Hedging trading

Hedging is a technique of trading used by some traders in which they open two concurrence positions at the same time,that is one in an upward direction and another one in a downward direction in order to minimize loss.In most cases,the hedging positions are normally of the same size,i.e 0.1 lot for upward direction and 0.1 lot for downward direction.This technique of trading may be advantageous to most traders.For example, a trader may decide to hedge his or her position the whole day such that if the market gain support,that is when they open one more another position of the same size moving in the same direction as the market.This will make them to have two positions moving in the same direction and worth 0.2 lot while one position worth 0.1 lot moving in another direction.
If the trader had initially open two concurrence hedge positions with a difference of -2pips, then the third position favours the trader with 10 pips,this will give a different of positive 8 pips thus the trader will have been considered to have made a profit of 8pips. The trader can now decide to close all the positions.That is how hedging trading works

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