What is Hedging? How does it work? What are the plus and minus’ of it?
Have you done a search? There are numerous discussions of hedging here.
for the most part it is going long on the USD/CHF and the Euro/Usd and collecting the difference in interest by holding on to the positions. The problem is to make any real money a person either has to go with a lot of leverage or they need alot of capital. If you have the capital there are better ways to make money, and if you want to go with high leverage it is like shooting yourself in the foot, since sometimes both USD/CHf and Euro/USd drop in prices and if you have high leverage you might get a margin call depending on how much $$ you have in your account. I’m a newb like you guys so maybe some of the other guys can explain the subject further
Kia did a good explaination… basically I don’t consider hedging to be real forex trading. It’s not really trading because you don’t even need to look at the charts or listen to news in order to do it.
Either you hedge the same amount both ways, in which case it doesn’t matter which way it goes, you will never really make/lose money on the trades as when one is +$10, the other will be -$10, etc. You are only collecting the interest, in which case you might as well be investing in a savings account or bonds.
Or you are doing partial hedging, in which case you are limiting your losses but also your gains. If you want to do this, you might as well just trade less, or not trade at all until you are sure of yourself.
Personally I never think you should have a buy and sell trade on the same currency at the same time. When one trend reverses you can close one order and open the opposite, but not both at once.
I disagree. If someone can make money consistanly using hedging they are still forex trading. Hedging can be a very useful tool if used the right way. Several of my successful trading plans use hedging and the key to trading is finding what works for you
It depends on why you are hedging in the first place. Occasional use of hedging to help you choose a trade direction, fine. But if hedging is your habitual pattern of trading to make some money and then delude yourself into thinking that you have made the best trade possible; you are not thinking or trading clearly and cleanly. Most of the time, the very idea of hedging is really a waste of traders’ time. In reality, it will consistently lose you money.
The search feature will bring you to a world of opinions on this including mine. Which I will not post here (it’s mostly negative).