Hedging -Zero Risk

Hedging -Zero Risk

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.

How To Recognize a Financial Mania When You're Smack Dab in the Middle of One

By Susan C. Walker, Elliott Wave International
November 12, 2007

When you're caught in the middle of a bad storm, you don't really care whether it's a tropical depression or a full-strength hurricane. You just know you're hanging on for dear life. The same idea applies to financial markets. When a market is trending up strongly, it's hard to tell whether it's just a bull market or a more dangerous financial mania.

The recent tremendous ride up for global and U.S. financial markets, including the Dow, looks and feels more like a mania than a mere bull, says Elliott Wave International analyst Peter Kendall. This distinction is important to recognize in the rising stage, because manias always result in a crash that takes them back beneath their starting point.

Kendall recently published his research into current financial manias throughout the world in SFO (Stocks, Futures and Options) magazine. The article, titled "Financial Manias and the Trade of a Lifetime," suggests an even more stunning finish for the current manias: "The speed and global scope of the unfolding credit crisis suggest that most of the fast-rising markets of the last decade will crash in unison," he writes.

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Editor's note: Elliott Wave International invites you to read the full five-page article with charts from the October 2007 SFO magazine by Elliott Wave International's Pete Kendall called "Financial Manias and the Trade of a Lifetime."

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As co-editor of The Elliott Wave Financial Forecast, Kendall searches for trends that help traders to move in and out of markets. By comparing other historic manias with the impressive rise of the DJIA since the late 1970s, he focuses on the skyscraper pattern that they all have in common. The four historical manias are the Dutch Tulip mania of the 1630s, the South Sea bubble of 1720, the U.S. stock crash of 1921-1932 and the dot.com bust of the 1990s and early 2000s. Once you can see the similarities, you will be better prepared to face the music when the crash comes. As Kendall writes, "once the belief that the markets will always rise becomes widespread, it actually signals the start of a price swing that tends to be a career-breaker for any trader who tries to oppose it."

He also discusses current manias, such as the Nikkei, which has yet to return to its start after a manic rise to its all-time high in December 1989, and the Dow, which reversed from its rise in 2000 but made a U-turn in 2002. The starting point for the Dow's mania as shown in the chart included in the article is at the 1000 level.

Kendall, who is also writing a book about financial manias, titled The Mania Chronicles, describes five telltale signs that help an investor to tell the difference between a regular bull market and a mania. It's a mania if:

1. There is no upside resistance, and rising prices seem to be perpetual.
2. Everyone in the market looks like an expert.
3. There is a flight from quality investments to riskier investments.
4. As financial bubbles pop in one area, they bubble up in others.
5. The crash after the peak takes back all the gains the mania made.

No. 5 can be viewed only with hindsight. But the first four signs provide essential clues to what's shaping up in the markets.

"By studying past mania experiences, traders can gain valuable insight into the collective emotions that drive their markets," writes Kendall. "It's possible to make significant money in the advancing stages of a mania with no knowledge of its existence. But there is nothing like recognizing a mania for what it is in real time to help a trader keep those gains and deal with the relentless crash after it peaks."

In the last part of the SFO article, he asks the key question, Are we at the peak yet? Find out his answer by reading the whole article for yourself.

Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. Her columns also appear regularly on FoxNews.com.

-New Trader Strategy..

Here I will take a simple system and apply it everyday to the Forex market. By following along, I hope that you'll be able to use this as a guide for following your own trading system each and every day. But before you follow along, here is a little background on the system that I will be trading. Actually this syetem has been widely spread over the internet but I want to tell you that it really works. The first system I used for trading is the following system.

The Main Trend Is Your Friend

The main concept of the theory is to catch small trends during the day while avoiding fakeouts. Simple right? Wrong! It's easier said than done. I will be making my trades off of a 15 minute chart, but I will be using a 4hr. chart to give me my main trend. If my 4hr. chart is trending up, then I will only be looking to go long on the 15 minute chart. On the other hand, if my 4hr. chart is trending down, then I will only be looking to go short on the 15 minute chart. By looking at the main trend first, I will have a better chance for a winning trade by moving along with the current market direction.

4hr. Chart Settings:

• 5 EMA applied to the close
• 10 EMA applied to the close
• Stochastics (10,3,3)
• RSI (9)

After establishing the main trend , it's time to look for trade entries on the 15 minute chart. The 15 minute chart looks similar to the 4hr. chart, except for the fact that I have added a MACD histogram. The trade entry rules are simple:






The 15 Minute Chart

• 5 EMA applied to the close
• 10 EMA applied to the close
• RSI (9)
• Stochastics (10,3,3)
• MACD Histogram (12,26,9)



Long Signal:


• 5 EMA must cross above the 10 EMA (Indicated on chart by a black candle)
• RSI must be greater than 50
• Stochastics must be headed up and not in overbought territory
• MACD histogram must go from negative to positive OR be negative and start
to increase value. (We want to catch trends early so the MACD histogram
must be negative)





Short Signal:


• 5 EMA must cross below the 10 EMA (Indicated on chart by
a purple candle)
• RSI must be less than 50
• Stochastics must be headed down and not in oversold territory
• MACD histogram must go from positive to negative OR be positive
and start to decrease in value. (We want to catch trends early
so the MACD histogram must be positive)





Stop Losses

There is not a hard number that I use for a stop loss. Instead I use either the most recent swing low (for long trades) or the most recent swing high (for short trades) as my stop loss. Using the examples above, this is where I would place my stops:








In these examples, the stop losses were not that wide. However, there will be times when the most recent swing high or low is several pips away from your entry. This is where you must be careful. If the stop is too wide for you to keep within your money management rules, simply stay out of the market! Trust me, there will always be another trade later. Even if that trade happens to win a gazillion pips, you should never compromise or doubt your decision to follow strict money management.


Happy trading

The "95% of all Forex traders fail" Lie!

I refer 95% lie to sentence: “95% of traders fail”. Although this are calculations made by brokers, based on their account history. I suppose those are accounts that were blown out by newbie traders.

Anyway I have to admit that it is true that 95% of account ends up empty within less then three months. But hose who were trading them … were they really traders? I think not, in my opinion they were gold diggers or just uninformed fools.

It happens often that after forex success story in newspaper or magazine, people without knowing anything about forex think: “Hey this is easy way to make money! If that guy in the newspaper made millions, I can make at least few thousands I am not stupid”. I don’t have to tell you how wrong this guy is. He takes loan, and starts trading, within 3 months he has got no money but a big loan to pay.

I believe this are the people who goes by 95% rule. But it doesn’t have to be that way. You can make money, but you have to understand it is not going to happen overnight. Probably not even within two years. But it is possible.

What it takes to become trader? In my opinion the only difference between successful and unsuccessful trader is … experience. All you need to do is trade and get some experience.

But there is something more important. As you may lack successes within this two years it is crucial to believe that you can really do it, that it is possible to achieve success. If you have problem with that then, do yourself a favor and buy Anthony Robbins “Awaken the giant within” great book on positive mindset.

-Less Trade but More Pips.

Do you want to trade real forex but you don’t have much time in front of your desktop ? Don’t worry ! we still have solutions to this problem. Normally I prefer to trade long period to short period except when I want to play game I will use scalping system.he..he..he..

Long trading will enable you to have more time to relax and to do other business, and the system that I will write down here is a very simple one, not extraordinary system, but according to some traders they can profit 2500 – 3500 pips per month using the strategy…..

By the way….have you ever got 2000 pips per month ? Oh… what a pity ……. Last year I ever got 3000 pips in one week…yes one week.…..he..he..he… eventhough I never learnt Forex at the University….

And the pairs you can trade using this system are : : GJ,GU,EU,AU,UJ,UChf,UCad,NU and EJ.

Remember traders, we only have 4-6 entry point for every pair a month with approx. 100-200 nice pips each.

We must patience to wait those entry points, so keep smiling…and don’t worry, you will make money. Iam sure about that !.

Here is the tool you need.

Metatrader4
EMA5 Red
EMA 15 yellow
EMA 50 White


MACD (5,13,1):
Fast EMA 5
Slow EMA 13
MACD SMA 1


Momentum value 10
QQE
TF : 4 hrs


Buy :
When the 5 Ema crossed 50 upward that is the first signal. Please check the MACD, the bar must be climbing up. after 15 crossed 50 the signal is 98% bullish.

Please open your buy there with TP1 80 pips and lock profit for 50 pips after TP touched and let the price go to TP2 180 pips.

Usually MACD, QQE and momentum are crossed up at the same time, and that is a signal to upload your weapon.

Patience traders as we are trading in 4h time frame. Noo need to Hurry.

MACD : Please draw a red line in zero line.

QQE, blue crossover upward means bullish and the time QQE crossover the MACD is going up and so is momentum. That means get ready to open long position and I suggest that you wait for 5EMA to cross 50 EMA for more safe. This Condition guarantee 100-250 pips bro.

That means Bullish when bar forms upper the blue line and bearish if it forms below the blue line.



In Forex Trading patience is the most important thing, we trade less doesn't mean less pips, but on the other hand less trade could be more pips.

Happy trading.

Scalping..

Many traders assumed that Scalping is not a good way of getting pips. I do never know what the reasons behind the statement. What I know is scalping can give me many profits... I repeat once more ; many pips in a very short time.

What we have to remember is a game...Have you ever played game ?: Nintendo or packman or anything ? What we need is only focus...focus...in a very short period of time but it's very amazing. It can be 2 minutes...3 minutes or five minutes per trading. Normally we can get only peanuts not a big fish ( 5 or 10 pips per trading ). But can you imagine if you can trade 20 times x 10 pips in an hour ? 200 pips right ? He...he..he..


And I myself assume that Scalping is a game....pips game..I get get a lot of pips while I was playing game..you don't believe me ? I will tell you later. Take no care what people say...a forex system or not.


Trading forex is not a science where you should know everything in sequence or where you can create a scientific formula. Forex is much related with mechanism...market mechanism, Where my President and your President play golf together, have coffee together and then...Boooom.....a currency skyrockets... He..he..he...

If you want to play game....let's start now and get ready:

-Prepare Forex Mini Account (only 0.5 dollar per pip) where you can perform
instant execution.

-Prepare 1 minute chart (not daily chart)
-Prepare Bolinger Band ( default setting)
-Prepare Zig Zag indicator ( already attached to Metatrader indicator)
-Prepare RSI ( 14 )
-Prepare your cigarettes......he..he..( Iam smoking now)



Look at the chart..sometimed you have to combine ZigZag indicator with RSI. If RSI > 50 means GO LONG and if RSI < 50 means GO SHORT.

I suggest you to use Mini account in fxegypt.com ( it can be one cent per pip) just to make you familiar with the 'system' before you go higher. And never use demo account, you will never be serious...Just let the ghost use demo account..not you...

Iam very sure that you will enjoy your game and at the same time you will make profits.

Happy trading.

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