Hi guys,
So I came across the word "hedging" and read through some threads on different forums. From my understanding, hedging is some sort of martingaling where to outcome is very high to be break even or in profit.
For example, enter a trade (let's say 0.05) and instead of a stop loss, you add a stop (or buy) order that doubles the amount in lot size of your first position. Once the trade goes like 30 pips (or depending on your strategy) against you, it triggers the second position (0.1). If the 2nd position goes in profit and you reach break-even in total profit, you close the first position and let this one run.
Repeat until the trade goes in one way.
My first though was: damn, that is really smart! Worst and rarest case you end up in a loss in case you catch the range and keep entering trades and cannot add anymore positions. Best case a break even or a nice profit.
But everything that sounds amazing and simple, usually has a hook. And I cannot seem to figure out this hook except you have to keep adding positions since your trade jumps between the range of 30 pips and you take a loss.
Since I am new to hedging and recently discovered it, what is your opinion in this way of trading? Is there even a disadvantage to this? I do not know ....
Cheers,
Ray
So I came across the word "hedging" and read through some threads on different forums. From my understanding, hedging is some sort of martingaling where to outcome is very high to be break even or in profit.
For example, enter a trade (let's say 0.05) and instead of a stop loss, you add a stop (or buy) order that doubles the amount in lot size of your first position. Once the trade goes like 30 pips (or depending on your strategy) against you, it triggers the second position (0.1). If the 2nd position goes in profit and you reach break-even in total profit, you close the first position and let this one run.
Repeat until the trade goes in one way.
My first though was: damn, that is really smart! Worst and rarest case you end up in a loss in case you catch the range and keep entering trades and cannot add anymore positions. Best case a break even or a nice profit.
But everything that sounds amazing and simple, usually has a hook. And I cannot seem to figure out this hook except you have to keep adding positions since your trade jumps between the range of 30 pips and you take a loss.
Since I am new to hedging and recently discovered it, what is your opinion in this way of trading? Is there even a disadvantage to this? I do not know ....
Cheers,
Ray