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Forex Tracer
Hi , have you heard anything about this robot "forex tracer" ?
Let me know if you have.
Thanks
Hi , have you heard anything about this robot "forex tracer" ?
Let me know if you have.
Thanks
you'rebeautiful
Newbie
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hi - how do you hedge
I might be a real numpty here but how do you hedge a spread bet and how to spread companies hedge your bet? Do you need 2 accounts? Do you hedge at same rate? Does this not mean a balanced transaction? Can you use hedging and not stop losses? any comment advice or sublime proverb appreciated. Thank you.
I might be a real numpty here but how do you hedge a spread bet and how to spread companies hedge your bet? Do you need 2 accounts? Do you hedge at same rate? Does this not mean a balanced transaction? Can you use hedging and not stop losses? any comment advice or sublime proverb appreciated. Thank you.
Directional
Experienced member
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you would create an opposing bet. you could do this with the same company, but hedging is exactly the same as being flat, except you pay a second spread and margin on the new position. logically, it would be much cheaper to close the trade, and open it again if you want to "un-hedge".
they dont generally. They may hedge their overall exposure from hundreds of bets, but not individually unless you were doing huge size, and maybe not then.
yes it does, having a balanced position means you neither profit or loss from market movements. Same as being flat.
you could, but it would be far more expensive.
Hedging is usually used for two purposes...
i) to secure a rate or price in the future - e.g. I know I need to buy some Gold bullion in december for my Jewellery businesss, I can hedge the risk with a Gold future and be certain that I won't have to pay more than $830 per oz.
ii) in a strictly trading role, hedges rarely take out ALL of the risk - as Arb mentioned, a "perfect" hedge would effectively leave you flat the market, except with more spread and commissions than closing your original position completely.
More often, hedging is used to take out some of the risk, not all. An example of this might be buying Bund futures and selling 10yr futures simultaneously - the idea is that the two instruments are highly, but nor perfectly, correlated. If I think that Bonds are going down, but the Bund it too valatile for me on it's own, I can take out some of the "volatility risk" by taking an oppossite position in something that should behave in a similar fashion. As long as the Bund goes down more than the 10yrs (as long as I make more on my short Bund trade than I lose on my Long 10yr trade), I'm in profit. This is known as an inter-commodity spread, google it along with "hedge ratio's" for some examples. You can do this with all sorts of things; stocks, commodities, bonds, etc...
You can do a similar thing with multiple expiries of the same futures contract - as a general rule, contracts that expire further in the future are more volatile than the nearer dated ones - so in the example above, I could sell December Bund and hedge it with September Bund futures - if the Bund goes down as I suspect, I can expect the December future to fall more than the September one, so my profits from the Dec future should cover my losses on the Sep future, and leave me a little profit (an "Intra-contract" spread). As the two are higly correlated, this is a much less volatile position that the September future on its own.
In options trading, hedging is a popular way to reduce a type of risk completely. Option prices are affected by more than just the price of the underlying (e.g. Gold, or the Bund). They are also affected by volatility, time, all sorts. Say an options trader though that an Oil option contract was pricing volatility too high; he might want to sell the volatility part of the option, but not expose himself to the risk that the price of Oil will have on his position. By using a variety of instruments, he can create a portfolio that hedges out the "price of oil risk", leaving him just with "volatility risk", which is what he has taken a view on. This is known as "Delta hedging", again plenty around on the web.
___________________________________________________________________________
A final point (misnomer) is the role of hedging in the currency markets. The way that currencies are traded means that the hedging described in point ii) doesn't exist. If you are long GBP/USD, and decide to hedge your position with EUR/USD, you actually end up with a GBP / EUR position - the long and the short USD trades cancel each other out completely. So, be careful if you think you are hedging a volatile pair, say EUR / JPY, because infact you will end up exposed to a position that you didn't buy or sell in it's own right.
The exception to the above is inter-commodity hedges, and securing a price. If I am going to get some winter sun over Christmas in the USA, I might decide that I will hedge the uncertainty of the exchange rate, and buy my Dollars now, then I can do the sums before I go to know how much I have to spend on the shopping.
The other exeptions would be to hedge something other than a currency trade with a currency trade - for example, I might decide that I am Bearish on Oil, but it's too volatile, so I hedge my position by going long EUR / USD - the two have been very highly correlated recently, so as long as Oil goes down more that EUR / USD goes down, I am OK. Be wary of trades like this though, as these relationships do not last forever; if the correlation between EUR / USD and Oil drops, my hedge becomes less efficient, and I am left exposed to additional, rather than reduced, volatility.
i) to secure a rate or price in the future - e.g. I know I need to buy some Gold bullion in december for my Jewellery businesss, I can hedge the risk with a Gold future and be certain that I won't have to pay more than $830 per oz.
ii) in a strictly trading role, hedges rarely take out ALL of the risk - as Arb mentioned, a "perfect" hedge would effectively leave you flat the market, except with more spread and commissions than closing your original position completely.
More often, hedging is used to take out some of the risk, not all. An example of this might be buying Bund futures and selling 10yr futures simultaneously - the idea is that the two instruments are highly, but nor perfectly, correlated. If I think that Bonds are going down, but the Bund it too valatile for me on it's own, I can take out some of the "volatility risk" by taking an oppossite position in something that should behave in a similar fashion. As long as the Bund goes down more than the 10yrs (as long as I make more on my short Bund trade than I lose on my Long 10yr trade), I'm in profit. This is known as an inter-commodity spread, google it along with "hedge ratio's" for some examples. You can do this with all sorts of things; stocks, commodities, bonds, etc...
You can do a similar thing with multiple expiries of the same futures contract - as a general rule, contracts that expire further in the future are more volatile than the nearer dated ones - so in the example above, I could sell December Bund and hedge it with September Bund futures - if the Bund goes down as I suspect, I can expect the December future to fall more than the September one, so my profits from the Dec future should cover my losses on the Sep future, and leave me a little profit (an "Intra-contract" spread). As the two are higly correlated, this is a much less volatile position that the September future on its own.
In options trading, hedging is a popular way to reduce a type of risk completely. Option prices are affected by more than just the price of the underlying (e.g. Gold, or the Bund). They are also affected by volatility, time, all sorts. Say an options trader though that an Oil option contract was pricing volatility too high; he might want to sell the volatility part of the option, but not expose himself to the risk that the price of Oil will have on his position. By using a variety of instruments, he can create a portfolio that hedges out the "price of oil risk", leaving him just with "volatility risk", which is what he has taken a view on. This is known as "Delta hedging", again plenty around on the web.
___________________________________________________________________________
A final point (misnomer) is the role of hedging in the currency markets. The way that currencies are traded means that the hedging described in point ii) doesn't exist. If you are long GBP/USD, and decide to hedge your position with EUR/USD, you actually end up with a GBP / EUR position - the long and the short USD trades cancel each other out completely. So, be careful if you think you are hedging a volatile pair, say EUR / JPY, because infact you will end up exposed to a position that you didn't buy or sell in it's own right.
The exception to the above is inter-commodity hedges, and securing a price. If I am going to get some winter sun over Christmas in the USA, I might decide that I will hedge the uncertainty of the exchange rate, and buy my Dollars now, then I can do the sums before I go to know how much I have to spend on the shopping.
The other exeptions would be to hedge something other than a currency trade with a currency trade - for example, I might decide that I am Bearish on Oil, but it's too volatile, so I hedge my position by going long EUR / USD - the two have been very highly correlated recently, so as long as Oil goes down more that EUR / USD goes down, I am OK. Be wary of trades like this though, as these relationships do not last forever; if the correlation between EUR / USD and Oil drops, my hedge becomes less efficient, and I am left exposed to additional, rather than reduced, volatility.
Hotch
Experienced member
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Ok, an easy one:
You come up with a stratergy, and test it.
What figuers do you need to work out, and what do you want your figures to be greater/less than.
I only ask as i came across Statistics Used In Performance Analysis, Formulas, VAMI, Managed Account Research, Inc. Advisor Analysis - Stats, Statistic Use - Commodity Funds Index and saw lots of things i hadn't looked at, and that i think it would be great to be able to decide (roughly) whether a stratergy is good.
Alternatively, is the final results (barring huge drawndowns) the only real important figure?
Thoughts?
You come up with a stratergy, and test it.
What figuers do you need to work out, and what do you want your figures to be greater/less than.
I only ask as i came across Statistics Used In Performance Analysis, Formulas, VAMI, Managed Account Research, Inc. Advisor Analysis - Stats, Statistic Use - Commodity Funds Index and saw lots of things i hadn't looked at, and that i think it would be great to be able to decide (roughly) whether a stratergy is good.
Alternatively, is the final results (barring huge drawndowns) the only real important figure?
Thoughts?
Vrothdar
Well-known member
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I'd strongly recommending reading way of the turtle by Curtis Faith. He discusses the topic in a reasonable amount of detail and gives some good pointers to get you started.
You really need to build up an understanding of what various statistics mean, the assumptions they make, what they can and can't tell you about your data, their reliability etc. and then decide which ones to use yourself. Personally I'd ignore that webpage as the information it gives is fairly vague and many of the statistics aren't all that useful because they raise more questions than they give answers.
Recently I've started judging the performance of strategies I test using a handful of simple charts rather than just statistics. I graph the following:
Pips gained to date (line chart) - Shows how well the strategy predicts market movements
Pips gained on each trade (bar chart) - Shows how much variation there is in the pips gained/lost on each trade
£s gained to date (line chart) - By comparing this to the pips gained to date chart I can get a feel for how effective my money management is for that particular strategy
£s gained on each trade (bar chart) - Makes it very clear if the majority of the profits come from a handful of lucky trades
I also work out what the longest losing streak was, how many losing streaks (2 or more losses in a row) there were, what the average losing streak was, maximum drawdown and average drawdown, maximum loss (as a percentage of account size at the time) from a single trade.
Some of the statistics I calculate I'm going to start plotting on charts instead as I feel it's more effective to judge variation visually than to use standard deviation or mean absolute variance simply because we're not dealing with random variables.
That's not to say that those statistical measures aren't of any use at all. I'm still a firm believer that geometric and binomial distributions can be a useful aid to quickly determining when a strategy has stopped working however I've not done enough serious work on that yet to say it's more than a strong belief.
You really need to build up an understanding of what various statistics mean, the assumptions they make, what they can and can't tell you about your data, their reliability etc. and then decide which ones to use yourself. Personally I'd ignore that webpage as the information it gives is fairly vague and many of the statistics aren't all that useful because they raise more questions than they give answers.
Recently I've started judging the performance of strategies I test using a handful of simple charts rather than just statistics. I graph the following:
Pips gained to date (line chart) - Shows how well the strategy predicts market movements
Pips gained on each trade (bar chart) - Shows how much variation there is in the pips gained/lost on each trade
£s gained to date (line chart) - By comparing this to the pips gained to date chart I can get a feel for how effective my money management is for that particular strategy
£s gained on each trade (bar chart) - Makes it very clear if the majority of the profits come from a handful of lucky trades
I also work out what the longest losing streak was, how many losing streaks (2 or more losses in a row) there were, what the average losing streak was, maximum drawdown and average drawdown, maximum loss (as a percentage of account size at the time) from a single trade.
Some of the statistics I calculate I'm going to start plotting on charts instead as I feel it's more effective to judge variation visually than to use standard deviation or mean absolute variance simply because we're not dealing with random variables.
That's not to say that those statistical measures aren't of any use at all. I'm still a firm believer that geometric and binomial distributions can be a useful aid to quickly determining when a strategy has stopped working however I've not done enough serious work on that yet to say it's more than a strong belief.
You have to contact your broker for that.
corpusninja
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Hello, I'm new here. Where can I find historical data for FTSE or currencies in order to try backtesting?
Traderdanc
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Best training programs?
Hi,
I am brand new to both trading and T2W. I have always been interested in Markets and Trading but only recently decided to take the plunge into this world. I studied finance at Uni and spent the last year at a bulge bracket I-Banking in the corporate finance side.
I am looking at applying to proprietary trading firms in London, and was hoping someone could give me some insight into which ones have the best training programs.
Anyone willing to help?
Hi,
I am brand new to both trading and T2W. I have always been interested in Markets and Trading but only recently decided to take the plunge into this world. I studied finance at Uni and spent the last year at a bulge bracket I-Banking in the corporate finance side.
I am looking at applying to proprietary trading firms in London, and was hoping someone could give me some insight into which ones have the best training programs.
Anyone willing to help?
hi im intersted in oil i wanted to know if you can buy oil shares not shares in companies but actual oil shares ?
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