All You Need To Know About Hedging In Forex!

Hedging in common terms is to protect yourself from big losses. We get warranties and insurances on the products we buy, to ensure that we are protected in the event of any expensive mishap. Financial protection is what hedging offers, and in the world of Forex trading, you will need financial protection on one too many occasions. While trading currencies, the money lost isn't in hundreds, it often reaches thousands. Losing such big money overnight can be a huge problem, and you shouldn't let your trading capital suffer such a dent. 

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That's where hedging comes in, hedging a trade is essentially placing a new trade in the opposite direction to your initial one, and in doing so you are making sure that if one trade fails, the other succeeds, hence keeping you from losses. Even if you do lose money, the amounts will be nominal or you might even end up with a breakeven. This is one of the more defensive Forex Trading Strategies in Vietnam.

Depending on the broker you have partnered with, you can also place a direct hedge. A direct hedge is essentially placing both a buy order and a sell order on the same currency pair. Now if you're able to time the market right, you can make big profits from both orders!

How Is Hedging Different Than Closing?

When the topic of hedging pops up, many traders suggest just closing the trade on a loss instead of taking risks with another one. As a Forex trader, this is also a choice. Hedging is supposed to be carried out backed by a lot of research, if you're new to Forex trading or still learning, cutting losses is the best option! In doing so, your capital will definitely take a hit, but it is still better than hedging without knowledge and losing both your initial and hedged trades! 

What If The Hedge Is Ineffective?

Many times it so happens that the hedged trade sees market reversals against its favor. Keep in mind that you can lose a lot of money if you hedge carelessly! Your job here is to place a stop-loss in your hedged trade or close it right away. 

Hedging Isn't For Everyone

You might be fascinated by the way hedging works and even brew up a misconception that hedging will help you dodge losses completely - but that's not the case. Hedge wrong and both your trades will end up in losses! Only once you have knowledge of market swings and timings can you hedge your trades.

Master Forex hedging with the leading broker by your side - call WesternFX today! One of the top Forex Demo in the game, we house incredibly talented traders who will provide you with world-class guidance. Guided by our stellar Forex Trading Strategies in Vietnam, you will see swift success. Call us today to know more!