Hedging in Trading

This is a discussion on Hedging in Trading within the General Trading Chat forums, part of the Reception category; I am not clear in hedging concept. If anyone knows well clarify it to me....

Reply
 
LinkBack Thread Tools Search this Thread
Old Aug 10, 2017, 12:00pm   #1
 
5 Posts
Joined Mar 2017
Hedging in Trading

I am not clear in hedging concept. If anyone knows well clarify it to me.
vimalanikal is offline   Reply With Quote
Old Aug 10, 2017, 6:47pm   #2
 
Quantt's Avatar
Joined Jul 2017
The idea is when you are long the market, you put another opposite trade, so in an event of major down, you will limit your losses, but keep in mind this will limit your are winning as well, because you'll loose on the hedging trade if everything goes as planned...
__________________
"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
Quantt is offline   Reply With Quote
Old Aug 10, 2017, 7:09pm   #3
 
Lee Shepherd's Avatar
Joined Feb 2008
Don't be misunderstood that hedging means going long and short in the same market. That's just bollox and you end up spending twice the comms. Your broker will love you for trading this way.

A true hedge would be a similar market or/and sector. Say for example you are long in one bank stock, you could be short in another banking stock. Therefore as one (assumed over bought) stock is short and the other (assumed oversold) stock is long. Both being in the same sector protects the trade with respect that we will not run out of banks - plus they are too big to fail etc. As one fails, others gain strength/customers. Therefore your trade is hedged in that sector.

Hedging does not have to be the same sector. Another example is gold V's dollar.

NOTE: Hedging is not guaranteed for profits, it just helps to limit losses if you trade in a particular sector or running a large book.

Lee
__________________
Check out Lee Shepherds Trading Diary:
http://www.trade2win.com/boards/trad...ing-diary.html
Lee Shepherd is online now   Reply With Quote
Old Aug 10, 2017, 7:33pm   #4
Joined Apr 2016
Best hedge is cash. Cash opens up opportunities. Opportunities yield winners. Winners cancel out losers or outgrow them.
EnlightenedJoe is offline   Reply With Quote
Thanks! The following members like this post: Trade2getrich
Old Aug 13, 2017, 3:31pm   #5
Joined Sep 2013
Quote:
Originally Posted by Quantt View Post
The idea is when you are long the market, you put another opposite trade, so in an event of major down, you will limit your losses, but keep in mind this will limit your are winning as well, because you'll loose on the hedging trade if everything goes as planned...
Its not a hedging its a BS. Hedging is intended to "fix" your risk by paying Premium for it. It can be done by futures or options where the future price of the asset you sell or buy is already known now. For example selling samsung shares you may find it useful to buy some call options on apple, its rival. This is called hedging.
gerryg is offline   Reply With Quote
Old Aug 24, 2017, 6:56pm   #6
Joined Feb 2016
.

Quote:
Originally Posted by gerryg View Post
Its not a hedging its a BS. Hedging is intended to "fix" your risk by paying Premium for it. It can be done by futures or options where the future price of the asset you sell or buy is already known now. For example selling samsung shares you may find it useful to buy some call options on apple, its rival. This is called hedging.
Hedging isn't just using two different instruments. You can hedge with one index.
The problem is that it's all about timing. You can severely be burned if you don't know what you're doing.
__________________
$1051153.2 = 73 weeks. If you can't do it....quit or hit the books
joseph1986 is offline   Reply With Quote
Old Aug 25, 2017, 7:07pm   #7
Joined Nov 2016
Quote:
Originally Posted by Lee Shepherd View Post
Don't be misunderstood that hedging means going long and short in the same market. That's just bollox and you end up spending twice the comms. Your broker will love you for trading this way.

A true hedge would be a similar market or/and sector. Say for example you are long in one bank stock, you could be short in another banking stock. Therefore as one (assumed over bought) stock is short and the other (assumed oversold) stock is long. Both being in the same sector protects the trade with respect that we will not run out of banks - plus they are too big to fail etc. As one fails, others gain strength/customers. Therefore your trade is hedged in that sector.

Hedging does not have to be the same sector. Another example is gold V's dollar.

NOTE: Hedging is not guaranteed for profits, it just helps to limit losses if you trade in a particular sector or running a large book.

Lee
That's not really a hedge because going in the opposite direction in a similar market or sector could end up increasing your loss. Hedging reduces your risk. Long a stock and want to hedge, then buy a put on that stock.
seekingTruth16 is offline   Reply With Quote
Old Aug 25, 2017, 9:37pm   #8
NVP
 
NVP's Avatar
Joined Jun 2004
Hedging originated from merchants wishing to lock in guaranteed positions on physical products by selling or buying them in advance ......it wasn't to make money ....simply to limit exposure
NVP is offline Coach/Trainer   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
Hedging Breakout Trading Idea. Thanks monkey180 General Trading Chat 1 Feb 13, 2016 3:24pm
Is anyone hedging their US dollar trading accounts ERA Forex 0 Nov 19, 2004 8:31pm
Hedging in day trading clylbw Discretionary Trading 19 Jun 6, 2004 12:37pm

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)