Forex Education Center And Investment- Forex Hedging Methodology,In general, Hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the price of commodities, currencies, or securities. As a result, the transfer of risk without hedging is buying an insurance policy. Hedging using a variety of techniques, but, in essence, involves taking equal and opposite positions in two different markets (such as cash and futures markets). Hedging is used also in the capital to protect a person against the effects of inflation through investment in high-yield financial instruments (bonds, stocks), real estate, or precious metals.
While Hedging in the proper sense he is protecting the value. In forex trading, hedging action means we open two opposite positions, so even if prices rise or fall of its floating rate remains the same. Hedging is usually done when we open position losses. In order not to be larger losses, we key with this hedging technique. So next Hedging also known as Locking (lock) because when we use these hedging techniques we locked position which makes the value of gains and losses always move in tandem.
For some people considered Hedging is one way that is powerful enough to achieve a profit, but back again any tactics, strategy and the way that his name will always be inherent risks. Most traders may prefer to save the hedging position or lock our defeat. One disadvantage of this is in terms of hedging a long time, demanding calculations more quickly and thoroughly, can affect our psychological terms for the impatient. As a result, even we can get stuck into minus points greater.
The basics of hedging
Hedging is a situation where we open 2 opposite positions simultaneously open buy position is open, but also simultaneously open simultaneously open sell position with no stop loss in pasangi but only profit targets are usually 30-50 poinan profit target range as for the intent and purpose is that we make a profit when the price swing occurs either when the price bullish or bearish when price
How it works hedging
By the time one reaches the open position of the target such as 50 points before the open position is automatically liquidated so that you only have one position are still minus 50 points the next step is to wait until a minus in position only reduced a little example of minus 50 points so stay minus 30 points. If true minus reduced, then we will do the opposite position open again but the fact we had a profit of 20 points and so on running processes that are important to remember is that we must consistently meet the target we do not become nervous if for example the second position even minus all think calmly that the actual minus whatever happens you will not be more than the numbers that have been the key.
How after trying to wait some time in the hope of living my position on this one minus reduced, but instead a growing reality?
This is one of the weaknesses of the hedging tactics one way to do so as soon as possible to do the opposite of open positions before growing big minuses in the hope of future opportunities to reduce the negative will always be there.
Ideally hedging system in practice if one position suffered losses ranging from 30-50 poinan alone. Hedging system is starting to feel heavy in practice if one position has already suffered losses of more than 100 points, there is one way to reduce the negative points that will be discussed in the following session.
Other Tips How to Disassemble Hedging
The first way
1 Do not be carried away / forward looking moments out of the locking.
2 If locking / hedging more than 50 pips, it takes up to several times the use of these techniques.
How:
Use H1
Use daily pivot indi
Wait for the moment the price touches the S / R 3 According to the monitoring if the price has touched the S / R 3, then the price will bounce 30-50 pips, before the market will decide to continue the trend or even a trend change. We take advantage of the moment.
Remove the valuable hedging profit when price touches the S / R 3.
If locking / hedging that occurs more than 50 pips, then you should do a limit order 25-30 pips in the opposite direction with an open position we are worth minus (floating is still open)
The second way
Hedging can we do, and we can take advantage of the movement of the price fluctuations. it's just the initial stage there must be sacrificed.
example: BUY and SELL simultaneously. The same with Lot. If it reaches 100 pips for example, we were minus Closs, and let the profit. then we go to the opposite position back. Here we have the profit of hedging positions. going up or down we just take SL profit.
For example hedging profit: SELL AUD / USD at 0.9100 and a BUY AUD / USD at 0.9000
prices there in the middle. If the price rises BUY leave. install the SL at 0.9085. Sell executed automatically. If it is safe we sell again. If the plunge, ready ready we put in BUY 0.9020 SL for example. Let SELL, BUY executed if the plunge. when viewed safely. we BUY again. and handled by SELL. and so on.
