Is hedging a good strategy?

There are many traders who prefer hedging, which is a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset. But, this strategy is really good as long as traders can handle it nicely; otherwise it’s not auspicious for a trader.

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What’s the point of your post though? You’re not asking a question and neither are you giving a real explanation behind hedging strategies.

Actually, very few private retail traders use hedging. Its not easy, its expensive, it soaks up your free margin, its of questionable performance, its possibly unnecessary given that we’re short-term traders and our small position sizes mean we can enter and exit any trade instantaneously.

But if you’re hedging, why?

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Its actually the opposite tommor hedging frees up your margin. How, well i will leave that up to you to figure out or ignore

Its not something I am going to use but there might be traders out there of all levels of experience who are unfamiliar with the technique. Maybe you want to post up some information that would steer them onto the right course? That would be helpful.

They can dig and create like i did. The clue is enough. Its all in the math per usual. Most are too lazy to crunch the numbers while turning over every stone

I have no doubt that there will be profitable ways to use hedging in private retail trading.

Many others reading your post will think you are wrong. Many others will think you might be right but they need a bit more guidance as to how to make it work for them.

Have you got anything to post which is practically useful for traders?

I think hedging can only be done from seperate accounts.

I can’t imagine a broker allowing you to hold positions on both sides of the same trade.

You can do “triangular hedging” where you open three positions using three currency pairs that each have two of a list of three pairs. e.g. AUD/NZD AUD/USD NZD/USD. By buying/selling the right pairs you end up being both long and short on each currency.

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You said hedging soaks up your margin. I was simply correcting that statement. Sometimes what is not so obvious is real

UK spreadbetting brokerages allow this. At least mine does.

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Wow!!! That’s amazing!! You’ll never be wrong!!

I’m in Canada and hedging is allowed. My broker offers accounts where you can enable or disable hedging. But, hedging has its challenges and can be costly. For the most part it’s usually just better for us retail traders to take the loss and move on.

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This hedging topic comes up over and over and over again in these forums… A yet not one member ever bothers to do a search on what has gone before… Astonishing or simply by design?

And as has been shown in this thread, most have absolutely no idea on why to apply it, how to apply it, when to apply it… Yet, are all certain it doesn’t work… Simple Hedging can be used in many risk mitigating strategies in markets as I displayed years ago.

An example of trading in both directions which can be applied to curtail losses in the retail markets for traders outside of the US… Maybe people should be thinking why this strategy is banned in the US??

Seriously, so many here would fall into a barrel of t*t’s and still come up sucking their thumbs…

Edit. Here is a thread from even further back that covers Hedging in greater detail including the math!! Worth the read if one is serious about applying hedging in the retail markets… As always, trial it on a Demo first… DYOR… It’s worth it.

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Not so simple as it seems. Being both long and short in equal sized positions means no loss but no profit

The best way to make use of this facility is a zone recovery strategy. These are fine when they work but when the market situation goes wrong the risk levels are very high and difficult to cap.

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When done precisely, hedging strategies decrease uncertainty and limit losses without decreasing potential earnings. Traders generally trade assets that are inversely correlated with weak assets.

Hedging is quite a risky strategy and beginners should stay away from it. If you can handle risks and your risk management skills are good then you can definitely go for it. Else not only it is expensive but also it may push you to losses.

Hedging in forex is a money management technique. But only good in the hands of an experienced trader.