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Thread: What is Hedging?

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    Default What is Hedging?

    Though i'm not really a newbie when it comes to trading forex? i still don't understand what hedging really means.... can anyone please throw more light on it?

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    Resolve (06-05-2013)

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    Quote Originally Posted by blessedfx View Post
    Though i'm not really a newbie when it comes to trading forex? i still don't understand what hedging really means.... can anyone please throw more light on it?
    Hedging actually means that you open BUY and SELL orders in the same currency same time so that the net profits and loss is just constant equal to the cost of the spreads.

    This is done to keep your order intact during highly volatile or uncertain market conditions when the trends are not clearly visible.

    When you see a clear trend you continue the profitable order and close the order which is in a loss

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    blessedfx (06-05-2013)

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    hmmm! though i do that some times, i didn't really know it was called hedging. but some times, instead of hedging, i do prefer to use the pending orders.

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    Hedging is same with reverse order, when you Buy and Sell same currency pairs, hedging can be alternate to minimize loss and you have chance to get profit with hedging

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    Indeed, you build stratagies in hedging: when a trend is clearly stable so that you can place a trade to get in profit then save that profit with a reverse order. If you have got several orders, then you can close not all orders in profit but some of them in order to keep the hedge on.

    Hope you have understood !

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    When a currency trader enters into a trade with the intent of protecting an existing or anticipated position from an unwanted move in the forex trade, they can be said to have entered into a forex hedge. By utilizing a forex hedge properly, a trader that is long a foreign currency pair, can protect themselves from downside risk; while the trader that is short a foreign currency pair, can protect against upside risk.

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    Hedging is used on both certain and uncertain market. But one will rather wait the first situation to enter in trade without setting an hedge on starting. Then when first orders in profit (pips gap is trader's appreciation) reverse orders can be commanded at a resistence limit (also depend on trader's appreciation). Therfore, uncertain market does not offer this possibility: once you get in trade you just set hedge to keep it safe.

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    Hedging in the sense he was protecting value. In forex trading, hedging action means we open two opposite positions, so even if the price goes up or down the value of its floating remains the same.
    Last edited by sanjoichie; 07-10-2013 at 04:32 PM.

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    The coverage ability allows the operator to both buy and sell positions in the same currency. Operators have the ability to enter the market without choosing a particular direction for the currency pair. While the ability of coverage remains a desirable option, traders should pay attention to the factors that may affect hedged positions.

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    well hedging gives the posibility to enter a trade without bieng afraid about the way the prise is giong because you bye and sell in the same time

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    hedging actually means that you open BUY and SELL orders in the same currency same time so that the net profits and loss is just constant equal to the cost of the spreads.Operators have the ability to enter the market without choosing a particular direction for the currency pair.

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    Hedge means it break over , like if you buy eur/usd and eur start going down then you can hedge with the pair which will help you to minimize your loss.

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    A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses/gains suffered by an individual or an organization.
    A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of over-the-counter and derivative products, and futures contracts.

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    Quote Originally Posted by blessedfx View Post
    Though i'm not really a newbie when it comes to trading forex? i still don't understand what hedging really means.... can anyone please throw more light on it?
    Simply put, hedging is the act of a trader to secure value, technically is open opposite position with the same lot size. So both positions will be locked unaffected by market movements comes next.

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    Hedging means protection , in forex it means to buy and sell same share at same time and when rates come in your favour than close those trades or buy and sell two different shares at same time which move opposite to each other mostly like EUR/USD and USD/CHF

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