What is hedging?
What is hedging? Hedging is the process of risks insurance or risk
reduction. Hedging is applicable in different areas, here we would consider
only forex market's risk hedging. In forex market, hedging becomes more
complicated than hedging in other field of investing. You can dream about a
world where profit potential is limitless
and risk free, however hedging
can't help you to escape the hard reality of the risk-return tradeoff. A
reduction in risk will always mean a reduction in potential profits. So,
hedging, for the most part, is a technique not by which you will make money but
by which you can reduce potential loss.
Technically, in order to fulfill the hedging you should invest in two currencies with negative correlations. If the investment you are hedging against makes money, you will have typically reduced the profit that you could have made, and if the investment loses money, your hedge, if successful, will reduce that loss. The main challenge of hedging in the forex market is the selection of portfolio of negatively correlated currencies.
Metatrader Expert Advisor HedgeOptima, enters the market according t the signal which is based on the appearance of a certain pattern. The metatrader expert adviser trades the currencies portfolio using the hedging of the currencies with a negative correlation. This approach reduces the risks and smoothes the profit curve.
The weak point of this strategy is that market turbulence increases volatility of one or more currencies in the portfolio, which causes an imbalance of hedging. So as any strategy hedging is us just tool not a Grail, however the results of it are very impressive.
BJF Trading Group
http://iticsoftware.com
Technically, in order to fulfill the hedging you should invest in two currencies with negative correlations. If the investment you are hedging against makes money, you will have typically reduced the profit that you could have made, and if the investment loses money, your hedge, if successful, will reduce that loss. The main challenge of hedging in the forex market is the selection of portfolio of negatively correlated currencies.
Metatrader Expert Advisor HedgeOptima, enters the market according t the signal which is based on the appearance of a certain pattern. The metatrader expert adviser trades the currencies portfolio using the hedging of the currencies with a negative correlation. This approach reduces the risks and smoothes the profit curve.
The weak point of this strategy is that market turbulence increases volatility of one or more currencies in the portfolio, which causes an imbalance of hedging. So as any strategy hedging is us just tool not a Grail, however the results of it are very impressive.
BJF Trading Group
http://iticsoftware.com
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