For all that do not know about hedging, in relationship to the forex market, please see the two links below. They provide a detailed insight on how to consistently profit without being detrimentally exposed to the forex market – through the use of hedging. I highly recommend any newbie seeking a profitable strategy to consider a hedging technique as yet another tool for your arsenal.
#Bigpipn
Are we going to go round and round on this again?
Hedging is not a trading technique in any way, shape, or form. It is only an accounting methodology.
The first video is a rambling mess. Lost any credibility it might have had when the CHF was noted as being a safe haven currency. The CHF is effectively pegged to the EUR! I won’t even get on the subject of the hedging comments.
There is a reason why the big banks and large investors often choose hedging to minimize risk while capitalizing on profit. I stated in the previous forum that I would share a few links that I found helpful regarding this topic. I understand there will be a lot of nay sayers out there implicating that you will break even less commissions if one were to hedge (and this is true on a 100% hedge), but I must say, my results and bankroll reflect otherwise.
My initial links spells out what hedging exactly is. The link below describes how one might strategically hedge in the forex market. I hope this helps for those of you new to forex.
#inittowinit
http://www.earnforex.com/articles/the-opportunities-of-trading-the-forex-hedged-grid-system
*Disclaimer I do not represent any of the links posted and do not agree with everything that is mentioned on their site, but do contend with the overall message they provide
None of the links had anything to do with hedging, IMO. I also disagree with rhodytrader’s statement about hedging not being a valid trading technique – but I think I know what he means – in the context of the OP’s post.
Hedging a long position in oil, for example, with a put option is a valid hedging technique – the option is relatively inexpensive and reduces overall risk should the price of oil tumble. Having a portfolio of stocks (long term positions) can be hedged by shorting market indexes during brief market downturns while not selling off anything in the portfolio, even if their prices will briefly decline. You attempt to be as flat in down trends as possible and profit in the up trends.
Long and short the same currency pair or a pair with a strong negative correlation is insanity. Grid systems… well, to each his own.
There is a difference between proper hedging - which is using a secondary instrument like and option or futures contract as John noted - and the type of direct offsetting many retail forex traders call “hedging”. No professional or institution would ever call the latter hedging. In fact, most of those I’ve talked to on the subject cannot even wrap their brains around why anyone would be long and short the same instrument at the same time.
I understand there will be a lot of nay sayers out there implicating that you will break even less commissions if one were to hedge (and this is true on a 100% hedge),…
This is true of the fraction of the position offset by the “hedge”, whatever % that is.
… but I must say, my results and bankroll reflect otherwise.
Your results and bankroll reflect merely your skill in getting long, short, and flat. If you have a position on and you “hedge” you have done nothing more than go flat or reduce your exposure. The sort of hedging you are talking about is simply a bookkeeping methodology. As such it cannot influence your profitability.
My initial links spells out what hedging exactly is. The link below describes how one might strategically hedge in the forex market.
Grid systems are nothing more than mean reversion strategies, and generally ones which increase effective bet size as the market trends. They can just as easily be done in a non-hedged fashion, most likely with lower costs.
I should have used “hedging” rather than hedging to be clear I was talking about offsetting positions rather than the sort of things you mentioned as examples. 
Big banks and large investors are on the OTHER side of the spectrum compared to small traders like us. we do not belong to the same group, hence most retail traders do not have the competence to utilize hedging properly.
“Hedging”, as Rhody describes, can be utilized in relative proportion and a strategy that anyone can take advantage of. Of course, if you have a $100 FX brokerage account your hedging basis would be less than a .1 lot size (to not risk blowing an account up), but still relevant. I used the example with the big banks to state a point that hedging, IN FX, is in fact an effective method.
The links displayed on this thread are a great representation on how to hedge in the FX market and I am discouraged to see that many of our senior members are not offering any better support on the topic, but to each their own.
Sorry, I disagree that the links are a great representation of hedging in forex. They aren’t really even hedging. The term is being mis-used, IMO. The term “hedge fund” exists for a reason – historically most investors buy stocks and other appreciable securities. Over the long term they expect the value of their securities to rise. Wealthy investors may also diversify their portfolios and dedicate a portion of their investment capital with hedge funds which have “short” portfolios in falling markets which is not something the average investor ever considers. The net result is the investor’s holdings continue to rise in up markets but do not decline (as much) in down markets since they are effectively hedged.
Long and short positions in the same currency pair or related pairs is not hedging. It is betting against yourself. Large banks and well-capitalized investors do, as your original post states, make use of hedging. They do not, however, use grid systems – which, if I am not mistaken, is a system employed by roulette players.