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What do you think of hedging?
- Thread starter Latham
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somrat4030
Well-known member
You keep mentioning eurotrader in each of your messages - why don’t you just post 1 such single message in the fx brokers section?
GeekyForex
Well-known member
Forex hedging is a risk management strategy used by traders to protect themselves against adverse market movements. It involves placing trades that offset potential losses in other positions, thus reducing overall exposure to risk.
One common example of Forex hedging is using a "long-short" position. This means simultaneously holding both long and short positions on the same currency pair, with one trade designed to generate profit if the price goes up and another trade designed to profit if the price goes down.
Traders generally adopt a hedging position when market volatility is on the horizon. Assume you have an open trade that is currently profitable but an economic announcement is due, taking a hedged position will protect your profits if the announcement has a negative impact on your initial trade.
Hedging is a great tool to make sure you get exposure only to particular risk, not simple up or down risk but for example risk that volatility will increase or that it will stay subsided. Hedging can be really flexible and it is usually implemented using options.
VasilTodorov
Well-known member
i think it is a little overrated
when you consider it deeply you need to pay 2 spreads and in most case it is useless i dont use it
when you consider it deeply you need to pay 2 spreads and in most case it is useless i dont use it
Building portfolio of your investment is a highly-appreciated strategy because it helps traders survive in Forex for a longer period of time and gain profit ultimately. The more a trader studies the more, the more he becomes innovative about the market. FXOpulence offers multiple types of trading accounts by using which traders can design their portfolio.
Fin_Trader
Well-known member
The problem with hedging is that it is quite difficult to make a profit when using multidirectional orders. That is, if a trader cannot find more accurate entries into the market without hedging, then even with hedging he will not be able to close such orders correctly and on time and gain profit.
Polakandil
Well-known member
I have implemented hedging in my trading strategy at FXOpen, according to my experience this is less effective in protecting risk because the main problem is when to open the hedging lock, this often becomes a dilemma because if the active order continues to float in loss, this can disturb emotions and make the loss bigger. not to mention transaction costs from the spread when open buy and sell. Now I like to use fixed stop loss.
If you look at 90% of people's comments, they are mostly promotions rather than insights.
To be honest, we're on the same page here mate! I don't see the convenience of it anyway. Not if you have a netting account at least, which is way different.
In my experience, hedging can be an effective risk management strategy, allowing traders to offset potential losses in one position by taking an opposing position. While it can protect against adverse price movements, it's essential to use it judiciously, as it can also limit potential profits and complicate your trading strategy. Overall, hedging requires careful planning and understanding to be beneficial.
Or if you are wrong about the market you can have two positions in opposite directions, both going negative. That will blow your account, sir. If you cannot net and you are not experienced with hedging, I do not advise it at all!
But even with that being said, I remember watching a fellow trader of mine hedge in a way that both his trades were in profit! It was outstanding. Of course when he was sure the trade hit a resistance level, and basically did a reverse trade. hedged then one of his trades hit a stop loss( IN PROFIT) then his other trade proceeded to profit as well. Very brilliant.
Polakandil
Well-known member
In using hedging in a forex strategy, different traders may have different perceptions and experiences while using it, some traders may use hedging embedded in a martingale strategy, this may be quite interesting, but adding a new position will incur transaction costs. If the trader is comfortable with hedging strategies and the broker has no restrictions, it might be best for him.
Lazarsblck
Active member
Ok then explain how do you it not how some other traders might use it.
panchovilla84
Member
hedging individual forex positions creates a drag on profit potential and incurs additional costs which means it isn't a cost effective risk management tool. However it might be useful if used at a portfolio level to keep net exposure in check esp if you are trading multiple pairs and have a number of positions open with high correlation
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