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Hedge In Forex

Discussion in 'Beginners Bootcamp' started by angeldust, Aug 5, 2012.

  1. angeldust

    angeldust Recruit

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    I am new to Forex
    What is "Hedge" ?
    What are its advantages and dis-advantages ?
     
  2. ilearn2t

    ilearn2t Sergeant Major

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    Hello angeldust

    Hedging is when two or more positions on the same pair is opened at the same time in opposite directions, where the purpose is to offset the losses in the first position by the gains received from the other position.

    This type of hedging slows down the trader from getting a margin call, as the second position will gain half of what the first loses.

    So lets say we open a buy order on EUR/USD using a "Micro" account and a lot size of 0.20, if we set a StopLoss at 20 pips we lose 40 cents at a 1 cent per pip value, if this target is reached, and 9/10 times the swing kicks in shortly thereafter and we panic buy into most trouble as we've confused ourselves about what to do next.

    So say we place the same order only we now set our target at a drop of 10 pips before placing a 0.10 sell order to cut possible losses.

    If it now hits the target of 20 pips we have a loss of 40 cents and a gain of 10 cents, over all total loss 30 cents.

    We could close the winning order and allow the buy to drop another 5 points before our next move, or hopefully the swing occurs and the pair begins to move in the direction you always thought it would, or try to judge the possible close of order if new swing pattern merges.

    If your first order gains then the other will show a loss, you must let the winning trade reach the maximum target you set before closing it in profit. Then wait for the losing trade to improve within a range of profit taken on first order.

    Good luck
    ilearn2t
     
  3. angeldust

    angeldust Recruit

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    Thank you so very much
    I have 2 more Qs :
    1. as of now I have downloaded MT5 Demo account from Alpari UK
    when I make an attempt to look for data,only a small data window it opens and there is no table ?
    is there a way to get a table on MT5 ? incidentally the support at Alpari UK is somewhat ignorant of this feature
    2. Would it be wise to use the table of FXCM to trade at Alpari UK ?

    your patience and your kindness is much appreciated
     
  4. FringFX

    FringFX Sergeant

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    basically, hedging is advantageous if you want to profit from a currency pair's movement on both directions.

    For example, you are long a currency pair for the long term, but you see short-term selling opportunities. You can trade both directions using hedging.

    The problem is for newcomers this is not advisable at all, because you will be magnifying the risks on your account. Hedging is another way of saying 'i do not know where price is going so I will trade both sides'
     

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