Traders that take offsetting positions simply increase their operating costs while decreasing their income. That is stupid.
If you are a forex trader, you are not a hedger. Hedgers offset currency risk incurred by multicurrency business operations. Example: A U.S. firm that invoices €100 million to Eurozone customers on net 30 terms has put a long EUR/USD position on their recievables. Taking an equivalent short position with a financial institution will offset that risk. Traders are those that take on that risk.
In that example, when the Euro falls from 1.2950 to 1.2513 (as it did in the last 30 days) the USD value of those Euro denominated recievables falls from $129.5 million to $125.3 million: a $4.2 million loss. Taking a $125.3 million short position in the EUR/USD during that time yields a $4.2 million win for the firm, offsetting the loss on the recievables. That is hedging. The pricing, the fundamentals, the trends, statements from central bankers, none of that matters to the hedging firm. They employ no strategy whatsoever to win in forex, they simply prevent wins and losses with offsetting positions and pay the small fees the financial institution charges to put on the hedge. The hedging firm makes profits selling whatever it is it sells.
Traders take on unhedged positions precisely to extract the losses of the hedgers from the forex market.
If a trader is taking offsetting positions, he is not risking a loss or exposing his account to possible gains, he is simply paying his broker more in fees. If you are confused by traders proclaiming that taking offsetting positions will earn profits in forex, it is because they are losing traders or not really traders at all. Don’t fall for that stupidity.
Get high, make love, and may the goddess of forex pleasure you NAV with a blessing of her fertility.