Trades closed overnight. How?

compu-forex

Sergeant
Messages
149
As others have mentioned, you were exposed to the overnight spread. GBPUSD can easily run to 20 or 30 pips. When you are hedged, you have double exposure without realising it.

I don't know what strategy you are trading but some words of wisdom :-

1. Hedging is one of the most useless strategies that exists in trading.
2. ANY hedge position can be resolved into 1 single trade.
3. Opening a hedge trade doubles your spread cost + commission(unless you use advanced closing strategies like Multiple Close By, which is unlikely). In your case, if you had simply closed your original trade, you would not have blown your account.
4. A hedged trade goes nowhere. If you have a trade running at a loss, you cannot "protect" the trade by hedging it. Once you hedge a trade, you may just as well have closed it because you have put yourself into a corner. The swaps will eat your account whilst you figure out what to do about the corner you are stuck in. In the meantime, your equity will be diminishing and you will be worse off that if you had just closed the original trade.

In short don't hedge. The only time you could use hedging is when it happens unintentionally using multiple strategies that have their own individual trades, so it's not actually hedging.
 

Balladotus

Private
Messages
28
Sorry, it's a little off-topic, but you haven't thought about increasing your capital, I think that such a small amount limits your market opportunities. Of course, I'm sorry again, it just seems to me...
 

adcrook

Private, 1st Class
Messages
50
seems trying to hedge against a bad position has lowered your capital and margin along with spreads meaning your account could not handle it
 

bigdolly

2nd Lieutenant
Messages
1,004
As others have mentioned, you were exposed to the overnight spread. GBPUSD can easily run to 20 or 30 pips. When you are hedged, you have double exposure without realising it.

I don't know what strategy you are trading but some words of wisdom :-

1. Hedging is one of the most useless strategies that exists in trading.
2. ANY hedge position can be resolved into 1 single trade.
3. Opening a hedge trade doubles your spread cost + commission(unless you use advanced closing strategies like Multiple Close By, which is unlikely). In your case, if you had simply closed your original trade, you would not have blown your account.
4. A hedged trade goes nowhere. If you have a trade running at a loss, you cannot "protect" the trade by hedging it. Once you hedge a trade, you may just as well have closed it because you have put yourself into a corner. The swaps will eat your account whilst you figure out what to do about the corner you are stuck in. In the meantime, your equity will be diminishing and you will be worse off that if you had just closed the original trade.

In short don't hedge. The only time you could use hedging is when it happens unintentionally using multiple strategies that have their own individual trades, so it's not actually hedging.


Opening an opposite trade is not hedging, it is called position "locking" (since you lock your loss at certain level). It has nothing to do with hedging. The latter is done using options or futures. You mitigate risk of adverse future outcome by either paying "insurance" (using options) or agreeing on details of future transaction at present time (buying or selling futures). In either cases you get certainty about future outcome since you pass risk to your counterparty.
 

Oliver_30

Private
Messages
25
The reason behind the overnight closed trades is mainly the swaps. If you do not have enough margin and your trades get opened for the night, the swap charges lead to the closing of the trades. Sometimes, it is high spreads also but most commonly they are because of swaps.
 

Eryk Martin

Recruit
Messages
14
What are swaps please ?
If you do not close your trade and carry it to next trading day, the swap is charged for keeping your trade running even when the market was closed. It may be debited or credited to your account. You can check the swap points by going to your instrument specifications on your trading platform.
 
Top