Opposite trades with equal lot sizes ended up reducing your capital

[Norbert Lepathy]

Today I placed two trades of equal lot sizes on the same currency pair. After a while one was going in my favour and the other against me. But slowly I noticed that I was losing money with the negative one. How can this be possible when the lost sizes were the same? It was supposed to maintain my balance in equilibrium. Can anyone explain what was happening? Is this normal?
Thanks for your response.

Norbert

 

[Jason]

Today I placed two trades of equal lot sizes on the same currency pair. After a while one was going in my favour and the other against me. But slowly I noticed that I was losing money with the negative one. How can this be possible when the lost sizes were the same? It was supposed to maintain my balance in equilibrium. Can anyone explain what was happening? Is this normal?
Thanks for your response.

Norbert

Because this is 'hedging' - both lots of positions would attract same amount of swaps etc, so if one lot makes a profit, the other losing lot will take the overall balance into negative territory

 

[brunildafulton]

The negative trade makes you lose money because overall, you're still losing money. It's not a good idea to hedge because it often results in a worse overall position.

 

[MarnieLarge]

That happened due to hedging.

 

[louisegoodman]

I did not understand, what was your purpose behind this trading experiment? Why did you want to achieve such equilibrium?

 

[catherinacrowley]

I think the hedging strategy is responsible for your loss in this case. It will be a better practice not to perform such experiments in trading.

 

[Polakandil]

I don't understand actually, maybe my mind can't reach it, but usually hedging position with buy and sell using the same lot size the floating loss remain same if occurs little different maybe about delay speed of data, and loss floating will not change except charged about the swap, or commission, its because order active overnight as rollover fee. hedging position will keep floating loss remain same until one order closed.

 

[brendalloyd]

Looks like hedging didn’t go well for you and you had to pay double trading costs.

 

[LamarKenyon]

It’s not because you are hedging but because you are not doing it properly. Not sure how experienced you are overall but looks like you are not prepared for it.

I believe you should stay away from it for some more time and try it again when you can understand market swings and timing in a better way.

 

[Leonardo_fx]

Hedging can be applied if you succeed then get out of this castle soon. When hedging for a long time, a negative swap can easily reduce the deposit, on most currency pairs the swap is negative.

 

[timothydanie]

I can clearly observe that you were exprementing by just having two equal lot sizes, it happened because of hedging and it is normal.

 

[Polakandil]

A hedging position is only one way to protect the risk temporarily, the most problem with using a hedging position is when to open lock hedging, get wrong decision still leading loss t increase, fixed stop loss can be simpler than hedging because the trader can set the risk exactlly.

 

[Whimsical]

Hedging many times is counterproductive and can make you lose money instead of bringing profit even if you have equal lot sizes. So you better avoid this.

 

[Neology]

This happened because you were experimenting and the market is uncertain. Anything can happen and change your plan, you have to be prepared. Also, this usually happens when you hedge, so maybe you made a wrong move or didn’t execute hedging properly. Do some research and get a better idea to improve your profit returns.

 

[Heartsome]

So, from what I can see, you were trying to hedge, and that didn’t end up working out, causing you to lose more money than you gained. You did improperly, and can use this as a learning opportunity for next time round!

 

[Spartan]

You tried to hedge but failed. It’s a good strategy if used properly. But if you don’t have any prior experience in it, try with a small amount so that it doesn’t ruin your account.

 

[Blockhead]

In hedging risk and rewards often become proportional to each other and maybe this is why you were losing money.

 

[Finicky]

I think that’s quite a risk. Hedging is not as easy as it may sound. Analysing the market from two different angles is not easy.

 

[Statoscope]

All of this happened because your hedging did not go well and you had to add twice the amount of money. However it is perfectly normal and you should not stress over it. If you wish, take a break and come back stronger. Good Luck.

 

[Venencia]

Applying opposite trades with equal lot sizes is a form of risk management called hedging. However, while reducing risks, hedging also reduces the overall profits. If your loss in one trade is more than the profits in another trade, your overall profit will be negative, meaning the outcome of both the trades would mean you lose.