Hedging on the Forex market. Types of locks.

Taking measures to reduce risks is a basic condition for profitable trading. The most popular tool used to solve this problem is the stop-loss. I’ve told you many times about him on the blog. But there is another way to limit losses. It is used in various markets, including the Forex market. I mean hedging or locking. I want to talk about it today.Appose that a trader has opened a buy order and determined the optimal level for placing a stop-loss. But I didn’t put him out there. Instead, at the level where the SL should be, the trader placed a pending sell order. If the price goes against an open trade and a Sell order is opened, the size of the loss will have a fixed value. That’s what they call locking.And now let’s get acquainted in more detail with the types of hedging on the currency market.

Hedging types

the market has not decided on the direction of movement, in this case it is possible to open
two mixed deals. When the situation becomes clear and it becomes clear what kind of
the market has chosen the direction, the second order (loss-making) can be closed. It’s, uh… it’s, uh…
is called a zero lock.Positive
Locke is used to get additional profit. Let’s look at an example.
A trader has opened a deal to buy on an uptrend. The correction has begun.
A trader opens a trade to sell and closes it when there are signs
to complete the correction.Negative
Locke is what I told you at the beginning of the article. It’s an alternative.
stop-loss. The difficulty of this type of hedge is the competent exit from
locale. I’ll tell you about it in a future article.The important advantage of hedging on Forex is the psychological factor. Closing an SL transaction is always a little stressful. A trader sees how the amount of funds on his deposit decreases. And the lock freezes the loss, and it does not affect the trading account in any way. Besides, locking gives the trader time for additional analysis of the market situation. Hedging also excludes losses from accidental contact with the stop-loss price.Hedging in the Forex market, of course, has disadvantages. I wrote about one of them above: the difficulty of leaving the local. This method also requires a sufficiently large deposit size. In addition, not all brokers allow traders to open multidirectional trading positions.Fyodorov’s Inga16.07.2019