17 replies to this topic

[CLK]

CLK,
You nailed yesterday's Close.... BEAR TRAP!

 

 

Now if the daily would get some follow through. The last week has seemed like nothing but a premium trap, bull and bear.

Holding overnight without a hedge is disastrous but the hedging wipes out the next day's gain. It's just a day trader's

market right now.

[NAV]

 

CLK,
You nailed yesterday's Close.... BEAR TRAP!

 

 

Now if the daily would get some follow through. The last week has seemed like nothing but a premium trap, bull and bear.

Holding overnight without a hedge is disastrous but the hedging wipes out the next day's gain. It's just a day trader's

market right now.

 

 

Hedging makes sense

 

1) When you trade billions of dollars and cannot quickly exit without moving the market

2) To protect against black swan type events (by buying far out-of-money options)

 

If you are hedging on small accounts, in short-term trading, it offers no advantage. It just adds to confusion and transaction costs. It's just a psychological aversion to taking stop loss hits. You will lose more money by fully hedging, than by not hedging. Even if you partially hedge, you take hits on your profits, which in the long term is worse than hedging.

 

Look at John Hussman's performance (hedged vs unhedged). It will open your eyes on the cost of hedging over the long term.

 

https://www.hussmanf...pdf/hsgperf.pdf

 

You cannot continue to bury your head in the sand and think hedging will reduce your losses somehow. In fact quite the opposite. 

Edited by NAV, 11 April 2018 - 12:37 AM.

[CLK]

 

 

CLK,
You nailed yesterday's Close.... BEAR TRAP!

 

 

Now if the daily would get some follow through. The last week has seemed like nothing but a premium trap, bull and bear.

Holding overnight without a hedge is disastrous but the hedging wipes out the next day's gain. It's just a day trader's

market right now.

 

 

Hedging makes sense

 

1) When you trade billions of dollars and cannot quickly exit without moving the market

2) To protect against black swan type events (by buying far out-of-money options)

 

If you are hedging on small accounts, in short-term trading, it offers no advantage. It just adds to confusion and transaction costs. It's just a psychological aversion to taking stop loss hits. You will lose more money by fully hedging, than by not hedging. Even if you partially hedge, you take hits on your profits, which in the long term is worse than hedging.

 

Look at John Hussman's performance (hedged vs unhedged). It will open your eyes on the cost of hedging over the long term.

 

https://www.hussmanf...pdf/hsgperf.pdf

 

You cannot continue to bury your head in the sand and think hedging will reduce your losses somehow. In fact quite the opposite. 

 

 

 

Looks like the hedging was working until 2011, don't know what he did different. I mostly partial hedge, but if I look at my system it only had

two 20 point stops during the two week consolidation, the rest were just mostly small gains or breakeven. The hedging cost more than the two stops. What I am trying to figure out is whether it's better to always have a position and carry overnight or take eod profits if I have them. I think maybe on a big day, take profits, only drawback to that is giving up part of a real breakout.

Edited by CLK, 11 April 2018 - 03:32 AM.

[CLK]

Seems this will be another sell signal day, min. 2615 on an ES abc. Probably get a lot worse as too many bulls

were expecting the breakout, now they will provide fuel to the downside, 2560 most likely.

[CLK]

Trying to get a better edge on trading the gaps. I think the futures MACD has some clues whether it is oversold or overbought and turning

when the cash market opens.

 

Basically, any gap larger than 35% of the previous day's range, don't expect it to fill.

 

https://youtu.be/wGNrzstG4kY

Edited by CLK, 11 April 2018 - 08:04 AM.

[CLK]

For today that works out to 17.5 points. Gap needs to be less for odds to fill.

[CLK]

The ES 5 min. was overbought on the cash open so I think a retest of the lows may be in order.

[CLK]

About a 50% fill for SPX, that still counts as a hit, IWM and QQQ 100%.