Brokers For Hedging Strategy
Hedging is when you open two trades in the same pair, which is equally sized but in opposite directions. Hedging, at least in theory, negates the need to set a hard stop loss on either long or short trades being hedged. The advantage of hedging is when the markets (especially Forex markets) tend to range most of the time, it can be possible to profit just from high volatility within a range by closing the long trade at a peak and the short trade at a trough.
Many brokers do not allow hedging, but some do. Brokers that allow hedging give traders the flexibility to buy and sell at once. By here, you will find some forex brokers that allow hedging for their clients.
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How do we determine at which level to put pending order in hedging?
Since hedging can be aimed as an alternative to stop loss, consider to place the pending order using the same method you use to determine stop loss.
Still, the psychological dilemma presented by using hedging as a stop loss is still there. It is suggested not to place Target Profit (TP) during hedging. Of course, there is another consequence: we have to stand by and patiently monitor the chart; when we feel the trend started to turn back, close the position that is in profit. If later it appears that the trend goes forward again, then open another hedging position, and so on. It means we will lose some spread, but it will feel better because we are able to take advantage of the price movement.
Continue Reading at Using Hedging As Stop Loss Alternative
Why is hedging not recommended for beginners?
Hedging is not advisable for beginner traders because extra patience and confidence are needed when opening locked positions. This technique needs composure and steady nerves on the traders' part so that they will not be easily tricked by fake movement on the chart. Besides, it is also advisable to use hedging only when the available margin is bigger than the used margin. When the available margin has depleted, it is better to make use of stop loss or cut loss.
Continue Reading at Using Hedging As Stop Loss Alternative
How to avoid short squeeze risks with hedging?
Hedging is a strategy that can remove uncertainty in investing to a greater extent. In addition, this strategy can protect your profits and reduce losses in the event of a crash or price correction. For example, a buy order to counter a losing sell position would count as hedging.
Hedging may seem counterintuitive as it is essentially entering a position opposite to the current position. However, this strategy reduces the level of risk due to price movements that can harm traders when buying shares. If your one order encounters unexpected loss due to a short squeeze, the other one would likely be still in position.
Continue Reading at Short Squeeze: How It Happens and What to Do
How to do forex hedging in the same currency pairs?
Hedging in the same pair is done by opening a new position in the same pair you have already opened before. This is the simplest form of forex hedging strategy.
Say, you expected the USD/JPY to go down from 103.75 to 103.49, so you sell the pair. After a while, the price moves upward, even breaking the previous resistance of 103.87. Still, you are unsure whether the move is real or the price will revert downward later. You opened a buy position in the same currency pair to hedge your way. That is hedging. In addition to opening a new position to the opposing direction, you could add a stop loss to both orders up to a certain level to consider whether the direction is confirmed up or down.
Continue Reading at Introduction to Forex Hedging Strategy
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