What do you think of hedging?

[LeoFx]

Hedging in trading involves offsetting potential losses in one asset by taking an opposite position in a correlated asset. It's a risk management strategy that aims to minimize losses during adverse market conditions. While effective, it requires careful consideration of costs, correlations, and impacts on overall portfolio risk and returns.

 

[Polakandil]

Ok then explain how do you it not how some other traders might use it.

How do it, for example, if a trader opens a buy and then the price drops 20 pips, he will open a sell with the same lot, and when the price drops again to a certain price range, he will open a buy with a larger lot size. If in this second step, the price continues to fall by 20 pips, he will open another sell position for hedging with the same lot size as the second step lot size. If the price falls again at a certain price distance point, then open buy at the third step with a larger lot size than the second step, and so on.

 

[Lazarsblck]

How do it, for example, if a trader opens a buy and then the price drops 20 pips, he will open a sell with the same lot, and when the price drops again to a certain price range, he will open a buy with a larger lot size. If in this second step, the price continues to fall by 20 pips, he will open another sell position for hedging with the same lot size as the second step lot size. If the price falls again at a certain price distance point, then open buy at the third step with a larger lot size than the second step, and so on.

Thank you for explaining, after two or three drops like this, your account will crash because your buys are in way more loss that your sells are in profits, because of the price difference, and also, you are paying more for spreads, commissions, swaps, depending on how long you want to keep the trades. Do you think its more reasonable to just take the L and close the trade and then maybe start a new buy position if your analysis suggests that this was a drawback and it might go back up.? What do you think?

 

[Polakandil]

Thank you for explaining, after two or three drops like this, your account will crash because your buys are in way more loss that your sells are in profits, because of the price difference, and also, you are paying more for spreads, commissions, swaps, depending on how long you want to keep the trades. Do you think its more reasonable to just take the L and close the trade and then maybe start a new buy position if your analysis suggests that this was a drawback and it might go back up.? What do you think?

I don't think anything, I prefer simple trade with stop loss and target profit and looking at market changes.

 

[Lazarsblck]

I don't think anything, I prefer simple trade with stop loss and target profit and looking at market changes.

Bet you dont