Hedging

[ndhoanggia]

Some brokers allow hedging on the same pair and I was thinking of using it to replace using stop loss. For instance with GBP/USD, sell at 2.0050 tp 2.000 and at the same time hedge buy 2.0050 and tp 2.01 and no stop for neither one. Just in case the trade decides to go "funny." I want to use this strategy for defined channels. Take profit at support and resistance lines. What do you think?

[akeakamai]

What if it shattered a support and had a nice free-fall to 1.9800? You'd be sitting on a huge loss if you took profit at 2.0000. Now if you're saying that you "rehedge" when you reach a P/T then that sounds like a good idea to me.

I just realized why a broker would like you to hedge your positions instead of using S/L.... double the spread! So yeah, if you're making a lot of trades, that might be something you have to consider..

and also you'll be eating up double the margin on your account, so you'd need a lot more capital to make the same trades using S/L...

[pipgod]

akeakamai is right. Brokers allow hedging to charge another spread. A stop loss or t/p order doesn't cost anything. I tried that type of trading a while back. That didn't last long.

Good luck, and good trading.

[toptick07]

MHO = I have not run numbers on this. Taking two positions does not equal a hedge, no matter what a dealer calls it.

Just in case the trade decides to go "funny."

If you're in a bad trade, close it. Do not compound errors by increasing your exposure and committing more precious capital.

Trades don't go funny. Traders do.