SPX 3x Short ETF Hedge PlayThe SPX looks like it is ready to give us a moderate pullback so I will be playing this via multi-week call options on this 3x-Short SPX Bear ETF
Hedging
CHFJPY Grid Hedging 50 Pips (Type A)0.02 lot size.
I am applying Grid Hedging (Type A) trading management to CHFJPY.
I will enter buy and sell trades. Close trade when the trade is in 50 pips profit and open another 2 buy and sell trades.
(Exit A) When buy trades more than sell trades, if last buy trade is 50 pips profit, I will close all trades.
(Exit B) When sell trades more than buy trades, if last sell trade is 50 pips profit, I will close all trades.
(Exit C) I will close all trades when total profit/loss of opened and closed trades has hit $60.
AUDCAD Grid Hedging 40 Pips (Type A)0.02 lot size.
I am applying Grid Hedging (Type A) trading management to AUDCAD.
I will enter buy and sell trades. Close trade when the trade is in 40 pips profit and open another 2 buy and sell trades.
When buy trades more than sell trades, if last buy trade is 40 pips profit, I will close all trades.
When sell trades more than buy trades, if last sell trade is 40 pips profit, I will close all trades.
I will close all trades when total profit/loss of opened and closed trades has hit $48.
NZDCAD Grid Hedging 50 Pips (Type A)0.02 lot size.
I am applying Grid Hedging (Type A) trading management to NZDCAD.
I will enter buy and sell trades. Close trade when the trade is in 50 pips profit and open another 2 buy and sell trades.
When buy trades more than sell trades, if last buy trade is 50 pips profit, I will close all trades.
When sell trades more than buy trades, if last sell trade is 50 pips profit, I will close all trades.
I will close all trades when total profit/loss of opened and closed trades has hit $60.
Preserving Your Capital Like A ChampIn the world of trading, effective trading capital management can mean the difference between success and failure. We cannot stress enough how critical this aspect is to long-term success. Today we will delve into the importance of managing your trading capital, the various strategies employed by many successful traders, and how you can implement these techniques to safeguard your investment and maximize profits.
Understanding the Importance of Trading Capital Management
Trading capital refers to the amount of money allotted for the purpose of trading your desired market. Proper management of trading capital is crucial for traders, as it helps them minimize losses and in turn, maximize profits. In essence, trading capital management is all about striking the right balance between taking risks and preserving your hard-earned money.
One key aspect that differentiates successful traders from gamblers is their mindset. Gamblers tend to chase big wins, hoping for a life-changing payout, while traders focus on consistently generating small, predictable returns over the long term. Don’t get us wrong, big wins can and do happen, and they feel great when they do. Think of trading as a really long boxing match. It's rare and impractical for a boxer to believe they can knock out their opponent by flying out of a corner with no defense and going straight for a haymaker each time. The foundation for success takes many consistent jabs, and an unwavering defense, much like trading. Traders who want to be long-term successful will prioritize risk management and capital preservation, ensuring that they can continue trading even after incurring losses so they can pursue consistent profits.
The Struggle is Real For New Traders
New traders often find difficulty in managing their trading capital effectively. This is primarily due to their focus on making profits rather than minimizing risks. The desire to make money can lead to taking unnecessary risks, which can result in significant losses. It is crucial to remember that every loss must be recovered through a profitable trade to regain lost ground. So why not implement strategies that mitigate that lost ground in the first place?
Strategies To Adopt for Long-Term Success
So, what are some of the techniques that successful traders use to optimize their chances of consistent profits in the markets? Here are a few suggestions to improve your trading capital management:
Implementing Stop-Loss Orders
Always trade with a stop-loss. There are countless ways to implement a stop-loss, and we covered this in great detail in a previous article that is linked below. A stop-loss order allows you to specify a price at which your trade will be automatically closed if the market moves against you. This is the most practical and easily enactable capital management technique you can use. Some would consider trading without a stop-loss to be one of the cardinal sins of trading, as it prevents you from managing risk effectively.
Utilizing Reward Risk Ratios (RRR)
Every trade carries the risk of making a loss. Successful traders assess their potential trade risk and potential reward before entering a position. Utilizing reward-to-risk ratios may seem complicated, but it doesn't have to be. Many traders will often aim for a reward that is twice their risk or a ratio of 2 to 1. So in theory for every $1 you risk you aim to make $2 in profit. Your RRR can also help you understand what your theoretical minimum win rate would need to be a profitable trader.
Utilizing this information is very handy when backtesting and forward-testing your strategy. In the early stages of a trader's journey, we highly recommend to keep a trading journal to keep track of these metrics. Keeping track of your wins and losses and keeping your RRR consistent offers deep insight into whether you are on the right path to consistency.
Managing Your Money
How much capital are you risking per trade? It's difficult to predict which trades will be profitable, but it's essential to risk a consistent amount on every trade. Coupled with an appropriate risk-to-reward ratio, this approach can help protect your trading account. For example, consider risking only 1-2% of your total trading portfolio on each individual trade with a maximum overall of 10% among your trades. This may not seem like much, but if you can remain disciplined with your stop losses and RRR you greatly increase the odds of success. If you have a small account don’t sweat it. It will help you grow that account size and compound those gains in a stable fashion that would outlast the method of throwing your entire account into each trade.
Hedging
Holding long and short positions on various assets in different sectors can help protect against any aggressive moves that affect the market as a whole. For instance, if there was a sudden 'flash crash,' the traders who solely went long would experience a loss or a potentially significant loss without proper risk mitigation. However, if you held both long and short positions, you could have made profits to offset the losses. Obviously, market events are hard to account for, but hedging can be a useful capital preservation strategy.
Focusing on a Single Asset to Limit Risk Exposure
Some traders prefer to concentrate on trading one asset to minimize risk exposure. This can be effective, especially when the trader has in-depth knowledge of the specific asset being traded. The potential downside is that this can limit your trading opportunities, but we highly advise this approach for new traders. Focusing on one asset can help you grow your experience and hone your strategy through a rigorously disciplined approach.
Consistency in Risk and Money Management
There is no one-size-fits-all approach to trading, and that's part of the beauty of it all. A strategy that works for one trader may not work for another. The key to improving your trading strategy is to adopt a disciplined approach to risk and money management. While this approach may not be as flashy as some in the trading community portray, consistently minimizing risk is an essential aspect of enhancing overall profitability and is a massive attribute to long-term success.
Final Thoughts on Trading Capital Management
Effective trading capital management is crucial for success in the world of trading. By adopting a disciplined approach to risk and money management, traders can minimize losses, maximize profits, and safeguard their investments. The techniques discussed – implementing stop-loss orders, utilizing reward-to-risk ratios, managing money, and diversifying trades – are all essential components of a successful trading capital management strategy.
Remember, the key to success in trading lies not in chasing the knockouts but rather by consistently landing the jabs while maintaining a stout defense. By following these strategies adopted by long-term, successful traders and focusing on preserving capital, you can improve your chances of obtaining that same long-term success in the markets.
Are we approaching the last cycle expansion phase?The last cycle expansion phase or the euphoric stage, has already occurred between 2020 and 2021.
Sir John Templeton said: “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.”
Reference of Nasdaq:
E-mini Nasdaq-100 & Opt
Minimum fluctuation
0.25 index points = $5.00
Micro E-mini Nasdaq-100 Index & Opt
Minimum fluctuation
0.25 index points = $0.50
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
GBP - Try again to fix the hedgeNo particular plan right now, Just observe the channel and see what breaks.
-If we have a strong run out and up, the hedge buy target becomes a focus, and then match sell from that level.
-If we have a strong run out down, the hedge sell, or breakeven(depending where it break) will be the focus, then match buy from that level.
No targets as of right now, just alerts and observations. Pretty sure I just got suckered by the supply zone break, but, this is where it is now lol. Should've taken the 23 pip loss on the sells yesterday when I had the chance, but tried to hold out for the plan, and didn't think much about flexing at the time from all the stop running and just general chaos in the movements.
This time, I stay flexible!
Neutral, though still feel short is probably the right way, just trying to manage a breakdown of the channel and trade to the goal of getting out of these positions at this point.
JPY TroublesThe Situation-
It was going GREAT.... Until it wasn't...
I mis read the trade, and got it wrong with a bad entry, then another, then another.
I made that entry worse trying to move out of the position at breakeven before close of the week
Managed to recover half of the drawdown amount through scalps, then after some "analysis fatigue" it got a bit worse, so I hedged out to go through the weekend and observe the open for a possible outcome:
The Plan:
I've selected a few levels and target points for few different outcomes, but with an overall short Bias.
Plan A, & Plan A Alternative:
Should price open and move up, I will look to close the buys (3 separate units, Blue Arrows) around Point 2, making a net profit of 84 pips. Point 2 has some support and resistance within a short span of time, so it's a little questionable, but I will be waiting for some rejection before entering a second sell from this level (3 units), as I already have a slightly higher order count than I should have because of some scalps that didn't fully work out, so make sure before entry.
If there is no rejection, or not much rejection, I will re-hedge up to the next level at Point 5, where there looks to be significant resistance. This will also secure another 270 pips (90 x 3 units) of profit if it makes it, otherwise will watch to see if it will reverse before to close premature, but the safest play would be go to the level or close the additional hedge at break even.
I expect the price to likely follow the idea of coming up to Point 2, get some volatility, then drop, clearing the sell trades at breakeven, and then look for a new fresh opportunity.
Plan B:
Price naturally opens down with the trend outlook in play, dropping all the way to Point 1 below at a key level. At that point, I will liquidate the sells for a net gain of roughly 360 Pips (120 x 3 units)
I will then immediately enter a buy sell from this level, Looking to close back above revisiting the level around Point 4 with a pullback. Just above halfway between Point 1 to Point 4, so any natural retracement should be able to clear out the buys near breakeven or small loss, before turning back down. Once the Buys get cleared (Breakeven or slightly better, as I'm expecting price to continue running down fairly quickly (just my experience of the nature of the JPY)
Hedge Protection for any new positions:
Fixed around 25 Pips beyond any buy or sell in the opposite direction, with major levels as targets for new hedges. This will allow enough space for the hedge to benefit the equity in an advantageous way to cover any new positions of correction with boosted free margin, and give plenty of possibility for meeting in the middle of a level quickly to breakout of some positions without much loss, but preferable and most likely for break even for either set of directions, with significant gain if major levels make it into the outcome. Plan B will give the most gain, but I am not looking to force the market, only make a success with what is presented while protecting the account from further mistakes on this trade setup.
GOLD : What Drives the Price of Gold ?OANDA:XAUUSD
Gold is highly sought after, not just for investment purposes and to make jewelry but also for use in the manufacturing of certain electronic and medical devices. As of February 2023, the price of gold was more than $1,870 an ounce. While down around $100 from a high posted in April 2022, it is still up considerably from levels under $100 seen 50 years ago.
But what factors drive the price of this precious metal higher over time ?
KEY TAKEAWAYS
1 Investors have long been enamored by gold, and the price of the metal has increased substantially over the past 50 years.
2 Not only does gold retain additional value, but supply and demand have a huge impact on the price of gold—especially demand from large ETFs.
3 Government vaults and central banks comprise one important source of demand for gold.
4 Gold sometimes moves opposite to the U.S. dollar because the metal is dollar-denominated, making it a hedge against inflation.
5 Supplies of gold are primarily driven by mining production.
Conclusion : Gold Is a high Value Asset , Which Can be Hedge Against Growing Inflation.
Pending Order to the next hoursPending orders in highlighted zones is another way to trade.
Use SL
NFP and unemployment rate will shake de market.... higher than forecasted unemployment rate will trigger alarms about the recession.
Bites Of Trading Knowledge For New TOP Traders #18 (short read)Bites Of Trading Knowledge For New TOP Traders #18
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What is the Blockchain? -
The Blockchain is a decentralized ledger that is append-only meaning that data can only be added to it. Once information is added, it is extremely difficult to modify or delete it. The Blockchain enforces this by including a pointer to the previous Block in every subsequent Block.
The pointer is a Hash of the previous block. Hashing involves passing data through a one-way function to produce a unique Fingerprint of the input. If the input is modified even slightly, the Fingerprint will look completely different. Since the Blocks are linked in a Chain, there is no way for someone to edit an old entry without invalidating the Blocks that follow, allowing a secure structure.
What Is a Blockchain Consensus Algorithm? -
A consensus algorithm is a mechanism that allows users or machines to coordinate the agreement of what is a valid block in the Blockchain in a distributed setting. It needs to ensure that all participants in the system can agree on a single source of truth. Types of consensus algorithms include Proof of Work (PoW) and Proof of Stake (PoS).
What is Proof of Work? -
Proof of Work (PoW) is a mechanism for preventing the same bitcoin funds from being spent more than once. Proof of Work consists of a consensus algorithm, which is a protocol that sets out the conditions for what makes a block in the Blockchain valid. It ensures the security and integrity of bitcoin’s distributed ledger.
RISKS AND OPPORTUNITIES FOR CORPORATES AND INDIVIDUAL INVESTORS -
Common application of financial market instruments for managing risk and opportunities.
Hedging Portfolio Risk
Hedging bitcoin exposure with the Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures (BMC) contract is a way to manage portfolio risk by taking a directional position opposite to the underlying asset as protection.
For example, a hedger may have plans to hedge downward price movement in bitcoin using futures contracts based on in-house market and portfolio analytical processes. The market analysis may use common technical analytical techniques such as support and resistance to formulate the trade decision.
If bitcoin is expected to weaken as it nears the resistance area, the hedger may plan to enter into a short futures position using the Bakkt ® Bitcoin (USD) Cash Settled Monthly Futures contract under either price levels of $27,500 or $32,500 to lock in the value of their underlying bitcoin position. Alternatively, if the hedger was in a short bitcoin position and wanted to hedge their position as price rose, entering a long futures position above price levels $12,500 or $16,500 could be considered.
TRADDICTIV · Research Team
--------
Disclaimer:
We do not provide investment advice, nor provide any personalized investment recommendations and/or advice in making a decision to trade. Before you start trading, please make sure you have considered your entire financial situation, including financial commitments and you understand that trading is highly speculative and that you could sustain significant losses.
LAZR Hedged Options StrategyLuminar Technologies, Inc. makes sensor technologies and software for vehicles and is distributed internationally. Laser imaging, detection, ranging sensors, perception and autonomy software are becoming the norm in newer cars. LAZR stock has also made a few headlines this week as a couple of institutions have started or added to their positions, and most analysts have rated it a buy or hold. There's some recent rallying in growth stocks in general. Overall, it seems to be a promising young company making in-demand LiDAR products.
The doubts: Big name analysts (like GS) have cut its target price. Northland downgraded it from outperform to market perform. Fed rate hike next week. Technically, it's testing the lower EMAs and levels with some bullish patterns but who knows with the random gaps up and down these days.
Here's our hedged strategy
Buy 1 $5.00 Call
Buy 1 $7.50 Call
Sell 4 $2.50 Put
All expiring 1/19/24
This strategy can make up to 26% (20% annualized) and protect from a drop of up to 66% (cushion set way down to $2.50) as of 1/19/24.
Capital Required: $999
Hedge 99% of Stop Loss | Will it work? | Why isn't this popular?The explanation is drawn on the chart using text boxes.
SHOP Options StrategyCanadian e-commerce platform Shopify Inc (SHOP) offers 1.7 million online retailers in 175 countries (as of 2021) a range of services including payment, marketing, shipping and customer engagement. After online shopping boomed during the pandemic, it crashed ~80%, laid off 10% of its workers, and acquired Deliverr (product shipping) and Dovetail (influencer marketing). Shopify has also announced expansion into brick-and-mortar with its new product, the POS Go -- a device that allows retailers to provide wireless checkout anywhere in the store and analyzes sales, inventory and other data for merchants. Market cap $35B.
If SHOP has hit its low and is on its way up, here's an options strategy that maintains growth potential of up to 18% (26% annualized) but also allow some downside protection as SHOP is given room to fall 47% before breaking even.
Capital required: $2969.64
Hedged option legs:
Buy 1 $25 call
Sell 1 $30 call
Sell 2 $15 puts
Exp 6/16/23
Win probability: HIGH
Currently Hedging my Portfolio with Two VIX ETFsUsing the SVOL reverse VIX ETF along with the UVXY leveraged ETF i am able to hedge my risk to my portfolio. I've actually been gaining on this strategy too so in this market I found this hedging strategy to be very reliable
Classic 10x While HEDGED''Oh Professor, I am a directional trader, I don't make money when I blend my positions. Hedging doesn't work for me''
Well, once again, I can assure you that hedging does work.
Many charts and many tokens, some will rise and some will fall.
In a market that changes direction in seconds you probably want to reconsider..
My message to my Turkish brother, while having some coffee. Also my message to you too.
One Love,
The FXPROFESSOR
Ps. i have bad weeks and i have good weeks, i have bad days and months and good days and months but at the end of the day i enjoy trading without stress. Get rid of people and things that stress you out, trade as a GAME first and with money you can play with and use your real buying power to selct good SPOT and accumulate between now and 2024-2025. Just my humble opinion, you are on Tradingview where we supposed to all be logical, grown ups. You look, you listen or you post and you always decide what YOU will do with YOUR money.
ATOM IDEA GOES AS NEUTRAL SINCE IT'S CLOSE TO TAKE PROFIT LEVEL AT 17,34$
The hedged grid trading system experiment The hedged grid trading system uses the principle that one should be
able to cash in at a gain no matter which way the market moves. No
stops are therefore required at all. The only way this is logically possible
is that one would have a buy and sell active at the same time. Most
traders will say that that is trading suicide but let's take some to look at
this more closely.
Let's say that a trader enters the market with a buy and sell active when
a currency is at a level of say 100. The price then moves to 200. The
buy will then be positive by 100 and the sell will be negative by 100. At
this point we start breaking trading rules. We cash in our positive buy
and the gain of 100 goes to our account. The sell is now carrying a loss
of -100.
The grid system requires one to make sure that cash in on any
movement in the market. To do this one would again enter into a buy
and a sell transaction. Now, for convenience, let's assume that the price
moves back to level 100.
The second sell has now gone positive by 100 and the second buy is
carrying a loss of -100. According to the rules one would cash the sell in
and another 100 will be added to your account. That brings the total
cashed in at this point to 200.
Now the first sell that remained active has moved from level 200 where
it was -100 to level 100 where it is now breaking even.
The 4 transactions added together now magically show a gain:- 1st buy
cashed in +100, 2nd sell cashed in +100, 1st sell now breaking even
and the 2nd buy is -100. This gives an overall a gain of 100 in total. We
can liquidate all the transactions and have some tea.
INVEST NOW AND TAKE PROFIT BY NOVEMBERTHIS IS NOT AN INVESTMENT ADVICE
The hedged grid trading system uses the principle that one should be
able to cash in at a gain no matter which way the market moves. No
stops are therefore required at all. The only way this is logically possible
is that one would have a buy and sell active at the same time. Most
traders will say that that is trading suicide but let's take some to look at
this more closely.
Let's say that a trader enters the market with a buy and sell active when
a currency is at a level of say 100. The price then moves to 200. The
buy will then be positive by 100 and the sell will be negative by 100. At
this point we start breaking trading rules. We cash in our positive buy
and the gain of 100 goes to our account. The sell is now carrying a loss
of -100.
The grid system requires one to make sure that cash in on any
movement in the market. To do this one would again enter into a buy
and a sell transaction. Now, for convenience, let's assume that the price
moves back to level 100.
The second sell has now gone positive by 100 and the second buy is
carrying a loss of -100. According to the rules one would cash the sell in
and another 100 will be added to your account. That brings the total
cashed in at this point to 200.
Now the first sell that remained active has moved from level 200 where
it was -100 to level 100 where it is now breaking even.
The 4 transactions added together now magically show a gain:- 1st buy
cashed in +100, 2nd sell cashed in +100, 1st sell now breaking even
and the 2nd buy is -100. This gives an overall a gain of 100 in total. We
can liquidate all the transactions and have some tea.
The hedged grid trading systemThe hedged grid trading system uses the principle that one should be
able to cash in at a gain no matter which way the market moves. No
stops are therefore required at all. The only way this is logically possible
is that one would have a buy and sell active at the same time. Most
traders will say that that is trading suicide but let's take some to look at
this more closely.
Let's say that a trader enters the market with a buy and sell active when
a currency is at a level of say 100. The price then moves to 200. The
buy will then be positive by 100 and the sell will be negative by 100. At
this point we start breaking trading rules. We cash in our positive buy
and the gain of 100 goes to our account. The sell is now carrying a loss
of -100.
The grid system requires one to make sure that cash in on any
movement in the market. To do this one would again enter into a buy
and a sell transaction. Now, for convenience, let's assume that the price
moves back to level 100.
The second sell has now gone positive by 100 and the second buy is
carrying a loss of -100. According to the rules one would cash the sell in
and another 100 will be added to your account. That brings the total
cashed in at this point to 200.
Now the first sell that remained active has moved from level 200 where
it was -100 to level 100 where it is now breaking even.
The 4 transactions added together now magically show a gain:- 1st buy
cashed in +100, 2nd sell cashed in +100, 1st sell now breaking even
and the 2nd buy is -100. This gives an overall a gain of 100 in total. We
can liquidate all the transactions and have some tea.
The hedged grid trading systemThe hedged grid trading system uses the principle that one should be
able to cash in at a gain no matter which way the market moves. No
stops are therefore required at all. The only way this is logically possible
is that one would have a buy and sell active at the same time. Most
traders will say that that is trading suicide but let's take some to look at
this more closely.
Let's say that a trader enters the market with a buy and sell active when
a currency is at a level of say 100. The price then moves to 200. The
buy will then be positive by 100 and the sell will be negative by 100. At
this point we start breaking trading rules. We cash in our positive buy
and the gain of 100 goes to our account. The sell is now carrying a loss
of -100.
The grid system requires one to make sure that cash in on any
movement in the market. To do this one would again enter into a buy
and a sell transaction. Now, for convenience, let's assume that the price
moves back to level 100.
The second sell has now gone positive by 100 and the second buy is
carrying a loss of -100. According to the rules one would cash the sell in
and another 100 will be added to your account. That brings the total
cashed in at this point to 200.
Now the first sell that remained active has moved from level 200 where
it was -100 to level 100 where it is now breaking even.
The 4 transactions added together now magically show a gain:- 1st buy
cashed in +100, 2nd sell cashed in +100, 1st sell now breaking even
and the 2nd buy is -100. This gives an overall a gain of 100 in total. We
can liquidate all the transactions and have some tea.
Bites Of Trading Knowledge For New TOP Traders #12 (short read)Bites Of Trading Knowledge For New TOP Traders #12
----------------------------------------------------------------
What is Hedging? -
Hedging is the action taken through the use of a financial instrument to minimize the loss or risk of the loss of value of an asset due to adverse asset price movements.
Who are Hedgers? -
Hedgers are market participants such as commodity producers who want to lock in selling prices of commodities they produce, or food manufacturers who want to lock in buying prices of raw materials purchased.
Market participants also include financial institutions handling financial assets and use derivative products such as futures to manage the risk of a portfolio of financial assets.
What is the difference between Physically Delivered vs Cash Settled Futures Contracts? -
Physical delivery is a term in a futures contract which requires the actual underlying asset to be “physically delivered” upon the specified delivery date, rather than being traded out with an offsetting contract.
Cash settled futures on the other hand allows for the net cash amount to be paid or received on the settlement date of the futures contract.
Futures exchanges may offer both types of contracts to market participants who have different purposes for trading futures contracts.
RISKS AND OPPORTUNITIES FOR CORPORATES AND INDIVIDUAL INVESTORS -
Common application of financial market instruments for managing risk and opportunities.
Diversification: Correlation in Futures
Investors could allocate a portion of their portfolio to establish a managed futures position to deliver non-correlated results under most market conditions, which may serve as a risk mediator within an overall portfolio. This may deliver lower relative returns during periods of price stability. However, during periods of market stress, managed futures could outperform the broad market.
For example, the Asia Tech 30 index which has no Thai companies as a component stock would not be expected to have any Thai Baht (USDTHB) currency exposure and which could be included in a managed futures portfolio at times where there is no or low correlation between the two markets and could be used as a hedge during times of negative correlation.
Diversification: Portfolio Focused on Asset Returns
Individual investors who have a portfolio of foreign stocks will have a return that is composed of the return of the foreign currency-denominated stock plus the change in currency exchange rates. Therefore, investing abroad means having exposure to two different sources of risk and return made up of the underlying asset and the exchange rate.
For a long-term investor, the focus on return-generating assets may be the priority rather than returns from currency exchange rates. This could imply removing currency risk through a clearly defined hedging strategy process initially and then adding back currency exposure at a later stage if it is determined that currency exposures could improve a portfolio’s return. Investors would need to analyze their expected returns with and without currency exposures and determine their net currency exposure that they would like to remove. U.S. Dollar based portfolios could use futures contracts such as the Mini US Dollar Index ® Futures to hedge a basket of foreign stocks denominated in their respective domestic currencies.
TRADDICTIV · Research Team
--------
Disclaimer:
We do not provide investment advice, nor provide any personalized investment recommendations and/or advice in making a decision to trade. Before you start trading, please make sure you have considered your entire financial situation, including financial commitments and you understand that trading is highly speculative and that you could sustain significant losses.
$SPX500: Top of relief rally?I'm short here, hedging my long book. Got a few long term positions that should do well regardless of whether this is part of a larger relief rally in a bear market, or a new leg up with new highs coming...but also have some growth positions I bot to capture the oversold names turning up that I need to manage risk for. I will be closing the ones that fail, but this signal helps control risk as individual charts pan out. Daily $SPX500 trend expires today, might see some rotation from stocks to bonds, as the quarter ends. Interesting at least, recession risk is substantial and bonds might react as well. Weekly charts for bonds show targets have been hit, so a rebound could occur.
Stay safe out there, I'm short 230% vs my stocks portfolio, since some names I hold have higher beta, and I have some leverage going as well. (long term positions are low beta, but got high beta names long still)
Cheers,
Ivan Labrie.
Bites Of Trading Knowledge For New TOP Traders #9 (short read)Bites Of Trading Knowledge For New TOP Traders #9
---------------------------------------------------------------
What is Hedging? -
Hedging is the action taken through the use of a financial instrument to minimize the loss or risk of the loss of value of an asset due to adverse asset price movements.
Who are Hedgers? -
Hedgers are market participants such as commodity producers who want to lock in selling prices of commodities they produce, or food manufacturers who want to lock in buying prices of raw materials purchased.
Market participants also include financial institutions handling financial assets and use derivative products such as futures to manage the risk of a portfolio of financial assets.
What is the difference between Physically Delivered vs Cash Settled Futures Contracts? -
Physical delivery is a term in a futures contract which requires the actual underlying asset to be “physically delivered” upon the specified delivery date, rather than being traded out with an offsetting contract.
Cash settled futures on the other hand allows for the net cash amount to be paid or received on the settlement date of the futures contract.
Futures exchanges may offer both types of contracts to market participants who have different purposes for trading futures contracts.
RISKS AND OPPORTUNITIES FOR CORPORATES AND INDIVIDUAL INVESTORS -
Common application of financial market instruments for managing risk and opportunities.
Risk management is the responsibility of market participants designed to limit risk exposures that specifically applies to the participants financial profile in the market.
The financial profile of a participant may include their role in the financial market or the amount of capital under their responsibility to be managed in the market, and therefore the risk variables that each would need to identify may be unique.
For both corporate and individual investors, the market to trade would be a key variable to clearly state and support with reasons for trading or investing. Reasons for selecting one market over another could include price volatility, liquidity, daily volume traded, size of the minimum price increment, and value of the minimum price increment. Comparing these variables between markets will help decide the suitability and/or risk of each.
For example, if Mini-Brent Crude Oil futures (BM) moves around $2.00 per day (or 2 points) and a point is worth $100, a trader might experience a $200 fluctuation in their account balance for one day. Another example is the U.S Dollar / Singapore Dollar (USDSGD), which could move 70 pips or more per day and trading a standard lot size with each pip worth $10, a $700 fluctuation could be expected for one day.
Market participants may also manage their risk through the size of their positions. The larger their position size, the greater is their exposure and the smaller their position size their exposure is lower. Investors should determine the risk that would result from various position sizes and select the size that ensures that their risk limit is not exceeded.
Finally, setting stops with a specified loss amount provides protection if the market does not move in the desired direction. It helps to prevent creating a loss scenario which is larger than an account can handle.
TRADDICTIV · Research Team
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Disclaimer:
We do not provide investment advice, nor provide any personalized investment recommendations and/or advice in making a decision to trade. Before you start trading, please make sure you have considered your entire financial situation, including financial commitments and you understand that trading is highly speculative and that you could sustain significant losses.
