In this episode of 2Traders Podcast, Walter and Darren dig into the topic of hedging. You will find out about the tricky aspects of hedging, including hindsight bias and some of the possible solutions for using hedging in your trading.

Also, Walter and Darren talk about brokers and some of the sticky aspects of hedge funds.

http://media.blubrry.com/2traders/content.blubrry.com/2traders/2Traders_-_EP38_Hedging_Strategy.mp3

Download (Duration: 17:43 / 20.2 MB)

In this episode:

00:47 – a bit tricky

02:05 – hedge my position

03:45 – advantageous

06:19 – trade within the hedge

07:26 – getting dumped

08:51 – expanding hedge

10:49 – break out

11:25 – offshore broker

13:10 – mistakes

14:52 – handy tool

Tweetables:

Not being able to hedge can be a disadvantage. [Click To Tweet].

Don’t look at hedging as an additional profit but as a tool for insurance. [Click To Tweet].

Conduct some more analysis, observe, and wait for some good signals to come up. [Click To Tweet].

Download The Full Episode 38 Transcript Here

Darren: It’s important to think about what’s least likely and most likely to happen when you use a hedge. The least likely outcome is for both of them to profit. That’s very rare so you shouldn’t be trying to make it happen.  

Announcer: Two traders, Darren and Walter, pull back the curtain on profitable trading systems, consistent money management, and profitable psychological triggers. Welcome to the Two Traders Podcast.

Walter: You’re here at the Two Traders Podcast. I’ve got Darren on the line. Hello there, Darren.

Darren: Hello, Walter.

Walter: Well, last time Darren, we touched on your hedging strategy. I know this is something that a lot of traders used or have considered using and I’ve always found it a bit tricky. I just wanted to get your thoughts and what can you do as a trader?

First of all, why would you use hedging? Why is it even something that you use? Then secondly, if you’re thinking about using hedging, what are some of the things that the pip falls? What are some of the things that traders need to know if they’re getting into this?

Darren: Yeah. I just had an email this weekend from someone who asked me. I emailed him back about hedging. I said that, “not being able to hedge puts you on disadvantage.” He was in the states and his broker wouldn’t allow him to do that. He asked me how are we at disadvantage not being able to hedge?

It was surely difficult for me to answer that question because it’s quite complex in my head. The way I see it is, let’s say we trade trends so we’re a trend trader and we are selling the prime USD. We’ve got a position, it’s in profit and we come to a certain scenario that’s making us think that we should take profit.