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hedge forex positions with no loss

vontogr (togr)
Oct 06 2016 at 07:46
4862 posts
bestdarngood posted:
5astelija posted:
Lets do more math: Buy EURUSD, sell GBPUSD, sell EURGBP 1.0 lot EACH.
Lets use the rates from previous week close:
EURUSD 1.12369
GBPUSD 1.29750
EURGBP 0.86572

From 1st trade we got +100 000€ and -112 369$

From 2nd trade we got -100 000£ and +129 750$

From 3rd trade we got -100 000€ and +86 572£

Now we add the money piles together:
100 000€ - 100 000€ = 0€
129 750$ - 112 369$ = 17 381$
86 572£ - 100 000£ = -13 428 £

We have left some dollars and owe some punds, which is the same as simply shorting GBPUSD.
Why should we short it more complicated, with 3 pairs?


That is relative cost of each pair, but you have to look at the Size of Each Trade and think of them as Units.

1 lot of EURUSD is 100,000 Units
1 lot of GPBUSD is 100,000 Units
1 lot of EURGBP is 100,000 Units.

The reason your numbers don't come out equal to 0 each is because of the spread (cost of purchasing/selling a currency).

In a perfect hedge, lets say you Buy EURUSD, Sell GBPUSD, and Sell EURGBP.
So if you Buy 1 lot = 100,000 Units of EURUSD, you are Buying 100,000 lots of EUR or selling 100,000 lots of USD.
Then with GBPUSD, you would be Selling 100,000 Units of GBP and Buying 100,000 units of USD.
Then with EURGBP, you would be Selling 100,000 Units of EUR and Buying 100,000 units of GBP.
Then the overall trade would be, 0 units of all 3 currencies. That is how you need to look at it.




That is nonsense:
So if you Buy 1 lot = 100,000 Units of EURUSD, you are Buying 100,000 lots of EUR or selling 100,000 lots of USD.
If you buy 1 lot EURUSD you are buying 100 000 EUR and selling like 112 000 USD. Thats the point.

5astelija
Oct 06 2016 at 13:16
54 posts
bestdarngood posted:
Then with GBPUSD, you would be Selling 100,000 Units of GBP and Buying 100,000 units of USD.


No, you dont get the same amount of different currencies. If eurusd rate is 2, you get 2 usd 'units' for every 1 euro 'unit' ='€'.
I wonder how you can make any strategy with such knowledge of the system.


vontogr (togr)
Oct 06 2016 at 13:23
4862 posts
5astelija posted:
bestdarngood posted:
Then with GBPUSD, you would be Selling 100,000 Units of GBP and Buying 100,000 units of USD.


No, you dont get the same amount of different currencies. If eurusd rate is 2, you get 2 usd 'units' for every 1 euro 'unit' ='€'.
I wonder how you can make any strategy with such knowledge of the system.


exactly :)

bestdarngood
Oct 09 2016 at 12:32
174 posts
5astelija posted:
bestdarngood posted:
Then with GBPUSD, you would be Selling 100,000 Units of GBP and Buying 100,000 units of USD.


No, you dont get the same amount of different currencies. If eurusd rate is 2, you get 2 usd 'units' for every 1 euro 'unit' ='€'.
I wonder how you can make any strategy with such knowledge of the system.



No, the value of the units doesn't matter, it is the number of units that matters.... You are still looking at it wrong. NUMBER OF UNITS and VALUE OF UNITS will not be equal. I agree with you on that. But the NUMBER OF UNITS matters for a hedging system more than the value of the units. If the prices all became 1:1:1, then both would equal out, but that is unlikely. But for having a safe hedge, you want to have an EQUAL NUMBER OF UNITS. Otherwise which ever currency that you have more UNITS of will be the commanding currency not the one that has the most value. What you fail to see is that 3 pairs of a hedge basket don't move equally in PIPs. For instance, for AUDUSD, EURUSD, and EURAUD, the EURAUD pair generally moves more PIPs than the other 2 pairs in the same time period.

What you are saying isn't necessarily wrong, but their are other factors that you haven't completely considered and don't see unless you actually map out prices. You can't just take one closing price, but you need to take multiple price points and see how each pair moves relative to the others over different time periods and you can see what I mean.

See my profile or message me for my latest EA
vontogr (togr)
Oct 09 2016 at 14:12
4862 posts
bestdarngood posted:
5astelija posted:
bestdarngood posted:
Then with GBPUSD, you would be Selling 100,000 Units of GBP and Buying 100,000 units of USD.


No, you dont get the same amount of different currencies. If eurusd rate is 2, you get 2 usd 'units' for every 1 euro 'unit' ='€'.
I wonder how you can make any strategy with such knowledge of the system.



No, the value of the units doesn't matter, it is the number of units that matters.... You are still looking at it wrong. NUMBER OF UNITS and VALUE OF UNITS will not be equal. I agree with you on that. But the NUMBER OF UNITS matters for a hedging system more than the value of the units. If the prices all became 1:1:1, then both would equal out, but that is unlikely. But for having a safe hedge, you want to have an EQUAL NUMBER OF UNITS. Otherwise which ever currency that you have more UNITS of will be the commanding currency not the one that has the most value. What you fail to see is that 3 pairs of a hedge basket don't move equally in PIPs. For instance, for AUDUSD, EURUSD, and EURAUD, the EURAUD pair generally moves more PIPs than the other 2 pairs in the same time period.

What you are saying isn't necessarily wrong, but their are other factors that you haven't completely considered and don't see unless you actually map out prices. You can't just take one closing price, but you need to take multiple price points and see how each pair moves relative to the others over different time periods and you can see what I mean.

@5astelija
I believe you are wasting your time explaining this matter to @bestdarngood

5astelija
Oct 09 2016 at 16:52
54 posts
bestdarngood posted:
For instance, for AUDUSD, EURUSD, and EURAUD, the EURAUD pair generally moves more PIPs than the other 2 pairs in the same time period.

Correct, but that doesn't mean you get more profit - the pips are just 'cheaper' in euraud. Currencies are relative, so you cant compare them with pips, use percents.
A 10% move in audusd would require x pips, while the same 10% move requires 2x pips in euraud - because the euraud price is roughly twice the audusd's.
= I still disagree with you, and I think you overcomplicate things to see something thats not actually there.
But I'll stop this nonsense now as @togr suggested :D

exnessdubai
Oct 10 2016 at 06:26
8 posts
avoid trade in more pair,it will blow your account and you can't concentrate.

bestdarngood
Oct 11 2016 at 07:34
174 posts
exnessdubai posted:
avoid trade in more pair,it will blow your account and you can't concentrate.


You don't understand basket hedge trading, it actually is much safer than trading just trading one pair...

See my profile or message me for my latest EA
exnessdubai
Oct 13 2016 at 11:29
8 posts
forex is risk,but you can make 200% with my simple stratgy.why are you hedging with lot of position?? and complicated trade?

olivia_jones
Oct 13 2016 at 11:41
24 posts
It is possible to create a hedge positions in different currency pairs but one has to match the notional amount of the buy side position with the sell side position. However, sometime hedging could be risky also when spread widens due to market volatility. Take the example of recent GBP flash crash, the spread widened a lot and I have seen many of fellows’ account getting burned due to that.

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