What Is Hedging In Forex
Traders employ this advanced type of strategy to protect their investments by mitigating losses. Hedging can be considered as a kind of insurance as it provides protection against losses if the outcome of a trade tends to be negative.
What is hedging in forex trading? In terms of forex trading, hedging is a strategy used by traders to protect a trading account from incurring large losses when something unexpected happens, by trading in both directions of a trade. Forex Hedging. Forex hedging is a tactic used by some traders to protect an existing or planned position from negative price movements. Correct use of hedging allows traders with a long position on a currency pair to protect themselves from a price fall and vice versa.
This strategy works by reducing the trader’s exposure to different risks. This means that you “hedge” one investment through another investment. However, hedging cannot be considered as the Holy Grail which would ensure the safety of all your investments. It involves a cost. Binary option edge.
What Is Hedging In Forex Markets
Insurance does not come free and it is the same in case of hedging too. When you employ the hedging strategy, the potential profits and losses also come down. What is Forex Hedging? In the forex market, hedging provides protection to your investments against volatility and uncertainties.
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