What is Hedging in Forex?

The Hedging is a great Strategy to make the profit when you already are in loss. It can also be called Insurance Policy, because after using this strategy, you will be safe from more loss. By using Hedging strategy, it’s not mean, your account will be totally safe from loss, you will get a little loss. Before starting trading, you must have to know about forex hedging completely and also you need to practice much time on a demo account until you become an expert in hedging.

Once you understand the forex hedging, you can apply it to your real trading account. For Example: you decided to buy EURUSD currency pair one standard lot at the price of 1.2635, but suddenly market prices move to 1.2585. Now you do not want to close your opened position and also don’t want to get more loss. At this time you can open one standard lot sell position on the same currency pair, (where already you have opened a buy position), and you analyzed that, the market will be up after going down at the price 1.2500. Now you have two opened positions on the same currency pair, and this strategy is referred to as Hedging in Forex.
Now when the market moves down at the price of 1.2500, your ‘buy’ position will be at a loss, but your ‘sell’ position will be in profit. Now if you think the market will be move upside, at this time, you can close your sell position (which is in profit) and remain your ‘buy’ position open until the loss ended or reduces, after that finish this position too and you can close your buy position as well.

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