|Forex Hedging Strategy|
What is Hedging? It is opening a buy and sell position at the same time with same lot volume. Sounds fantastic and great trading idea because wherever the market goes, up or down, you have a trading position that will be on profit, and when the position goes on the opposite you will profit again to the other position. But to many who uses hedging position at the first time, This result them to too much floating loss position, and when get out of control, they face margin call.
When to use Hedging Strategy? Most of the traders doesn't know when to use the hedging properly, though they have a good idea because the currency pair are moving in harmonic waves and the price keep on coming back to a certain price, they would really benefit from hedging. But the primary purpose of hedging is to protect the account, profit is only second to it.
- We should use hedging to protect the account from further loss,its like freezing the account. If the market suddenly changes, hedge the position and analyze the market situation, assess if we have to use hedging or close the loosing position early instead of waiting for several years without assurance of good profit.
- Hedging can also be use when we think that the price will going to reverse and comes back to our first position, we can use hedging instead of stop loss.
- The best time to use hedging for profit is when the price has reach its peak like highest high, or lowest low, because most of the time it will reverse.
Contrary to common perception about Hedging, it is not recommended for everyone, it should only be used by traders who have several years of experience in trading their chosen currency pair because Hedging will only cause confusion to newbie and starting traders.