It took me a while to get it too.
Hedging the FX market requires a completely different mindset.
I have seen no less than four experienced traders get hammered using the same system that I use because they simply get too involved and cannot shake the fear/greed mentality that comes with directional trading and is why most traders fail when trying to guess the market.
Traders often try to beat the market.
When you hedge using the system I use all you want to do is STAY in the market!
When a directional trader sees an equity drop of 2000 on a 10,000 account they are programmed to see this as a 'drawdown'.
But, a real drawdown in directional trading would leave you with only 8,000 to work with to build your equity back up.
But, with hedging as I do it, if your equity drops to even $5,000 you are still earning interest and buying low and selling high as if you were in the market at the $10,000 level because indeed you are. You still have roughly the same number of lots and are earning the same amount of interest daily.
What this does is make it easy to go up but hard to go down. It works kind of like a ratchet effect. You know, kind of like the price of gasoline. :)
It is like the wheels are greased for increase while resisting decrease. If the equity drops there is the mediating of daily interest and regular buy low sell high profits.
So, as long as you keep your margin low you have a very good chance of riding through times when the correlations are off.
In hedging the only thing we really want to see for long term success is a relatively high correlation or negative correlation between the pairs we trade. If the EURUSD goes up we want to see the USDCHF going down, and so on.
I was asked the other day what would happen if the USD tanks even further.
With the system I use it is not an issue as long as the correlations stick. If the USD tanks then the EURUSD should go up and the USDCHF should go down. We will buy low on the USDCHF and sell high on the EURUSD. All the while we will be earning substantial daily interest at 400:1 with triple interest on Wednesdays because of the weekend downtime in the market.
The key to this system is to keep the margin low and largely stay away from the USDJPY. The correlations are just not consistent enough and I would leave this for the traders who are intimate with the Yen.
Too often people are looking for a get rich solution to their financial problems and fail to have a plan that will really work in the long run. Most people are so occupied with just tried to keep up an unsustainable lifestyle and just ahead of the bills each month. In fact, the majority of households would be in financial crisis if there were two months, or even one month, without income. So, it is really had to get people to think ahead and see the big picture.
Using a good hedging system we can have very good years and not so good years. But, with the power of compounding and proper money management wonderful things are possible.
To learn more about compounding see the link on the left of this blog.
Anything is possible in terms of gains. Improper use of the system can also result in losses.
See disclaimer.
Friday, September 28, 2007
Tuesday, September 25, 2007
Global currency market balloons to $3.2-trillion a day
TONI VOROBYOVA
Reuters
September 25, 2007 at 11:31 AM EDT
LONDON — Trade on global currency markets has jumped a record 71 per cent over the past three years and is now worth more than $3.2-trillion (U.S.) a day — roughly equal to the entire annual economic output of the world's third largest economy, Germany.
Daily turnover has soared from $1.9-trillion in 2004, partly due to greater activity by hedge funds and “black box” computer trading, the Bank for International Settlements said on Tuesday in a benchmark survey which it conducts every three years.
Currency trading rose in Canada, but not nearly as much as elsewhere. Volumes rose 11 per cent to $59.8-billion a day -- the lowest growth rate since the survey began in 1983. Almost all Canadian transactions had the U.S. dollar on one side.
The survey underlined London's leadership in the world of currency trading, which is hard to measure as most business is conducted by telephone or on electronic systems rather than....
For the Full Story CLICK HERE
Reuters
September 25, 2007 at 11:31 AM EDT
LONDON — Trade on global currency markets has jumped a record 71 per cent over the past three years and is now worth more than $3.2-trillion (U.S.) a day — roughly equal to the entire annual economic output of the world's third largest economy, Germany.
Daily turnover has soared from $1.9-trillion in 2004, partly due to greater activity by hedge funds and “black box” computer trading, the Bank for International Settlements said on Tuesday in a benchmark survey which it conducts every three years.
Currency trading rose in Canada, but not nearly as much as elsewhere. Volumes rose 11 per cent to $59.8-billion a day -- the lowest growth rate since the survey began in 1983. Almost all Canadian transactions had the U.S. dollar on one side.
The survey underlined London's leadership in the world of currency trading, which is hard to measure as most business is conducted by telephone or on electronic systems rather than....
For the Full Story CLICK HERE
Friday, September 7, 2007
$2500 and $100 @ 75% p.a. Scenario
We do not plan to fail. We rather fail to plan.
To play with some scenarios you can find this calculator on the links posted on the right side of this blog.
This calculation takes a lump of money and compounds it monthly over a fixed period of time at a fixed annual yield. Plus it allows you to add monthly contributions.
To play with these calculations go here:
http://www.convenientcalculators.com/
To play with some scenarios you can find this calculator on the links posted on the right side of this blog.
This calculation takes a lump of money and compounds it monthly over a fixed period of time at a fixed annual yield. Plus it allows you to add monthly contributions.
To play with these calculations go here:
http://www.convenientcalculators.com/
Thursday, August 30, 2007
Typical Equity Fluctuations
The data below is the latest as of this posting. Notice that this account has gone through two Shanghai meltdowns and is chugging along in the middle of the present sub-prime loans crises.
These numbers are not exact as I only log in and record what I see during that day. Therefore some days are missed and sometimes I have recorded two readings in one day.
The margin was 9% in January. On Aug 1st I compounded at 16k and set the margin this time at 9.5%.
The results are as follows. Note that the account equity has to fall to the Margin Regd number to get a margin call. That is the only way to get knocked out of the market here while hedging.
Everyday interest is being earned and we always buy low and sell high. If used properly this system ensures that 100% of the trades are winning trades.
Date Equity Margin Reqd
10 January 2007 $9,174.00 not recorded
12 January 2007 $10,224.00 not recorded
13 January 2007 $10,491.00 not recorded
14 January 2007 $10,504.00 not recorded
15 January 2007 $10,508.00 not recorded
16 January 2007 $11,056.00 not recorded
17 January 2007 $11,190.00 not recorded
18 January 2007 $11,216.00 not recorded
20 January 2007 $11,667.00 not recorded
22 January 2007 $11,769.00 not recorded
23 January 2007 $12,049.00 not recorded
24 January 2007 $11,788.00 not recorded
26 January 2007 $11,714.00 not recorded
27 January 2007 $11,552.00 not recorded
29 January 2007 $11,688.00 not recorded
30 January 2007 $12,218.00 not recorded
31 January 2007 $11,891.00 not recorded
01 February 2007 $11,235.00 not recorded
06 February 2007 $11,050.00 not recorded
07 February 2007 $10,831.00 not recorded
08 February 2007 $11,762.00 not recorded
09 February 2007 $11,734.00 not recorded
12 February 2007 $11,547.00 not recorded
13 February 2007 $10,905.00 not recorded
14 February 2007 $11,354.00 not recorded
15 February 2007 $11,290.00 not recorded
16 February 2007 $10,334.00 not recorded
17 February 2007 $10,298.00 not recorded
19 February 2007 $10,458.00 not recorded
21 February 2007 $10,831.00 not recorded
21 February 2007 $10,752.00 not recorded
22 February 2007 $11,087.00 not recorded
24 February 2007 $10,973.00 not recorded
27 February 2007 $9,957.00 not recorded
28 February 2007 $9,452.00 not recorded
04 March 2007 $7,769.00 not recorded
05 March 2007 $6,948.00 not recorded
05 March 2007 $6,816.00 $937.00
06 March 2007 $7,363.00 $938.00
09 March 2007 $8,506.00 $941.00
09 March 2007 $9,258.00 $933.00
14 March 2007 $7,347.00 $933.00
17 March 2007 $7,506.00 $948.00
21 March 2007 $9,139.00 $946.00
21 March 2007 $9,210.00 $946.00
22 March 2007 $9,602.00 $936.00
23 March 2007 $9,751.00 $936.00
04 April 2007 $11,457.00 $936.00
08 April 2007 $11,589.00 $932.00
12 April 2007 $12,314.00 $939.00
12 April 2007 $12,504.00 $934.00
17 April 2007 $12,750.00 $929.00
18 April 2007 $12,827.00 $927.00
23 April 2007 $12,971.87 $934.00
26 April 2007 $12,817.00 $931.00
28 April 2007 $12,708.00 $934.00
30 April 2007 $12,399.00 $936.00
01 May 2007 $13,063.00 $936.00
01 May 2007 $13,149.00 $936.00
01 May 2007 $13,352.00 $936.00
03 May 2007 $13,405.00 $934.00
07 May 2007 $13,135.00 $938.00
08 May 2007 $13,531.00 $941.00
10 May 2007 $13,921.00 $944.00
11 May 2007 $13,123.00 $940.00
12 May 2007 $13,344.00 $939.00
15 May 2007 $13,490.00 $940.00
19 May 2007 $14,275.00 $943.00
21 May 2007 $14,256.00 $938.00
22 May 2007 $14,309.00 $938.00
23 May 2007 $14,638.00 $935.00
25 May 2007 $14,579.00 $934.00
28 May 2007 $14,673.00 $934.00
29 May 2007 $13,851.00 $942.00
29 May 2007 $13,938.00 $942.00
30 May 2007 $13,562.00 $946.00
31 May 2007 $14,040.00 $946.00
01 June 2007 $14,844.00 $947.00
03 June 2007 $14,837.00 $947.00
04 June 2007 $14,523.00 $949.00
04 June 2007 $14,802.00 $949.00
06 June 2007 $13,962.00 $941.00
07 June 2007 $13,887.00 $947.00
07 June 2007 $14,065.00 $947.00
08 June 2007 $14,521.00 $945.00
10 June 2007 $14,637.00 $944.00
11 June 2007 $14,990.00 $944.00
12 June 2007 $15,273.00 $944.00
12 June 2007 $15,740.00 $947.00
13 June 2007 $15,780.00 $948.00
14 June 2007 $15,975.00 $947.00
15 June 2007 $16,107.00 $947.00
17 June 2007 $16,153.00 $947.00
18 June 2007 $16,575.00 $945.00
18 June 2007 $16,676.00 $945.00
18 June 2007 $16,757.00 $945.00
19 June 2007 $16,716.00 $943.00
19 June 2007 $16,790.00 $943.00
21 June 2007 $17,031.00 $943.00
24 June 2007 $16,099.00 $945.00
26 June 2007 $15,761.00 $945.00
27 June 2007 $15,952.00 $945.00
28 June 2007 $16,289.00 $940.00
29 June 2007 $15,823.00 $945.00
02 July 2007 $15,203.00 $948.00
03 July 2007 $15,896.00 $948.00
04 July 2007 $16,056.00 $948.00
04 July 2007 $16,134.00 $948.00
05 July 2007 $15,952.00 $947.00
07 July 2007 $16,167.00 $947.00
09 July 2007 $16,155.00 $947.00
16 July 2007 $16,104.00 $947.00
17 July 2007 $16,685.00 $952.00
18 July 2007 $16,847.00 $952.00
19 July 2007 $16,979.00 $953.00
19 July 2007 $17,101.00 $953.00
23 July 2007 $18,058.00 $954.00
24 July 2007 $17,698.00 $950.00
25 July 2007 $18,399.00 $947.00
26 July 2007 $16,972.00 $948.00
27 July 2007 $15,886.00 $952.00
29 July 2007 $15,292.00 $957.00
31 July 2007 $15,632.00 $957.00
01 August 2007 $15,348.00 $965.00
01 August 2007 $16,023.00 $1,525.00
02 August 2007 $16,570.00 $1,527.00
08 August 2007 $15,945.00 $1,535.00
09 August 2007 $12,987.00 $1,539.00
10 August 2007 $14,354.00 $1,539.00
13 August 2007 $13,512.00 $1,537.00
14 August 2007 $12,985.00 $1,559.00
15 August 2007 $13,443.00 $1,565.00
17 August 2007 $8,718.00 $1,575.00
19 August 2007 $10,048.00 $1,597.00
20 August 2007 $10,356.00 $1,597.00
22 August 2007 $12,386.00 $1,598.00
23 August 2007 $13,686.00 $1,601.00
26 August 2007 $14,582.00 $1,594.00
27 August 2007 $14,183.00 $1,594.00
28 August 2007 $12,316.00 $1,594.00
30 August 2007 $14,450.00 $1,584.00
See side bar to the right for updated data and the risk disclaimer.
This is intended to educate readers on the fluctuations of the market.
I suggest you create an excel file with such data to get a clear sense of how volatile your account is on your present settings.
These numbers are not exact as I only log in and record what I see during that day. Therefore some days are missed and sometimes I have recorded two readings in one day.
The margin was 9% in January. On Aug 1st I compounded at 16k and set the margin this time at 9.5%.
The results are as follows. Note that the account equity has to fall to the Margin Regd number to get a margin call. That is the only way to get knocked out of the market here while hedging.
Everyday interest is being earned and we always buy low and sell high. If used properly this system ensures that 100% of the trades are winning trades.
Date Equity Margin Reqd
10 January 2007 $9,174.00 not recorded
12 January 2007 $10,224.00 not recorded
13 January 2007 $10,491.00 not recorded
14 January 2007 $10,504.00 not recorded
15 January 2007 $10,508.00 not recorded
16 January 2007 $11,056.00 not recorded
17 January 2007 $11,190.00 not recorded
18 January 2007 $11,216.00 not recorded
20 January 2007 $11,667.00 not recorded
22 January 2007 $11,769.00 not recorded
23 January 2007 $12,049.00 not recorded
24 January 2007 $11,788.00 not recorded
26 January 2007 $11,714.00 not recorded
27 January 2007 $11,552.00 not recorded
29 January 2007 $11,688.00 not recorded
30 January 2007 $12,218.00 not recorded
31 January 2007 $11,891.00 not recorded
01 February 2007 $11,235.00 not recorded
06 February 2007 $11,050.00 not recorded
07 February 2007 $10,831.00 not recorded
08 February 2007 $11,762.00 not recorded
09 February 2007 $11,734.00 not recorded
12 February 2007 $11,547.00 not recorded
13 February 2007 $10,905.00 not recorded
14 February 2007 $11,354.00 not recorded
15 February 2007 $11,290.00 not recorded
16 February 2007 $10,334.00 not recorded
17 February 2007 $10,298.00 not recorded
19 February 2007 $10,458.00 not recorded
21 February 2007 $10,831.00 not recorded
21 February 2007 $10,752.00 not recorded
22 February 2007 $11,087.00 not recorded
24 February 2007 $10,973.00 not recorded
27 February 2007 $9,957.00 not recorded
28 February 2007 $9,452.00 not recorded
04 March 2007 $7,769.00 not recorded
05 March 2007 $6,948.00 not recorded
05 March 2007 $6,816.00 $937.00
06 March 2007 $7,363.00 $938.00
09 March 2007 $8,506.00 $941.00
09 March 2007 $9,258.00 $933.00
14 March 2007 $7,347.00 $933.00
17 March 2007 $7,506.00 $948.00
21 March 2007 $9,139.00 $946.00
21 March 2007 $9,210.00 $946.00
22 March 2007 $9,602.00 $936.00
23 March 2007 $9,751.00 $936.00
04 April 2007 $11,457.00 $936.00
08 April 2007 $11,589.00 $932.00
12 April 2007 $12,314.00 $939.00
12 April 2007 $12,504.00 $934.00
17 April 2007 $12,750.00 $929.00
18 April 2007 $12,827.00 $927.00
23 April 2007 $12,971.87 $934.00
26 April 2007 $12,817.00 $931.00
28 April 2007 $12,708.00 $934.00
30 April 2007 $12,399.00 $936.00
01 May 2007 $13,063.00 $936.00
01 May 2007 $13,149.00 $936.00
01 May 2007 $13,352.00 $936.00
03 May 2007 $13,405.00 $934.00
07 May 2007 $13,135.00 $938.00
08 May 2007 $13,531.00 $941.00
10 May 2007 $13,921.00 $944.00
11 May 2007 $13,123.00 $940.00
12 May 2007 $13,344.00 $939.00
15 May 2007 $13,490.00 $940.00
19 May 2007 $14,275.00 $943.00
21 May 2007 $14,256.00 $938.00
22 May 2007 $14,309.00 $938.00
23 May 2007 $14,638.00 $935.00
25 May 2007 $14,579.00 $934.00
28 May 2007 $14,673.00 $934.00
29 May 2007 $13,851.00 $942.00
29 May 2007 $13,938.00 $942.00
30 May 2007 $13,562.00 $946.00
31 May 2007 $14,040.00 $946.00
01 June 2007 $14,844.00 $947.00
03 June 2007 $14,837.00 $947.00
04 June 2007 $14,523.00 $949.00
04 June 2007 $14,802.00 $949.00
06 June 2007 $13,962.00 $941.00
07 June 2007 $13,887.00 $947.00
07 June 2007 $14,065.00 $947.00
08 June 2007 $14,521.00 $945.00
10 June 2007 $14,637.00 $944.00
11 June 2007 $14,990.00 $944.00
12 June 2007 $15,273.00 $944.00
12 June 2007 $15,740.00 $947.00
13 June 2007 $15,780.00 $948.00
14 June 2007 $15,975.00 $947.00
15 June 2007 $16,107.00 $947.00
17 June 2007 $16,153.00 $947.00
18 June 2007 $16,575.00 $945.00
18 June 2007 $16,676.00 $945.00
18 June 2007 $16,757.00 $945.00
19 June 2007 $16,716.00 $943.00
19 June 2007 $16,790.00 $943.00
21 June 2007 $17,031.00 $943.00
24 June 2007 $16,099.00 $945.00
26 June 2007 $15,761.00 $945.00
27 June 2007 $15,952.00 $945.00
28 June 2007 $16,289.00 $940.00
29 June 2007 $15,823.00 $945.00
02 July 2007 $15,203.00 $948.00
03 July 2007 $15,896.00 $948.00
04 July 2007 $16,056.00 $948.00
04 July 2007 $16,134.00 $948.00
05 July 2007 $15,952.00 $947.00
07 July 2007 $16,167.00 $947.00
09 July 2007 $16,155.00 $947.00
16 July 2007 $16,104.00 $947.00
17 July 2007 $16,685.00 $952.00
18 July 2007 $16,847.00 $952.00
19 July 2007 $16,979.00 $953.00
19 July 2007 $17,101.00 $953.00
23 July 2007 $18,058.00 $954.00
24 July 2007 $17,698.00 $950.00
25 July 2007 $18,399.00 $947.00
26 July 2007 $16,972.00 $948.00
27 July 2007 $15,886.00 $952.00
29 July 2007 $15,292.00 $957.00
31 July 2007 $15,632.00 $957.00
01 August 2007 $15,348.00 $965.00
01 August 2007 $16,023.00 $1,525.00
02 August 2007 $16,570.00 $1,527.00
08 August 2007 $15,945.00 $1,535.00
09 August 2007 $12,987.00 $1,539.00
10 August 2007 $14,354.00 $1,539.00
13 August 2007 $13,512.00 $1,537.00
14 August 2007 $12,985.00 $1,559.00
15 August 2007 $13,443.00 $1,565.00
17 August 2007 $8,718.00 $1,575.00
19 August 2007 $10,048.00 $1,597.00
20 August 2007 $10,356.00 $1,597.00
22 August 2007 $12,386.00 $1,598.00
23 August 2007 $13,686.00 $1,601.00
26 August 2007 $14,582.00 $1,594.00
27 August 2007 $14,183.00 $1,594.00
28 August 2007 $12,316.00 $1,594.00
30 August 2007 $14,450.00 $1,584.00
See side bar to the right for updated data and the risk disclaimer.
This is intended to educate readers on the fluctuations of the market.
I suggest you create an excel file with such data to get a clear sense of how volatile your account is on your present settings.
Wednesday, July 18, 2007
Hedging the FOREX Market
Since the arrival of the FreedomRocks FX Hedging System there hedging the FOREX Market is getting a lot more attention. Wall Street is starting to look at this kind of trading and are giving some traders billion dollar accounts to trade.
The brokers are also now clamouring to get FreedomRocks traders onto their trading stations at 400:1 leveraging. Recently FXCM gave all FreedomRocks users 400:1 leverage up to 1 million dollars. This is a first in FOREX retail history and speaks volumes as to the credibility of this system and the interest it is getting from the biggest brokers in the US.
FreedomRocks is definitely the system to watch, test, and profit by.
I will be posting results on compounding and non-compounding accounts. Some of these will be live and some demos. In this system demos and live accounts are pretty much the same as emotions do not enter into this system. The system works exactly the same on a live account as it does on a demo.
The brokers are also now clamouring to get FreedomRocks traders onto their trading stations at 400:1 leveraging. Recently FXCM gave all FreedomRocks users 400:1 leverage up to 1 million dollars. This is a first in FOREX retail history and speaks volumes as to the credibility of this system and the interest it is getting from the biggest brokers in the US.
FreedomRocks is definitely the system to watch, test, and profit by.
I will be posting results on compounding and non-compounding accounts. Some of these will be live and some demos. In this system demos and live accounts are pretty much the same as emotions do not enter into this system. The system works exactly the same on a live account as it does on a demo.
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