Thread: Hedge Systems

Anyone have a hedge system they can recommend?

Here are some ideas.

SMA MultiHedge - MQL4 Code Base

More Complex:

The Basic of Coding A Hedge Expert Advisor - MQL4 Articles
(mq4 at the bottom of the page)

Quite a few correlation indicators on this site and others.

I am sure ND will attach a list of the many indies and systems found on this site.

COTtrader
"Ken"

Hedge EAs/Tools:
- HedgExpert_v1. Original thread, idea, version #1.
- HedgeEA: good public thread with EAs and instruction in pdf file.
- Hedge: elite section thread with discussion and EAs.
- 10point3 Hedge is here.
- SMA MultiHedge is here.
- HedgeHog System & EA is here.
- script that hedge positions at the same time/level is here.
- HedgeMulti EA is here.

Hedge Discussion
- Interesting discussion about Hedge Calculation.
- Hedge-ring/triangular/basket.
- Question on Hedging.

Hedge Trading Systems:
- MA over Equity-Indicator for Hedge Trading.
- Low-Risk Hedge (Arbitrage) Trading Methodology.
- 100% hedging system with two brokers.
- simple hedging system.

A simple thing I never realized is this: Lets say you have for your 100% hedge on 2 brokers 1 lot short at "no_swap_BROKER_X" and 1 lot long at example: FXDD both GBPJPY . So you will earn 26 $ per day swap. Fantastic? Nope! Because the GBJPY goes many 100s pips one way in 1 day. And now comes the problem: you can not simply transfer the profit from one account to the other, you have first to close the trade on the winning account and than transfer. And open a new trade with again 8 pips spread. But you earn only 2.6 pips a day. Now if you calculate how much money is in circulation to earn less than 26$ a day ... I think I will stick with normal trading.
This type of hedging should be fine if there was a way to transfer the money between the 2 accounts instantaneously. This BPS or "broker processing service" that was supposed to make transfer from one broker account to the other in real time, like you pay your Skype bill with a money bookers account. Forget it. I read that their service really sucks and that it can even take up to a week before the money arrives. Imagine that you are in a 100% hedge you need to "carry" the money from the winning to the losing account. You will have to close your hedge and wait till the money gets in the other account.

So what about the correlation type hedging? As soon as there is any other profit possible beside the swap, you are actually exposed in stead of correctly hedged. So as a start this is excluded.
Everybody goes for the biggest swap with a non exotic pair and that is GBPJPY. If we correlate this with the lowest negative swap pair (that correctly correlate) CHFJPY than gives this around +26$ versus -6.5$ . 20$ a day ? WAW? Nope again !
In order to correctly hedge GBPJPY against CHFJPY you need to short CHFJPY in the amount of lots of the cross pair and that is GBPCHF and that is 2.41 lots of CHFJPY short x -6.5$. And now you may calculate if you want to be busy with this kind of trading for 0.8 pips profit a day !

Conclusion: There is no free meal.

JP

Indeed pipperoni, hedging only to collect the swap is not as profitable as some people might think.

There are plenty of free meals, but NFA wanted them not to be available to the retail forex traders.

Originally Posted by TheEconomist

There are plenty of free meals, but NFA wanted them not to be available to the retail forex traders.

Wath you mean?

Originally Posted by sjerar

Wath you mean?

I mean that commodities, currency futures, and something we will never see available with regular, not to mention MT brokers - muncipal bonds - hide lots of arbitrage opportunities, unlike the forex, which is , in its high-liquidity nature, a no-arbitrage environment. Practically, under this cover of protecting the traders, actually NFA restricts their trading environment to a casino, forbidding the presence of other , ARBITRAGEABLE contracts , besides forex.

Originally Posted by Pipperoni

A simple thing I never realized is this: Lets say you have for your 100% hedge on 2 brokers 1 lot short at "no_swap_BROKER_X" and 1 lot long at example: FXDD both GBPJPY . So you will earn 26 $ per day swap. Fantastic? Nope! Because the GBJPY goes many 100s pips one way in 1 day. And now comes the problem: you can not simply transfer the profit from one account to the other, you have first to close the trade on the winning account and than transfer. And open a new trade with again 8 pips spread. But you earn only 2.6 pips a day. Now if you calculate how much money is in circulation to earn less than 26$ a day ... I think I will stick with normal trading.
This type of hedging should be fine if there was a way to transfer the money between the 2 accounts instantaneously. This BPS or "broker processing service" that was supposed to make transfer from one broker account to the other in real time, like you pay your Skype bill with a money bookers account. Forget it. I read that their service really sucks and that it can even take up to a week before the money arrives. Imagine that you are in a 100% hedge you need to "carry" the money from the winning to the losing account. You will have to close your hedge and wait till the money gets in the other account.

So what about the correlation type hedging? As soon as there is any other profit possible beside the swap, you are actually exposed in stead of correctly hedged. So as a start this is excluded.
Everybody goes for the biggest swap with a non exotic pair and that is GBPJPY. If we correlate this with the lowest negative swap pair (that correctly correlate) CHFJPY than gives this around +26$ versus -6.5$ . 20$ a day ? WAW? Nope again !
In order to correctly hedge GBPJPY against CHFJPY you need to short CHFJPY in the amount of lots of the cross pair and that is GBPCHF and that is 2.41 lots of CHFJPY short x -6.5$. And now you may calculate if you want to be busy with this kind of trading for 0.8 pips profit a day !

Conclusion: There is no free meal.

JP

Hedging is defined as holding two or more positions at the same time, where the purpose is to offset the losses in the first position by the gains received from the other position.

Usual hedging is to open a position for a currency A, then opening a reverse for this position on the same currency A. This type of hedging protects the trader from getting a margin call, as the second position will gain if the first loses, and vice versa.

However, traders developed more hedging techniques in order to try to benefit form hedging and make profits instead of just to offset losses.

In this page, we will discuss, some of the hedging techniques.

1. 100% Hedging.

This technique is the safest ever, and the most profitable of all hedging techniques while keeping minimal risks. This technique uses the arbitrage of interest rates (roll over rates) between brokers. In this type of hedging you will need to use two brokers. One broker which pays or charges interest at end of day, and the other should not charge or pay interest. However, in such cases the trader should try to maximize your profits, or in other words to benefit the utmost of this type of hedging.

The main idea about this type of hedging is to open a position of currency X at a broker which will pay you a high interest for every night the position is carried, and to open a reverse of that position for the same currency X with the broker that does not charge interest for carrying the trade. This way you will gain the interest or rollover that is credited to your account.

However there are many factors that you should take into consideration.

a. The currency to use. The best pair to use is the GBPJPY, because at the time of writing this article, the interest credited to your account will be 24 usd for every 1 regular long lot you have. However you should check with your broker because each broker credits a different amount. The range can be from $10 to $26.

b. The interest free broker. This is the hardest part. Before you open your account with such a broker, you should check the following: i. Does the broker allow opening the position for an unlimited time? ii. Does the broker charge commissions?

Some brokers charge $5 flat every night for each lot held, this is a good thing, although it seems not. Because, when the broker charges you money for keeping your position, the your broker will likely let you hold your position indefinitely.

c. Equity of your account. Hedging requires lots of money. For example, if you want to use the GBPJPY, you will need 20,000USD in each account. This is very necessary because the max monthly range for GBPJPY in the last few years was 2000 pips. You do not want one of your accounts to get a margin call. Do not forget that when you open your 2 positions at the 2 brokers, you will pay the spread, which is around 16 pips together. If you are using 1 regular lot, then this is around 145 usd. So you will enter the trades, losing 145 usd. So you will need the first 6 days just to cover the spread cost. Thus if you get a margin call again, you will need to close your other position, and then transfer money to your other account, and then re-open the positions. Every time this happens, you will lose 145 usd!

It is very important not to get a margin call. This can be maintained by a large equity, or a fast efficient way to transfer money between brokers.

d. Money management. One of the best ways to manage such an account is to monthly withdraw profits and balancing your positions. This can be done by withdrawing the excess from one account, take out the profits, and depositing the excess into the losing account to balance them. However, this can be costly. You should also check with your broker if he allows withdrawals while your position is still open. One efficient way of doing this is using the brokerage service withdrawals which is provided by third party companies.

for more info see Welcome to My Fx Report - Live Forex Trading

Is there any aother hedging system besides it ?