An Alternate To Hedging By Wayne Jackson
This is a strategy to replace hedging that Wayne Jackson created. We agree with his feelings about hedging in this post and feel that it provides valuable information. We wanted to share this theory because it presents insights into hedging and the options you have. However this is not a post to endorse his products because we have never had the opportunity to test and review his products and services. We hope you find this post as insightful as we did.
DO NOT LOSE SIGHT THAT the prime strategy is to trade medium/ long term and trade with the trend, with a trailing stop.
We have posted this in his words.
“Hedging ” to me is simply hiding a loss under another opposite trade…and sooner or later, when the hedge comes off, there is an ugly loss exposed…I don’t like that concept !!! (However, to those who use them, I say, different strokes for different folks…that is, its a personal choice).
Currently, this is what seems to happen to some Traders…
1. you put a trade on and you put a stop loss of around 40- 50 pips
2. the market goes against you (horrors….I was wwwwwrong !! )
3. let the market continue…it will probably go say another 30 – 100 pips past your stop…who knows ???
4. FINALLY, the market comes back around and starts to head in the opposite direction
5. by now you are totally hacked off with the market and you let it go
The solution that that I found is a pretty simple one but one that has to be executed without fail…
Scenario 2
That strategy is:
1. you put a trade on and you put a stop loss of around 40- 50 pips
2. the market goes against you (horrors….I was wwwwwrong !! )
3. let the market continue…it will probably go say another 30 – 100 pips past your stop…who knows ???
4. PUT AN ORDER IN AT THE EXACT SAME FIGURE AS YOUR STOP LOSS (if you were originally “short” then place a “short” order) This ensures that when the market comes back, as it invariably does, you have a DEFINATE order in place to put you back in the market where you were originally…and you are now in the same direction as the market is moving..
5. FINALLY, the market comes back around and starts to head in the opposite direction
6. The market picks you back up on its new direction
7. THE ADVANTAGES OF THIS (THEORETICAL) STRATEGY IS THAT
a. IT HAS AN EFFECTIVE AND DISCIPLINED COURSE OF ACTION
b. IT GIVES YOU A SPECIFIC “ENTRY” POINT
c. IT REDUCES LARGE DRAWDOWNS
d. IT PUTS YOU BACK IN THE MARKET EXACTLY WHERE YOU GOT OUT
I know that there are DISADVANTAGES with this strategy, buy I think that the overall effect of the advantages outweigh the disadvantages.
I also think that this strategy is more appealing to my business sense of minimizing risk than the original concept of “hedging” that initially set me off to discover an alternative strategy to hedging.
I have now been using this strategy for a couple of months and it is working brilliantly.
PLEASE NOTE: I am a medium to long term trend trader. The above method works best on those time frames. It works less well on short term time frames because of the volatile “noise” in the market.
When a stop loss has been triggered, I allow it to go past my SL by a minimum of 50 pips before I set the new order.
When the market has turned and is coming down in the “trend” direction, my order is then opened.
Try it…you will be surprised how good it is.
The key advantage is that you are not tempted to “hang on” to a losing trade….and therefore your drawdowns are minimized.
However this is a “default” trade. It is NOT the prime strategy to use.
DO NOT LOSE SIGHT THAT the prime strategy is to trade medium/ long term and trade with the trend, with a trailing stop.
A continuation of the Anti-Hedging strategy
I start with weekly, then move closer in using daily, 4 hour and 1 hour to help me make a decision. Less than 4 hours tends to be “noise” rather than a “trend”. They are the “sucker” rallies and declines.
PS Don’t be the sucker…
But I am also starting to notice that it doesn’t really matter anymore where I buy or sell.
The anti-hedging strategy is FAR, FAR, FAR more important.
The anti-hedging strategy ensures that,… if you make a trade in the wrong direction,…. you can get your losses back …AND you are in the direction of the trend.
Stick a trailing stop loss on it and you are guaranteed a profit.
So…
1. If your trade is a winner, you stick a trailing stop loss on it and let it run.
2. If your trade is a loser, employ the anti-hedging strategy, and at some time, you can get your losses back …AND you are in the direction of the trend. Stick a trailing stop loss on it and let it run.
K.I.S.S. (keep it short and simple)
Tags: hedging, long trading, medium trading, trend trading
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17 Responses to “An Alternate To Hedging By Wayne Jackson”
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I do use hedging – successfully. This is what you do. EUR/USD and USD/CHF are inversely correlated. Use the following example: You go long the EUR/USD pair, and (horrors) it immediately goes against you. You place an order to go long (yes, long) the USD/CHF pair at the point where you might have put a stop loss for the EUR/USD trade. Because these pairs trade inversely, one goes up when the other goes down. Because of the nature of the market, (i.e. it perpetually goes up/down/up/down) one of these will be profitable while the other will not. Sell the winner, hold the loser if the loss is greater than the win. Sell otherwise. If you held on to the loser you can now hedge the loser until it’s a winner if you want to. I’ve done this successfully, and it works. It also helps me sleep at night.
I agree with Cindy above.I do the same and it always works.
Hello Cindy and Ahmed, is it possible to get more info on hedging?,i am about to try it
fxcm UK.Twice i lost biggggggggg money when i a trade went against me.
Hello,
Mr Wayne went broke from the trading, I saw him in Singapore and he looked in very bad way…. not like in the past.
Now he very poor, on forex factory they start a fund to help him back on his feet.
Not good strategy, not for Jacko.
Mr Chan
Hello my friends,
I dont agree with Jackp strategy, that is why i never paid him 700sd to get his information. i think people wo is real trader, dont sell tips on internet.I see you talking about hedging, i would like to learn more abot it. I discovered some interesting blog they provide free signals. The best thing the figures they post may put you on right side of the road, that is very iportant inforex.
todaymarketsignalsdotblogspotdotcom
I agree real traders don’t have time to post anything on blogs and forums they concentrate in the market and the open position not selling tips to the world otherwise millions of people even beginers will be driving expensive cars around vegas spending tons of cash made from the market
PS lol..
after apply for banruptcy because of huge losses in forex, conclusion is: thereis no profitable system sold on internet, the only one having success are the brokers and banks and scammers. i am very disappointed with forex, after buying systema+systems=bankruptcy. this is a devil business.
Yes , you all right,no profitable system sold on internet, the only one having success are the brokers and banks and scammers.
Using a Hedging for forex trading will end up broke.
cholo, Mauricio, Facefish – how wrong you all are. There are GOOD systems on the net PROFITABLE systems on the net. All 3 of you lack the most important in trading: Good, sound money management, good sound risk management and good sound trading psychology. If you do not have this – no trading system on the forex market will get you anywhere
Joe you say that, because you hava quick rich schem and it is easy for you to think the rest of people suffering in this financial jungle, as Cholo said, if there is profitable systems on internet why to many begginers driving expensive cars by Las vegas? Honestly if i had a profitable system i would not sell it on internet. most of this systems sellers are 1:scammers or 2:people with profitable systems, but the just sell false information to rip off inocent people, to get more money to put on their real accounts to make profits for themselves
Joe you say that, because you hava quick rich schem and it is easy for you to think the rest of people suffering in this financial jungle are stupid with no brain, as Cholo said, if there is profitable systems on internet why not many begginers driving expensive cars by Las vegas? Honestly if i had a profitable system i would not sell it on internet. most of this systems sellers are 1:scammers or 2:people with profitable systems, but the just sell false information to rip off inocent people, to get more money to put on their real accounts to make profits for themselves
Hi, I have to agree with Joe, he is right on the money. I learned from a professional trader that all systems work, its the mentality we need to develop with in us to make any of these systems work for us.
for example, lets say you have a trader who likes to trade fast, he is not concerned so much with losing his money, he is concerned enough though to have good money management, the best system for him would be a trading system which lets him get in and get out of the market quickly, he feels best in this type of situation, anything longer than the 5min to 15 or 30 min is much too long.
than you have another trader who only feels comfortable with long trades and being able to think long and hard about the market before he gets in. his style would be more on the 1 hour 4 hour and daily times. anything lower than the 1 hour is uncomfortable for him.
both of these traders are very successful in how they trade because they picked a system that makes them feel at ease while they are trading.
So all the systems work, and work well, you just have to know which one works best for you and how to have the correct mindset for it.
plus good money management is key as well in any kind of trading.
Hi cindy,
I think this strategy you do could be very dangerous. You say to sell the winner while keeping the looser. How about if this looser is increasing day by day after 2 or three days you will be a big looser
I think the best strategy I have found ( being regular looser) after a decision to trade is to trade opposite to your decision.
Surprising how often it works.
Then you are trading against the crowd.
Some of the posters here would be better off stopping forex.
Money management, sound planning and a sound price action system will make money.
There are no get rich quicks and systems – these are all bull shit.
In a LONG term trend the system of a trailing stop loss can help. Ideally if the trend is long term you could have a bank big enough to take the draw down. You are not concerned as the trend will always be up or down. It will always come to rescue you.
The tricky thing is the placing of the stop loss.
You will only get caught if you get stopped out and then the trend comes back straight away. I have seen 50 pips indicated.
Currencies move in cycles, most things do. Some things have long long terms trends – Gold is an example. This is a good market to apply this type of system on.
Has anyone (especially turtles) heard from Wayne Jackson since 27 July 2010?
I have sent $700 and four emails since then, but have not received a response.