and the original long position will remain open. The danger with this is if I get stopped out, the short entry order remains there, waiting to be executed and I must remember to delete it.

So I'm not real happy with either of these options, and are considering reviewing other brokers/platforms as a result.
 
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Why not just open sb accounts with different companies go long one and short the other.
 
Zapster - You just haven't thought this through. If you said you wanted to have entry orders in opposite directions, that would be what some calll a bracket trade - if the FTSE100 price is now 5900 and you want to catch a move either go up or down, you place an order at 6000 to catch an upward move and a sell order at 5800 to catch a downward move. Many SB firms allow OCO (one cancels the other) orders for this type of system so that if your buy at 6000 is triggered, your sell at 5800 is cancelled, and vice versa.

But you were originally talking about positions, not orders. If price is 5900 and you buy at £1 per point and simultaneously sell at £1 per point, your profit (and loss) will always remain zero, no matter how far price travels and no matter in which direction. If it goes up 100pts you make £100 on your long and lose £100 on your short, so what's the point?

In reality, you would lose the spread on eventually closing each trade, plus overnight finance charges if you're keeping open Rolling SB positions.

Eventually, you know, you have to take a risk in this game.
 
Totally agree with you tomorton.

However lets just say that he wants to take advantage of a momentum move but isnt sure which direction. He only wants to risk (for example 10 points) A position could still be placed long or short where for the first 10points it will be neutral.If the position takes off then he will be stopped out on one for 10 points and could let the other ride.
 
note- i'm still aware that you can be whip sawed on both trades and lose both sides-

I'm pretty sure that we're all aware that there re no guarantees in this industry

Posting this in case i get totally flamed
 
mik1973 said:
note- i'm still aware that you can be whip sawed on both trades and lose both sides-

I'm pretty sure that we're all aware that there re no guarantees in this industry

Posting this in case i get totally flamed
Click to expand...

Saved yourself there ;) I was just going to point out that at some point you still have to decide which way its going to take off.
 
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