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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Direct hedging involves opening an order that buys one currency pair, such as GBP/USD, while simultaneously placing another trade to sell the same pair. This means that if the market goes against your first trade, you can still make money from the second trade without having to close the first one.
However, it's worth mentioning that some brokers don't allow traders to take direct hedging in the same account.
Continue Reading at Why Is Hedging Not Allowed in Some Countries?
How is hedging policy outside of the United States?
Hedging practices are mostly legal in other countries, including in the EU, Asia, and Australia. That doesn't necessarily mean that there's no regulation about it, though.
In the EU, there's a policy about "variation margins" that applies to any bank, company, and fund that uses currency forwards and other derivatives to hedge. The policy was implemented in January 2018 and didn't get a lot of support from the market participants. Many traders argue that this rule will limit their access to market opportunities and make European cities less attractive as currency-trading hubs.
Continue Reading at Why Is Hedging Not Allowed in Some Countries?
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
What aspects should you consider in choosing brokers for hedging?
Here are some things to look for when choosing a forex broker for hedging:
- Low spreads
- High leverage
- Good execution
- Competitive fees
Continue Reading at Introduction to Forex Hedging Strategy
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