Steps to Forex Hedging

Here are the four main steps:

Risk analysis: Traders hedge a trade only if there is some unusual amount of risk or if the risk level has changed. So, the key is to calculate the existing risk.
Subtract risk tolerance: Risk tolerance is the normal risk level on a trade and the amount of loss that the trader is prepared for. Traders can deduct this amount from the total risk and get the excess risk eliminated with hedging.
Select strategy: The third step in forex hedging is considering the effectiveness and cost of various possibilities.
Act: Implement your strategy and keep an eye on the market. If the market situation changes, it is possible to close a part of your original or hedge position for better results.
While the strategy cannot be best for every trade, it has its own use and effectiveness in specific situations.

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