strategy for hedging?

<p id="isPasted">The&nbsp;hedging strategies&nbsp;are designed to minimize the risk of adverse price movement against open trade. If you fear a stock market crash is coming or want to protect one of your trades from the market uncertainty you can use one of the many types of hedging strategies to gain peace of mind.</p><p>The hedging 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 carefully select the second trade.</p><p>The biggest misconception among retail traders is that the&nbsp;Forex hedging strategy&nbsp;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 a 1 lot sell EUR/USD to offset the first trade. However, that’s not how hedging works.</p><p>There are essentially 3 popular hedging strategies for Forex. Nowadays, the first method usually involves the opening positions on 3 currency pairs, taking one long and one short position for each currency. For example, a trader can open a long GBP/USD, USD/JPY, and short GBP/JPY position. Since a trader has one buy and one sell position for each currency, it is called a direct or perfect hedging strategy. &nbsp;&nbsp;</p><p>Another simple Forex hedging strategy requires the use of highly positively or negatively correlated currency pairs. An example of this would be the opening of long EUR/USD and short EUR/JPY positions simultaneously. Since those two pairs are highly correlated, the loss in one case can be offset by the gains made from the second trade. &nbsp;</p><p>There is also a third method, instead of opening several positions, some professional Forex traders might prefer using options. This gives an individual the right to buy or sell a currency pair at a fixed price at a specific date in the future. &nbsp; For example, a trader might decide to open a long AUD/JPY position at the 70 level. At the same time, he or she can purchase a put option at 69. This is like insurance because if the Australian dollar starts to fall against the Japanese Yen a trader can exercise an option, close trade at 69 and consequently limit his or her losses.</p>

<p>Futures and Options are two common hedging techniques used in stock market. Call Option and Put Option are the two facilities provided in Options Trading. Option is similar to the insurance premium you pay for your car. You pay a small premium and buy one call option (a right to buy at a later date at a particular value of the share- valid for 3 months) when you think that the share price of a company will go up. When it really goes up your paid premium value also goes up and the difference is your profit. Similarly when you think a share price will come down later, buy one Put option (right to sell a share at a particular rate later) by paying a small premium and when the share price comes down your put option value will go up and the difference is your profit. Here the risk is very less and the deposit to the broker is also less.</p>

<p id="isPasted">Advanced traders often use hedge strategies, as they require a deep understanding of financial markets. While there is no reason that you can't hedge if you're new to trading, it's important to understand the forex market and develop your trading plan first.</p><p>Forex traders have a wide range of options to manage their potential losses, and hedging is one of the most popular. The most common strategies for hedging forex include simple forex hedging, and more complex systems involving multiple currencies and financial derivatives, such as options.</p>

<p><br>Replace stoploss of your open positions with opposite positions. This strategy is based on the theory that 95% of the time the market is moving up and down randomly. This strategy does not work when the market is trending and drain your account fast. Check out my strategy here. It may interest you.</p>

<p><br>If you are bullish on any script, then buy futures and also buy an ATM put. Remember, delta of a future is 1 and delta of an ATM option is 0.45–0.5 or so. therefore When script moves in your direction , you make money in futures and lose money in put, so effectively, you will make around Rs 0.6 or more, with movement of every Rs 1 in the script. However, if script moves against you, then you lose money in futures and make money in put. So effectively , you will lose around 0.45 or less with movement of every Rs 1 in the script.</p>