Hedge Trading

What Is Hedging?

I call hedging a kind of insurance. Think about a bad event like a storm or flooding. We can not prevent a negative event from happening, but we can reduce the impact of the event by ensuring our asset. So, we can see the hedging every day. 

But in forex trading hedging means strategically using pairs in the market to offset the risk of any price movements in the opposite direction. In other words, forex traders hedge one position by another.

To do this you should know the correlation between different pairs.

Obviously, to open extra positions you will pay all the fees. No insurance is free, is it?

What are the negative points in hedge trading?

• In Forex, less risk means less income.
• Remember that you can not make money by hedging, It just helps you reduce your risk.

apadanaforex applies hedge trading on eToro. 

In sideways markets, we can do hedging on the same pair. Please do not do this in a very trendy market as you never know when the price will find its peaks. In the sideways market, we will make money on one and losing on the other one then we can close the profitable one at a point close to the peak and wait for the other one to either gets into profit or towards getting profitable. 

The other hedging scenario is looking for the pairs that are negatively correlating. For example, USD/CHF could be a good pair against EUR/USD. You can then close both trades when the total value is in profit.