Hedging means opening the buy and sell position at the same lot of volume. Its very good ,sounds fantastic and great trading idea because whenever market goes up or down, you have trading position there and you will get profit from one trade and after that if market get reverse , you already have there trade too and you will get profit again so your both trades will close in profit .but its not necessary that your both trades will close with profit but its possible that if one trade close in profit and other in loss , in this way ,you will have to face less loss and some time your profit is more than loss and its mean as an average you will be in profit .Mostly too many traders who do hedging have to face loss because every person cann’t do hedging in the proper way. It can be use with a special technical way to open and close trades and only experience and professional traders can hedging well.
Most of the traders don’t know why to use hedging properly ,although they have good idea because currency pairs are moving in harmonic waves and price is keep on coming back to a certain price and they can really get benefit from hedging but the main and primary purpose of hedging is to protect the account and prfoit is its secondary option.
Instructions to use hedging :
1. We should use hedging to protect the account from further loss,its like freezing the account. If the market suddenly changes, hedge the position and analyze the market situation, assess if we have to use hedging or close the loosing position early instead of waiting for several years without assurance of good profit.
2. Hedging can also be use when we think that the price will going to reverse and comes back to our first position, we can use hedging instead of stop loss.
3. The best time to use hedging for profit is when the price has reach its peak like highest high, or lowest low, because most of the time it will reverse.
Proper use of hedging strategy with example:
Before entering hedging , we should analyze the market first . Example the price of EUR/USD reaches 1.3250 after buying position of 1.3300 and you already have loss 50 pips and if you think the market will go down more . its better to hedge the position by selling with same lot volume at 1.3250 and when market reaches at 1.3200 and you are sure than now market will reverse and will go up then you close your selling trade and if market revers and start to go up then you can close your buying trade at proper position even with less loss and sometimes you can close your trade with profit too.
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