I want to see how smart traders cover themselves in day trading during extreme volatility. Unfortunately, market makers and liquidity providers are also intelligent.
Let me give you an example: I forgot when it happened but it was in this year, maybe it was brexit vote or another event that the market was expected to have a wide range of volatility/change that would be a swing either increase or decrease at least 1000 point in DOW future. To profit in that situation, I bought calls and puts in SPY and QQQ, each contract was about $250, 10 of them for each call and put (Both LONG, $2500 for calls in SPY and $2500 for puts in QQQ, something like that). and I was prepared to lose one end ($2500) and profit from the other end (not sure how much, depending on the extent of the change), because of the wide swing. Sure enough, one end became worthless ($0) and the other became about $9500. That is how hedge worked, but this is a very simple case. There are much more sophisticated ways to hedge.
first thing a professional trader does is define the direction (trend) with a probability that should lead to profits in the long run. if he found the trend he should only take a trade in that direction. if he does not know what the trend is he waits. doing nothing is very important for a professional trader. in short: a professional trader always knows what to do: go long, go short or WAIT. there is no need to hedge, as it would confirm that the probability for profit is not good or even that the trader has no clue what the market will do.
in the night of the brexit (in europe) I made 193 k euro. In forex on fxall Victory of the no taken for granted. Risk? Victory of the not expected. Risk? What was the riskiest and least risky bet? I'm tired of hearing more intelligent men's stories because they use options or other paid coverage bla bla bla But do you reread yourself when you write these stupidity? We are not on the forum "the twilight saga". Avoid believing yourself cunning.
Hi Half Italian, I wish you the best of luck in this endeavor. I tried what you are trying to do for 10 years but just had sporadic success. Try to read some book like Trade in the Zone from Mark Douglas and also be really careful not just with your money but also your mental health with is even more precious. Best of luck my friend.
Thank you, i am moved. To tell the truth i have never read any book other than scientific or mathematical. I don't love wasting my precious time reading philosophers, guro and etc.. In America perhaps the only book worth reading is that of Dave Cummings (tradebot system). Greetings of good mental health.