hedge forex positions with no loss

Discussion in 'Newbie Questions' started by ilqar200, Sep 24, 2016.

  1. ilqar200

    ilqar200 Trader

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    Hello. Please excuse me for my newbie question. I want to hedge my forex positions (i.e buy or sell ) with other financial instruments with no loss to my capital. Is it possible anyway ? How i can do this if this possible ? Thanks.
     
  2. Enivid

    Enivid Administrator Staff Member

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    That depends on what kind of position you are trying to hedge. If it is a spot Forex trade, you can manage it with an equal but opposite trade. For example, if you bought 1 lot of GBP/USD, you can hedge it with a sale of 1 lot of GBP/USD. However, what's the point of this?
     
  3. ilqar200

    ilqar200 Trader

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    You dont understand my question. I dont meant trading. I want to hedge my forex position with other financial instruments or in another exchange with zero loss or at worst with minimall loss .
     
  4. eyeball

    eyeball Master Trader

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    According to financial lore and legend ( and some math nerds too) there is no such thing as a "perfect hedge ", but you can come close. See Investopedia.com or just Google "perfect hedge"
     
  5. Enivid

    Enivid Administrator Staff Member

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    I really don't. That's why I wrote that everything "depends on what kind of position you are trying to hedge." Also, it is important what goals you are trying to accomplish. Because if it is a spot Forex position you are trying to hedge with a minimal loss goal, then an opposite spot Forex position is a perfect solution to your problem. Other options would involve binary options, vanilla options, futures, maybe even bonds. However, they would be inferior compared to hedging spot with spot if the aim is loss minimization.
     
  6. Daniel Richards

    Daniel Richards Trader

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    First of all, check your broker's policy on Hedging! If your broker does not allow hedge trades, all you profit will be cut and you will suffer from huge losses. Be careful with that.
     
  7. Hafizmd

    Hafizmd Active Trader

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    Practically all the brokers allow hedging. But it's no good for a trader himself... It's hardly possible to get out of hedged position with profit.
     
  8. myfxpt

    myfxpt Master Trader

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    I'm enjoying a 75% win ratio using a correlation hedge strategy. I don't think you have taken a long enough look at hedge trading and the potential it offers.
     
  9. Enivid

    Enivid Administrator Staff Member

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    Couldn't you attain the same results without hold both short and long positions on the same pair?
     
  10. myfxpt

    myfxpt Master Trader

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    Thanks for the question. I am not holding short and long positions on the same pair. I am trading two positively correlated pairs, like AUDUSD/NZDUSD or CADJPY/GBPAUD for instance. Each pair is assessed for strength and weakness, and based on this I will buy the strong pair and sell the weak pair. I do not see the point in holding both a long and short position in the same pair...you are just delaying the inevitable!
     
  11. Enivid

    Enivid Administrator Staff Member

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    Then you are using unconventional definition of hedging because in retail Forex, hedging is defined as holding opposite positions on the same currency pair at the same time.
     
  12. myfxpt

    myfxpt Master Trader

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    Correlation Hedging is defined as holding two different, but related, currency pairs.
     
  13. myfxpt

    myfxpt Master Trader

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    That said, I have played with one strategy with lots of merit. The author, Timon Weller, says "If you are planning on using this strategy, be warned, it can backfire. It is not a surefire success strategy and involves skill throughout its complete execution.", but that might be okay if the profits are good and you've made regular withdrawals along the way. It takes some concentration to learn, but worth the effort. Anyway, I want to share with you a video that demonstrates the strategy and let you judge for yourself.
     

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