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  1. #1
    Join Date
    Mar 2015
    Posts
    151

    Forex Hedging Strategy

    Before getting into Forex hedging strategy, it would probably be best to explain hedging. It's pretty much the same as the phrase everyone has heard, “hedging your bets.” Hedging is defined as holding two or more positions at the same time, where the purpose is to offset the losses in the first position by the gains received from the other position. Yes, the profit turns out to smaller than a straight trade, but then again, so are the losses if you're wrong.

    Hedging occursa in all markets and all forms of trading. Carrying a long position in one area, while carrying a short position in another area is commonplace among traders, and Forex hedging strategy works along the same lines.

    Good idea
    Like all forms of trading and strategy, the Forex hedging strategy is a good one if it works. For instance, if you buy the EUR/USD and the market is going down, you might want to hedge against this losing trade by selling the EUR/JPY. In essence then, what you're doing is taking both a long and short position on EUR and hoping the resulting trade will move in your favor. Large companies and financial institutions do this all the time.

    This kind of trading can work to not only offset a loss, but also turn a loss into a profit. If nothing else, it may minimize your losses. When large companies and financial institutions do this, they are mainly doing it to protect profits they already have. When retail Forex traders do it, they are trying to offset, minimize, or reverse a losing trade. For obvious reasons, a Forex hedging strategy can be tricky.

    Bad idea
    Like all forms of trading with a risk, if it works you look like a genius; if it doesn't...well, you don't look like a genius. When you buy the EUR/USD and it goes against you, so you sell the EUR/JPY to protect yourself, more things than the obvious have happened.

    It's true that you've both bought and sold the EUR, so the hedge has worked to your advantage as far as that is concerned. However, now you are left being short the USD and long the JPY. For those two currencies, you are exposed to the will of the market and that's the kind of exposure you may not want.

    With any Forex hedging strategy, the Forex trader winds up, in a way, with more risk than he originally had with just a losing trade. If, when both sides of the hedge are executed and the USD goes down and the JPY goes up, then everything is good. Not only will the trader have limited his loss on the EUR/USD, but he may even turn a profit. But in the meantime, you'll have to keep a sharp eye on both markets, because it may wind up doubling your loss if the open ended currencies go against you.

    Limiting risk
    Every novice Forex trader is told not to be stubborn and stick to a plan. Usually a trader implementing a Forex hedging strategy is one that won't admit he's wrong about his original trade. Although it may work out for him, the risk is such that it's best to get out with a loss and move on to the next trade. Don't be stubborn. While you're trying to limit your loss, you might up extending your risk.

  2. #2
    Join Date
    Nov 2011
    Posts
    6,014
    Good when you can turn the table but if not it will be a non stop loss for you. With hedging a trader will try to locking their loss into the same amount of loss so it won't be bigger. Mostly traders will put the other new position to compensate this loss, but the previous locked positions still not unlocked.

  3. #3
    Join Date
    Aug 2015
    Posts
    410
    Nice description! Actually, when I was a novice trader then I was too much interested on hedging, but now I am not! Because, this strategy is not suitable for me! I feel huge mental stress when I used hedging style! Even though, ECN broker TradingBanks access’s me to use any kind of trading style in my live chart, but am very choosy!

  4. #4
    Join Date
    Aug 2015
    Posts
    382
    Actually, credible trading broker does not restrict any kinds of trading techniques with scalping and hedging. Now I am trading with MXTrade which is regulated and permits scalping and hedging without any kinds of limitations. So, my trading life is very much comfortable.

  5. #5
    Join Date
    May 2016
    Posts
    2,447
    Quote Originally Posted by Rassel Munna View Post
    Actually, credible trading broker does not restrict any kinds of trading techniques with scalping and hedging. Now I am trading with MXTrade which is regulated and permits scalping and hedging without any kinds of limitations. So, my trading life is very much comfortable.
    NOTHING wrong with hedging or scalping, hedging itself actually legal as long as you have bucks to get your the second position. Hedging is basically open one position for example SELL and then later open the other position in this case BUY, so there are 2 open position with the first one SELL and the second one is BUY. It locked the profit/loss movement

  6. #6
    Join Date
    Jul 2015
    Posts
    2,503
    Hedging is not limited to buying and selling same currency at the same time. There are many other methods and applications of hedging. Some googling will help.

  7. #7
    Live account and demo account both are the same operating system. But in demo account there is no need to invest any capital. This is for learning the forex before investing in the market. On the other hand live account needs investment and it is like a real account where profit and loss are genuine. Demo account is just for the beginner. When a trader become professional he can operate a live account. Demo account is a risk free account. On the other hand live account is full of risk. When I was a newbie I opened a demo account in Forex4you to learn the basics of forex. After getting all the knowledge I moved to their live account. Now with the help of them I make profit consistently.

  8. #8
    Join Date
    Apr 2020
    Posts
    436
    Now there is a really large choice of strategies for working in the forex market. In my opinion, for a trader now the key task is to choose a moderately aggressive and passive strategy.

  9. #9
    Join Date
    May 2020
    Posts
    556
    I work with a broker Amarkets, and I try to use several strategies for trading at once, choosing the most successful moments for their application.

  10. #10
    Join Date
    Jan 2017
    Posts
    834
    1% is more appropriate to any trading concept for avoiding loss with certainly.
    As a scalper what percent risk is sustainable? any idea you have ?

  11. #11
    Join Date
    May 2020
    Posts
    556
    Quite a correct strategy, but will it be as effective? In general, choosing a profitable strategy for work is far from easy.

  12. #12
    Join Date
    Aug 2020
    Posts
    36
    The forex currency trading market is a hazardous one, and hedging is just a single way that a trader can restrain the measure of risk they go up against. Such a lot of being a trader is money and risk organization, that having another gadget like hedging in the weapons store is inconceivably useful. Not all retail forex brokers consider hedging inside their platforms. Influence sure to investigate totally the broker you to use before beginning to trade. Yet, I can do hedging with Eurotrader broker. They bolster hedging. I additionally like their instant trade execution and low trading cost.

  13. #13
    Join Date
    Jul 2020
    Posts
    177
    I used many strategies in the trading process, and I have only one conclusion - you need to be able to use all strategies, but know when to apply a certain strategy.

  14. #14
    Join Date
    Apr 2020
    Posts
    436
    It should be understood that it is not always possible to apply this strategy. It, like all other strategies, takes place during a certain situation in the market.

  15. #15
    Join Date
    Apr 2016
    Posts
    533
    Only the Forex hedging strategy requires holding buy and sell at the same time on the same pair. Forex hedging is used more to pause the profit or loss during a reversal. So, if the market is going up and you're short, you might buy to temporarily hold the position until the market turns back in your favor.

  16. #16
    Join Date
    Apr 2020
    Posts
    436
    The strategy is quite interesting, but you need to be able to use it. In my opinion, with the right approach, it can still bring a good profit to the trader.

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