If in our previous post is to discuss how to open lockingan or hedging, this time we will step back a few steps by discussing about forex hedging. A very basic technique that many traders use to perform risk management, the end result is sometimes out of the question with a loss even though sometimes it ends up being a profit.
Based on the basic word hedging has a meaning to protect the value, this means by hedging in forex trading means that a trader is protecting the value of a position with two opposite positions so there is no greater loss.
Easy example is when do buy and turn out wrong position, we do sell under position of our buy with hope of loss not getting bigger. Traders usually do this hedging when they realize that they are wrong predictions and wrong positions, so that their positions are held in the opposite position and lock in losses. In this way usually the benefits are not as expected, but with such hedging we can minimize losses and avoid the loss is much greater.
This hedging technique is also called locking by traders because its main function is to lock the losses so that no bigger loss occurs. Just waiting for the moment and the right moment and changing the floating loss becomes an advantage. If the release at the right moment and the rate of profit greater than the loss of your trading results is positive or in other words you get a profit.
In doing hedging is it possible that floating loss is locked to become wider? Of course it can be, this is why in opening lockingan must be done with great care and analysis is really optimal. For how can be seen in our previous post on how to open lockingan or hedging.
HOW TO HOW A TRUE HEDGING?
Doing hedging is actually not difficult, it only needs a clear knowledge of support and resistance, where from the support and resistance we can see whether a price movement is Retracement or Reversal, about how it can be seen from our previous post entitled what is Retracement and Reversal .
Suppose there is a Buy EUR / USD position at the 1.3400 level in the hope that the price will move to 1.3500 but there is an issue that keeps the price down to the level of 1.3380. This means that the current buy position of 1.3400 has a floating loss of 20 pips.
This is when you must determine whether the current price is Retracement or Reversal. If it is a Retracement with the support level at 1.3380 then you just wait if the price will close above or below 1.3380, if closing above 1.3380 then it could be the price just bounced it and returned to the right trend. So you let the position buy 1.3400 you and just wait for the price to rise.
But if it is a reversal which then breakout occurs, then all you have to do is make the position sell in opposite direction at 1.3880 level and lock the losses at -20 pips.
When doing this hedging technique should really be noticed with the jelly market in front of you. Fluctuating prices sometimes make a trader hesitate to open new positions and hedge. In hedging you should really pay attention to Retracement and Reversal, because most traders underestimate both and always assume the price will reverse direction and ultimately the losses enlarged to late hedging with a large floating loss position.
You should be aware that opening any position in forex trading is always accompanied by risk, this is why you should really have the right strategy. Not just open Buy or Sell with the hope of profit of so much, but you also have to take into account how if prices reversed direction and not in accordance with the trend you want.
This is important for you to do because of the risk of continuing to target you every time, but with the right strategy you can avoid the risk of loss that is in sight.
Based on the basic word hedging has a meaning to protect the value, this means by hedging in forex trading means that a trader is protecting the value of a position with two opposite positions so there is no greater loss.
Easy example is when do buy and turn out wrong position, we do sell under position of our buy with hope of loss not getting bigger. Traders usually do this hedging when they realize that they are wrong predictions and wrong positions, so that their positions are held in the opposite position and lock in losses. In this way usually the benefits are not as expected, but with such hedging we can minimize losses and avoid the loss is much greater.
This hedging technique is also called locking by traders because its main function is to lock the losses so that no bigger loss occurs. Just waiting for the moment and the right moment and changing the floating loss becomes an advantage. If the release at the right moment and the rate of profit greater than the loss of your trading results is positive or in other words you get a profit.
In doing hedging is it possible that floating loss is locked to become wider? Of course it can be, this is why in opening lockingan must be done with great care and analysis is really optimal. For how can be seen in our previous post on how to open lockingan or hedging.
HOW TO HOW A TRUE HEDGING?
Doing hedging is actually not difficult, it only needs a clear knowledge of support and resistance, where from the support and resistance we can see whether a price movement is Retracement or Reversal, about how it can be seen from our previous post entitled what is Retracement and Reversal .
Suppose there is a Buy EUR / USD position at the 1.3400 level in the hope that the price will move to 1.3500 but there is an issue that keeps the price down to the level of 1.3380. This means that the current buy position of 1.3400 has a floating loss of 20 pips.
This is when you must determine whether the current price is Retracement or Reversal. If it is a Retracement with the support level at 1.3380 then you just wait if the price will close above or below 1.3380, if closing above 1.3380 then it could be the price just bounced it and returned to the right trend. So you let the position buy 1.3400 you and just wait for the price to rise.
But if it is a reversal which then breakout occurs, then all you have to do is make the position sell in opposite direction at 1.3880 level and lock the losses at -20 pips.
When doing this hedging technique should really be noticed with the jelly market in front of you. Fluctuating prices sometimes make a trader hesitate to open new positions and hedge. In hedging you should really pay attention to Retracement and Reversal, because most traders underestimate both and always assume the price will reverse direction and ultimately the losses enlarged to late hedging with a large floating loss position.
You should be aware that opening any position in forex trading is always accompanied by risk, this is why you should really have the right strategy. Not just open Buy or Sell with the hope of profit of so much, but you also have to take into account how if prices reversed direction and not in accordance with the trend you want.
This is important for you to do because of the risk of continuing to target you every time, but with the right strategy you can avoid the risk of loss that is in sight.
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