Our Signals Strategies for Trading and Investing – Part 4
A Unique Hedging Strategy
The financial markets (Forex, derivatives, precious metals, stocks, indices, commodities, futures, spread betting, CFDs, ETFs, options, cryptos, etc.) are very difficult to trade successfully. Even it is more difficult than you can imagine.
Setting up accounts, and initiating trades are simple. Anyone can make profits at any time, but in most cases, the markets soon take away the profits. So, making profits on a consistent basis is one of the hardest achievements on this planet.
Stay away from anyone telling you trading is easy. Ignore anyone talking about trading profits in terms of certainties rather than in terms of probabilities.
Why Is Trading So Hard? Less than 2% of traders Can Make Consistent Profits
Trading is hard because the market cannot be predicted. Period.
We tend to think we are smart. We tend to think we know what we’re doing. But the market is very good at letting us know that we’re not smart.
Sometimes we predict the market and we’re right. Sometimes we predict the market and we’re wrong.
The Unique hedging Strategy
Hedging is well-known to professional trades. It is about buying and selling the same instrument at the same time.
For most, this strategy doesn’t work ultimately. Why?
It is because they usually enter the market at the wrong periods. For you to make money as a hedger, you need to enter the market only when prices go out of balance (i.e. when demand exceeds supply, or vice versa).
How do you know when prices go out of balance? That is our secret.
If a pair of hedging trades are opened when demand and supply go out of balance, then the chances of making money are better. And doing that, we:
Cut our losses short,
Let our profits run,
Use good position sizing
Use breakeven stops when needed,
Use optimal stops always.
Yes, ride your winners and abort your losers. That is the only way to survive in the harsh market conditions (since a good strategy must have average losers that are bigger than average winners).
Most traders cannot succeed because of poor position sizing and awful risk management, not because their strategy is not good.
Inability to cut your losses will eventually result in huge drawdowns. 20% – 25 % drawdown is difficult to recover.
But this goes against how most traders would want to think, because most of us are not wired to trade properly, owing to psychological issues. We like to trade to satisfy our emotions, and that is a recipe for financial disaster.
Those who cannot agree with this fact can go do something else or buy lotto tickets.
When the markets are seriously ranging, fewer signals are generated... Crypto markets can also range most of the time and many great signals don't build up in consolidating markets. Poor-quality signals are not a curiosity and high-quality signals are rather rare.
Just continue to do the needful: Manage your risk and profits will ultimately come naturally.
In the long run, the strategy would prove itself.
This is a marathon, not a sprint.
Sometimes we may not see new hedging signals in recent times, and besides, the best way to make winners that are bigger than losers, is to run winning trades for as long as rational. There is no way around this fact.
Taking profits in scalping mode will end up to be statistically not viable, in the long run.
We are currently using the strategy on Forex only, but we are looking to applying it to indices as well and this is being forward-tested as this message is being sent out.
We would reach a conclusion on whether or not to apply it to indices, within the next several months.
Note that this hedging strategy is for the subscribers in our VIP groups only, as a signal.
To join our free Telegram group, please visit here: https://t.me/predictmag
get free, winning trading signals, please visit: www.predictmag.com
Share on Facebook Share on Twitter Share on Google+