Can you if you dont mind give an example of what an effective hedge is, perhaps for myself having traded 13 years i seem to find a hedge is similar to simply having a toned down position without the hedge. Since a hedge always comes at a cost, "Best to use credit card and easier to get refunds" Couldn't have been said better, "I have had over 3 dozen trades trying to find highs in Indexes," I too spent well over 5 years always shorting highs and buying bottoms, BUT what i noticed, that even when these trades are successful the pressure is so high, whether you trade systematically or discretionary, because of the gains are all dependent on few trades the amount of dependence is enormous in comparison of trades that make smaller percentages or gains in with more frequent trades, I am a swing trader not day trader at all, and not advocating for it, i imagine like a coach of a soccer team, if you have the expectations that one player needs to score 5 times lets say, the level of pressure is enormous on that one player that again even if achieved too much focus on one player, when the true goal is to score the most, doesnt matter which player scores as long as in the end you got the most scores/goals made. More over if these trades do NOT work and years have passed the time loss is never recoverable. My biggest mistake and learner was GE, i been buying it since it was at 19 bucks. Yet having looked, the swings it made up and down while its in the range if 8 to 13 bucks are MORE of a percentage gain than holding GE even if it goes back to 33
I started hedging in 90's, since Risk Management was not my "edge" back then, it was simple buy calls when selling or buy puts when buying, but now Hedging is my edge and no one ever should reveal their edge, plus it has become so complicated, had to take physics to include in risk management. It is like finding when 2 missiles are to collide before it happens so I can use other formula's to be placed before volatility expands so options do not get too expensive. There are always other factors such as spreads, quantity, when to expirations, how many to get positive expantentcy at time of entry. But after entry, this changes. Yea, I use to have 40-60k built up into each lot only to get stopped out at breakeven plus lunch, been that way with Gold, it missed the reversal area by 30 bucks in Dec 2015, so as it has gone up, kept selling it and hedged, still have rollover positions from 2011 as original entries. Automation has one target fairly large and 10% of position is taken off, this is for losses on options/futures where after getting stopped out on underlying, options reverses for double losses, don't happen often but does happen. Have learned to hedge open profits on reversal charting patterns, so like Crude Oil never got high enough to reverse, on monthly or weekly or daily shows reversal chart patterns, automation hedges open profits instead of selling the future's position, but mid March price hit breakeven stops on future's and hedges start getting out as price goes lower. So on a breakeven position, model did well off the hedges. But recently, model bought Crude oil lower and hedged, and added today/hedged. In futures, don't swing as week duration but take add on trades which with rollovers can take years. In stocks do swings later in over time of market kept going up of taking profit of 90% of position and 10% as runners. Have developed method of using weekly options, only took 3 years to make something to be happy, so buying them instead of the stocks with 5 days or less till expiration, don't talk about the Greeks, model does not use them as signals off directional. At an age where math not easy any more so Greeks never can retain definitions whereas charting is like breathing to me. Whether futures or stocks, 90% of my models are waiting for huge retracements then buy/hedged, usually where I am buying, trend often is changing for many. I am numb to numbers now, so too old to care if chunks made or lost, so long as I don't change models stop losses, my way of trading works for me. Too old to care enough to change hugely. Have much more answers to questions now. When pressure gets high and you trying to get better tax bennies, can hedge, but I recommend playing "what if's" for a few years to iron it out.
I sold my 2 CLV20 at 36.12 for a profit of $5,640. I wish I wouldn't have panicked and sold the 7 CLV20. I lost over $16,000 instead of profiting $14,910!!!
You will always panick if you do NOT have a plan,,, you got size i dont understand why you dont scale in and out?? thats what i do,.,, and i know this was the biggest problem i had back when i could not trade more than one CL, but even then etf give you scale to "slice" the position.. Its amazing because no matter where it goes up or low your either buying or selling but holding a small even if very small position on the direction your expteing it to go, for me, Up, but i am always wanting and hoping it swings side ways as long as it can,, more money is to be made in a 2 dollar round trip 10 times than in crude going up 10 bucks
Oil at resistance and a gap to fill. Will oil fill the Gap sooner or later? It's trading at plenty of resistance and price action bearish in the last few days. As traders await supply cut details there's many questions still looming. The fact is there is huge over supply and low demand and those dynamics paint bearish price action on a chart such as gaps down and probable follow thru gaps. With the current meeting going on, this is a known catalyst which will propel oil prices one way or the other. If oil goes higher from here there is still more resistance above where the gap is. However, oil is in a overall down trend and price action will confirm direction and continuation of trend. I think the gap above will probably be filled later rather than sooner.
I told you...If you want to swing trade, you have to be prepared for the possibilities. But I also still say that you made the right decision to get out when you did, because CL may have kept on going down, and you would have been in an even bigger-world-of-hurt. I just wish you would have peeled off a few of the losing contracts, instead of the whole thing at once. Would have given you more time to flesh out your situation. At least you made some of it back, so take solace in that.