Forex Hedging Strategy

Forex Stop loss, hedging strategy and cut loss are method for controlling our loss in our trading activities. Stop loss is our method to put automatic order for closing a trading position when the market price touches a certain price level where this level become our limit "our maximum loss in single trade". We can set our stop loss, pips that we can take for risk. I will discuss about stop loss technique in other article.

What is Forex Hedging?
Hedging Forex Strategy or locking means that we open buy and sell position in the same time without close one of these positions. Practically, we can use pending order and instant execution for hedging to protect our trading position. We also can use Forex hedging strategy as a stop loss.

Cut loss is closing a trading position manually.

All of these strategies can we use to limit our risk, except we let our capital dragged out into margin call. The question is, which one is the best strategy for limit our trading risk? actually it depends on you. Stop loss is more safety because our trading position will close automatically after market price touch our limit. And we can calculate our risk in trading plan before.

Forex hedging strategy or locking positions is used by many forex traders who want more flexible risk, in other word we still limit our risk but we can still keep chance when the negative position can be closed with profit. If we manage Forex hedging strategy properly we can close our trading with profit. But it needs patient and discipline to doing hedging strategy. The main difficulty in hedging strategy is in margin management and when we open locking positions. It need experience to open a locking position. We must pick the right time to open locking or hedging position. "Should I close my trading position right now ?, "is trend still continue If I close my trading position now?, "Will market trend reverse if I don't close my trading position now?, and etc.

And here is tip for you when you use Forex hedging in your trading. You can close and keep your locking position with scalping trading to cover your loss if trend still continue. This Forex hedging system need serenity and good psychology, so we are not provoked easily by false signals.

You can use this Forex hedging technique if you have big margin available in your trading account. If you only have small available margin it would be better if you use cut loss technique for your trading. Personally I only use cut loss for my trading.

Forex traders need guts and good mentality especially when they have to take risks and protect their account from big loss.