What is Hedging in Finance ically, hedging is when you op eee ing a Sua ear cede: ey Poor eetriras: of ee ri Serer: The stop-losses are a critical tool used in Forex trading to limit lossesif the trade doesn't go as planned. ‘You simply can't be successful in the long-run if yau don’t limit your downside by using stop lasses. The hadging strategies work the same way as a stop loss order in terms of limiting losses. However, the advantage of hedging is that you can also make money on the hedge trade if you careful select the second trade The biggest misconception among retail tredersis that the Forex hedging strategy means placing an equal ‘and opposite trade to the one that you already have opened in other words, if you bought 1 lot of EUR/USD, you would throw a1 lot sell EUR/USD to offset the first trade. However, that's not how hedging works. © rristenornedgiog nme conic! me os we a, wf e Only the Forex hedging strategy requires holding buy and sell t the same time on the same pair. Forex hedgingis used more to pause the profit or loss during a reversal, So, if the market is going up and you're short, you might buy to temporarily hold the position until the market turns back in your favor. That's just ‘one angle to understand what is Forex hedging, pho, PrdForex Hedging Strategy Using Two Currency Pairs employ as a Forex trader. Understanding the price an help to re Pee ce rece Sere eee ae eae ear Pee ua stween the oil price and theGold Hedging Strategies 3old is a perfect hedge if you want to protect yourself ageinst higher inflation. Gold prices tend to benef Meuron nec ee eee ; ean a an inverse correlation between Gold price: f Gold prices go up, the US doll Hedging Through Options 7 moe Sees ey especially the equity portfolio. You can apply this hedging strategy by seling e put options and buying a cal ptions and Options are also one of the cheapest ways to hedge your portfolio,Home Blog About Trading tategy Guides Let's say as an exemple of hedging strategies that you buy the USD/JPY.If you want to use hedging strategies youthenhave to also buy EURIUSD.In this case youre effectively buying EURIUPV becouse the USD parts cancel ‘each other Now, inorder to hedge your trade youneed to sell EUR/JPY Those three transections together form ahedge, Meh Acne Td rare Tec eee cee Retire easel Cry 3 Currency Hedge Examples SDI USIPY USDCAD USOCAD NZDUSD AUDUSD EURUSD NZDUSD ALDUSD NADUSD EURUSD GaPUSD EURUSD GBPUSO GRPUSD GBFUSD USOCAD URUSD EURUSO GEPNID ‘Sell EURIPY GBPIPY EURCAD GBPCAD GBPNZD GBPAUD EURCAD EURNZD EURAUD GBPUSO Sell sory USUIPY.USDCAD USOCAD NZDUSD.AUDUSD EURUSD NZDUSO AUDUSD NEDUSD Sell URUSD G8PUSD_FURUSD GHPUSD _GBPUSD GAPLSD USDCAD FURUSD EURUSD GB>NCD BuyOil Hedging Strategies Some currencies are more exposed to the influence of the oll price, The mare noteworthy example isthe Canadian dollar, Usualy, there Is a positive correlation between the oll price and the Canadian dollar exchange rate. When the oil price strengthens, the USD/CAD exchange rate will weaken. In this case, you can use the oil hedging strategy to hedge your exposure on the USD/CAD trade. You can go long USD/CAD and open a short hedging position in Oil