Friday , December 14 2018
Home / Forex Education / Hedge Strategy in Forex trading

Hedge Strategy in Forex trading

Hedge means open two contradictory deal at the same time. One of them for purchase, and the other for selling on the same currency pair. This strategy has a greater concept than this. Also, it has a followed system and rules, which you should best known.

Hedge
When a trader doesn’t want to activate stop- losing order, he should use another method in order to save himself from losing some or all of his stock. So, the only alternative, which he should use, is hedge, which means fabric or coverage and hedging.
Hedge is considered an order that can stop losing in Forex.
Hedge working system is started by the trader who open two processes on the same currency pair, one of them is for purchase, and the other is for selling, using one margin for both processes. The margin that is reserved for the first process, can be used in the second one.
Forex brokers are divided into three types according to using hedge:
First: forex brokers that allow using this startegy without any restrictions or terms such as EXNESS, FBS and XM brokers.
Second: forex brokers that never allow using this strategy. So any trader should know before dealing with any broker, accurately read its contract terms. Because, if he doesn’t know that the broker doesn’t allow using this strategy, and he open a deal of the open one, the open process will automatically be closed, and replaced with a new process without his order.
Third: forex brokers that allow using this strategy under conditions, such as trader is not allowed to benefits from hedge until giving up profit feature in his account.

Uses of hedge

Hedge can be used by two ways:
The first way: using hedge as precautionary or compelling procedure, in order to be an alternative of stop-losing order. For example, a trader may open a hedge process on a currency pair that he lost, and he think that the currency pair is moving in a contradictory trend of his deal. so, he hopes to gain from the contradictory pair motion in order that price returns to make profit in the first process trend which he previously opened.
The second way: previous planning of using hedge on the same currency pair at the same time of declaration of economic data.

Risks of hedge

Hedge
Although hedge is using margin in the open process, the purchase and selling price is fixed, but success and Professionalism are in the time of getting out hedge. Getting out of the hedge must be on the right and suitable time. This time differs according to technical analysis. So there is a need to good experience, and attention to the rapid of market motion. The closing of those two processes in order to release hedge, must be through one of the following ways:
First: waiting strong news of the pair processes, to move a large number of points in one of the two trends, so it gets out from analysis range. The process moves to price motion, the other contradictory process should wait till price returns.
Second: pair reaches the purchase and selling limit. The percentage of raising and declining is high that is allow for a trader to make a risk.
Professional trader may use a third way, which he doesn’t need to gain in the two trends, especially if the second process moves with trend. The third way is to open the second process with a higher value than the first process. When profits become more than loss in the first process, he should close both processes at the same time, but he should have experience and large practice of hedge.

 NSFX broker 

 FBS broker 

 Exness broker  

If the article is useful for you please share it by the icons of social media from the top of the page to benefit everyone.
If you have any inquiry please feel free to write it in the comments box and we’ll get back and publish it, thanks.

Leave a Reply

Your email address will not be published. Required fields are marked *