How to Hedge trading Forex | Forex Hedging Strategy

Forex Trading is hard really hard and when I started out I lost way more money than I ever made until I started hedging and not just hedging hedging in a very specific way edging with a strategy hedging with a plan in this video I'm going to show you four steps to a hedging strategy I'm going to show you window hedge how to trim a hedge how to squeeze a hedge and how to build a hedge from the inside it might work for you or you might find something that you can apply to your own trading strategy so the first step to Forex hedging is when to get into a hedge I'm going to give you an example how many times have you had a market go up pulls back goes up pulls back goes up pulls back and now the fomo is starting to set in now you're like this thing's just gonna go up forever I want to get in I'm I'm trading this pullback so on this pullback you decide to get in the market that's the Blue Line you're entered you're in you're going long you're shooting to the moon and you're gonna make a gazillion dollars well how many times have you picked up this Market it gives you a little teaser and then goes south if you're anything like me this happened like almost all the time way more time than it ever just went up and made a profit and when it did I was always quick to take it because you're so nervous that's gonna tip over right that's where hedging comes in it gives you peace of mind and a little bit of flexibility here's the rule on when to get into the Hedge so as soon as you enter into the market right here you're gonna find where 30 Pips is 30 Pips below it is where you're going to set a stop sell order basically it's your stop at 30 Pips we're gonna put a red line this is our stop so if the market comes down and hits this it will pick up an equal shared stop order and then you'll be hedged the most you're out is 30 Pips the difference between the two so if the market comes up it gives you a little teaser and then tanks like it always does and go straight down you're now hedged at 30 Pips every time you enter a position this is something you need to do is put a 30 pip stop by or a 30 pip stop sell in the opposite direction and that way if you're wrong which you're probably going to be wrong at least 50 percent of the time you don't have to make any any decisions you don't have to decide where to put a stop or have a mental stop you're automatically have chosen 30 Pips from here I'm going to hedge this position all right so now you have found yourself in a hedge what do you do from here this is probably where most people fail hedging is what do you do once you have two equal shares go in opposite directions none of them May making money and none of them are losing money but how do you get out of the Hedge the first thing you want to do is you want to find 40 Pips below where the Hedge Mark is this is your target profit 40 Pips it's a little bit more than the spread on the Hedge but it's not so far out that you don't have a chance of getting there you don't want to set a Target profit so it automatically kicks it out this is just a target range so you're in your hedge and you go to bed overnight and wait to see what the market does the next Marine comes up comes down comes up comes down and when you wake up this is where the market's at it's below 40 Pips so it's at least 40 Pips in the money in fact it's a little bit more so we're gonna draw that down you're actually 73 Pips in the money that's awesome that's better this is where you're going to take profit we're going to close our hedge at this green line we're going to close this bottom position you've got a hundred thousand units each pip is worth ten dollars and a hundred thousand units and you've got 73 Pips so 10 times 73 is 730 dollars but you also have a loss you have a loss on the top side this hedge is 73 plus the 30 103 Pips out of the money at ten dollars a pip you have 10 times 103. so you have a thousand Thirty loss and you have 730 in profit so now what you're going to do is you're going to trim the Hedge I've designed a little bit of a calculator to help plan in this out but you've got a hundred thousand units and minimum you're looking for 40 Pips that would have been four hundred dollars we actually got into the money seven hundred and thirty dollars we're only going to put a hundred dollars in our pocket whatever the amount of units you have that's how much money you're going to put in your pocket so if you have a hundred thousand units you're gonna put a hundred dollars in your pocket if you had fifty thousand units you're gonna put fifty dollars in your pocket and then the rest you're going to apply to the outside hedge so in this case we may we have 730 dollars in profit we're gonna keep a hundred bucks and we're gonna apply 630 dollars to the outside hedge which is the top line our original position so that original position was out of the money a thousand Thirty we're gonna apply six hundred thirty dollars to it which means we can close sixty one thousand one 165 five units of that top position let me show you what that looks like on the charts we originally had a hundred thousand units we're going to close 61 165 and we'll have left thirty eight thousand eight hundred and thirty five that's what we'll have left on the top position we're going to close this guy close 100 percent and this will give us a one hundred dollar profit our original position we had a hundred thousand units we close 61165 and we have 38 835 units left we closed a hundred percent of our Hedge for a hundred dollar profit so net we're up a hundred bucks and we have a we have less than 40 percent left of our original position now you have to re-hedge or re-put a stop Hedge for the balance that's left so how you do that is wherever you close the position or wherever the market is you're going to go down and find 30 Pips just like we did on the original position we're going to put a line right there and call that red and that is going to be our next stop hedge now if the market comes up and goes down and goes through this we will pick up that hedge and repeat the process we have 38 835 units still left on the long side and we have 38 835 units that is now hedged and these two are a total of 133 Pips apart you go to bed the market comes up goes down and it ends up down in this area right here now it's in the money is it more than 40 Pips in the money 58 Pips in the money so we're we're in the money we're good to go we're going to close that position for a profit close 100 of this and we're going to put 38 dollars in our pocket we have 38 835 units so we're going to close and keep 38 dollars as our net profit our total profit for this position is 3. 88 times 58.

so we have 225 dollars of total profit and we're going to keep 38 dollars of it and apply the rest of it to this outside hedge so we have 38 835 and we've got to calculate how far out of the money that is for a total of 193 Pips out of the money is 748. 84 cents thirty thousand seven hundred forty nine out of the money and we're gonna apply 187 dollars towards us so we're going to close 9698 units and a hundred percent of the bottom Edge that will look something like this we're gonna close nine thousand six hundred ninety eight and we'll have left 29 comma 137. we're closing this guy I'm 100 of it for a 38 pip or a 38 dollar profit so now after it's all said and done we're down to 29 137 units we've made 138 dollars on the way down and the next thing we need to do is set our stop hedge our stop order down at the bottom for 29 137.

you're gonna find 30 Pips below the market and we're going to set a sell stop order right there if the market comes up and then goes down it'll activate that or it might come down to here and then bounce we're going to cover what to do if you do not pick up your stop sell at the bottom that's when we squeeze the Hedge let's talk about squeezing the Hedge okay so now we're going to talk about squeezing the Hedge the market has worked its way down you've made 138 dollars net profit and you have a 29 137 unit position left on the top with the 29 137 unit position at the bottom but the market didn't open it that's just a stop order and the market is going to bounce and it's on its way up this is where you're going to squeeze the Hedge so from here it's going to go up it's going to come down it's going to go up it's going to come down let's say it gets to right there during the night what you want to do is maintain 30 Pips from wherever the market is so if the Market's right there you're going to be 30 Pips below that that's where you want your stop to be so all you do is just continue to work this up it's more like a trailing stop so every time the market moves and you have an opportunity to squeeze that just a little bit do it all you're doing is minimizing the spread and the risk of that 29 137 unit position left in place you can squeeze that until it either closes and comes up and goes into profit or until it comes back down and hits it either way it doesn't matter you're just squeezing that position as much as you can more than likely you'll squeeze it it'll come up and go back down and hit it at that point you're just back to trimming the hitch nothing has changed other than you've narrowed the gap on how far apart that position is now we're going to talk about building from the inside so the question is what do you do when you have a 223 pip spread and the market is trending in the middle it's easy when it's going out you can trim from the top or when it's going down you can trim from the bottom but when it's in the middle you're kind of stuck so this is going to be how you build from the inside we're going to open a position right here and we're going to go short Market's coming up we think it's going to hit this uh resistance and turn and come back down to the bottom you now have the option of choosing how many units to open that position with remember your margin is at a hundred thousand units you're down at 29 000.