Forex Hedging Strategy which makes hedging, hedging measures meant to open in two opposite positions, so even if prices go up or down the value of its floating tetep same.
Hedging is usually done when positions open that we are experiencing losses. So that losses do not become greater, we are the key to this hedging technique.
Hedging is also known as Locking (lock) because of the time we use hedging techniques have us locked position which makes value gains and losses are always moving in tandem.
example:
Currently the value of the GBP / USD is 1.5600.
I predict a currency pair GBP / USD will rise towards 1.5700, so I opened a buy position.
A few minutes later it turns GBP / USD moves against my predictions, which is down to 1.5580. That is the position I buy a loss of 20 points.
In order for this loss does not grow big, I opened a new position opposite to the first position by opening a sell position at 1.5580 level.
Suppose further market fell again to the 1.5550 level then I had 20-point loss, because the first loss position of 50 points (1.5600 - 1.5580) and a second position gain 30 points (1.5580-1.5550).
Likewise, if the market rises to the level of 1.5620, I still lose 20 points for the first position gain 20 point and 40 point second position loss (1.5620-1.5580).
Thus wherever the next market move, because it uses hedging strategies remain locked my losses for 20 points.
So what can a locked condition and loss of 20 points above turn into profit?
Of course . As long as we can unlock it in the right conditions.
And the best conditions to close positions using hedging strategy that is when we are sure that the next strong market will move in one direction, such as in the converging or diverging.
example:
I open a buy position at 1.5550 and then open a sell at 1.5500.
Then, when the market was at 1.5450 occurs convergent.
What should be done is to close my short positions that are profitable 50 points. So I get a profit of 50 points.
Because converges, then a few moments later the market bounced up beyond the level of 1.5500, for example, to a level of 1.5525.
At that time I close my long positions being point.Sehingga loss 25 25-point loss.
After the second position is closed, its accumulation is = profit 50 points (sell positions) + 25 point loss (buy position)
Total = 25 point profit.
That's forex strategy hedging, the strategy most commonly used by traders to minimize the risk of loss.
This hedging strategy we can use in our day to day trading. But his advice is:
- If the market is moving erratically, and we are not sure of the direction of the trend further, it should cover both the hedging position is being done.
- But if we believe further market moves in one direction with a strong, then we close the one position that is opposite to the direction of our predictions. With the hope that the open positions can achieve greater advantage than disadvantage position has been closed.