With the in-depth understanding of the foreign exchange market and the skilled operation mode, many investors have begun to try new foreign exchange trading methods to obtain income, such as foreign exchange hedging, which is more popular in the foreign exchange market. What is foreign exchange hedging? Can foreign exchange hedging really make money?
What is foreign exchange hedging
Foreign exchange hedging is to avoid the risk hedging of single line trading. The so-called single line trading, that is to say, in foreign exchange trading, if the trader is optimistic about a currency pair, he will only do long on it. If the judgment is correct, there will be a lot of profits, but if the judgment is wrong, the loss will be great. Then the so-called hedging refers to that a trader shorting a currency while doing more than one currency, that is to say, both long and short a currency. Under normal circumstances, the size of the positions of these two orders should be the same to be considered as a real hedging transaction.
What are the precautions for foreign exchange hedging?
1. Hedging is not a conventional method and should not be used frequently. It is suggested to use it only when you look at the general trend and only when the admission time is not good.
2. Hedge to control the size of positions and trading scale.
3. Hedge early, don't wait for passive use.
4. Stop loss must be set when hedging foreign exchange. What is the profit principle of foreign exchange hedging transaction? To understand the profit-making principle of foreign exchange hedging transaction, we must first clarify what is the foreign exchange hedging transaction. Foreign exchange hedging transaction refers to the risk hedging of long and short trading varieties at the same time. In other words, regardless of the rise and fall, traders' previous profits and losses will not expand. That is to say, using hedging transactions, traders can lock up losses when they are losing, and can keep profits when they make profits. Therefore, foreign exchange hedging transactions are also called foreign exchange lock positions. So how can foreign exchange hedging make a profit? Next, we will analyze the profit principle of foreign exchange hedging transaction in detail. In fact, hedging in foreign exchange hedging transactions is for currencies, not just currency pairs. In other words, traders hedge against money, not a single currency pair. The profit principle of hedging transaction is to reduce the risk and make more profit at the same time.
What should be paid attention to in foreign exchange hedging
1. Hedging has great risk, so traders should use it carefully.
2. Foreign exchange hedging transaction needs certain methods and skills. Before mastering the relevant skills, it is better to simulate the operation.
3. Stop loss must be set when hedging.
Although foreign exchange hedging can indeed bring benefits to investors, we still have to bear in mind that in the investment process, we must be cautious and not blindly risk for profits.
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