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Yes, this is true when you enter an opposing trade on the SAME instrument, but that's why I mentioned I use the MICRO instrument, which is a different instrument, even though I'm using the same account. For example:
Account ABC:
(1) NQ LONG Position Entered
(22) MNQ SHORT Position Entered (whenever triggered)
This is permitted, because I'm using two separate instruments on the same account. Hope that makes sense.
BTW - been doing it for weeks now in the US of A and confirm it works.
As for the viability, I use a grid trading system and can confirm (so far) it's working for me quite well. Today, my entries sucked, as you can see. Macro/NQ is on the left and Micro/Hedge on the right. Not a great day, but the Hedge trades saved my *ss, as they have for weeks when I have off days like today and I'm just not "with it".
The challenge I have is solving Scenario 3 like mentioned. If anyone has any thoughts on this, please chime in. I'm sure this can be solved. 2023-06-07_114711
Thanks for clarifying. The equity curve you posted is on an upswing but doesn't look all that reassuring. Maybe with more practice and some of the wrinkles you're asking about ironed out. I'll be watching and copying you if it proves itself over time!
FWIW, this is an equity curve for one of the Leeloo accounts I just took from eval to PA. If you can get it to work like that, it would definitely be worth considering.
You can't outsource confidence in trading decisions
Ha! Indeed, that equity "curve" is anything *but* a curve today, but I'll take it
Today really was an excellent day for most traders I'm sure, just not for me. That's the thing tho - I can be the best loser in the market all day as long as I end up green when I experience losses. I'm the best loser I know! Oh wait... cough cough, that doesn't sound right, LOL.
Anyway - I don't want to hijack this thread over my personal trading but was just sharing to show what was possible in practice. I'm hoping this thread can revive and focus on hedging and/or dollar cost averaging strategies.
I'm all ears, but will share any observations or thoughts I have and I hope others will as well. I certainly appreciate your perspective, and nice "curves", btw!
There is a heavy psychological side to these "hedging" strategies worth pointing out.
This may or may not apply to you - I apologize in advance if I'm barking up the wrong tree as I don't know you personally, but it does apply to others …
.
I believe my response there may also be relevant here.
Hi @ZviTradingCoach, thanks for your response and jumping in here and pointing out that thread. So I read over that thread just now, and the method of entering 'both' a long and short simultaneously does not apply to my style of grid trading. When I first started trying out hedging, I did initially give simultaneous entries a trial, but quickly came to the same conclusions you point out in the thread (minus the arbitrage and long term holding). Simultaneous entry does not apply to my style of trading at all, although I'll admit it does 'feel' good that when I win, I win, and when I lose (thus far) I break even.
In my work in progress strategy, I use hedging this way:
1. Determine my overall trade direction bias (long/short/flat)
2. Wait for price to hit a level of interest and place my trade
3. If I was wrong on direction, my hedge will activate if the market moves in the opposite direction *at the next level*
4. Since I've unwittingly eaten a handful of hot peppers like the gangster guy in Dumb and Dumber, I try not to have a heart attack (LOL, jk)
Example:
1. Market structure and cum. delta bullish (<--insert whatever here for bias)
2. Market breaks out of 200% level, and being a certified genius, I decide to enter long at 150% level if / when the market pulls back
3. My Long is activated at 150%; target 200% on macro
4. I immediately place a limit order short on micro / hedge instrument at 100% level with take profit set to 50%
5. Oops, I was wrong. The market moves down to 100% and my hedge is activated
6. If 50% is hit, great; my hedge covered my loss and paid for commissions of both trades
7. If the hedge moves against me, this is Scenario 3 I described in my initial post
Any thoughts about a standard technique that can counter Scenario 3? Not just "this" time, but a method that works "every" time? One sure fire way is to simply accept a 3 unit loss. Anyway - I still believe it is possible if one has enough liquidity to stay solvent (may John Maynard Keynes rest in peace).
There is a Youtuber, Nick Shawn, who hedges his positions. Listening to him, it makes sense. In regards to the technicalities, some brokers allow having two opposite positions. I trade with Oanda and Dukascopy. The former does not allow hedging, while the latter does, so you can be long a short simultaneously.
It is a useful trade management technique, though I haven't gotten the hang of it yet. Instead of taking a loss you lock it in (the difference between positions), which makes it psychologically somewhat easier. In a way it is reminiscent of a grid trading.
In regards to the wash rule, how does it work with straddles? You can buy a call and a put at the money, the same expiration and obviously the same strike.
One of the videos explaining hedging in forex. Applies to any CFD.
