HOW TO HANDLE HEDGING?
Hedging means protection of your capital.
Many traders are buying july silver and selling august silver with NO STOPLOSS.
That is not hedging in our opinion.
Because even after 5000 point movement you will not get anything.
When you are closing one side,other side becomes naked risk.
So hedging should be with maximum 0.5% stoploss bothside.
If you are taking 200pt SL in july buy & august sell
Silver moves 1% in any direction,
then you will get 500pt in one direction and -200pt sl in other direction.
It is not essential that you are getting profit everytime in hedging.
sometime It moves 200pt in one side and reverses to hit SL in other side.
In such case,
If you have hedging of 2 lots july buy & 2 lots aug sell
Sl hit one side suppose buy side
then atleast buy 1 lot again with same sl.
the rule is-
1keep open both side till desired profit
2.close both sides when 1 sl hits.
Now question is -
What is the benefit in hitting SL of 200pt in 1side and getting 200pt in other side.brokerage+taxes are also extra loss?
In fact ,
hedging gives you desired profit only 3 times out of 10times.
Then what does it give?
It gives you support till clarity.
suppose crude is swinging above & below the average.You made hedging & got 10pt and lost 10pt sl .
If you had hit 2 sl in single side of 15 pt,then your trading window had showed you-3000 loss.
After seeing such figure in red,
A trader loses his balance and a big story of new loss starts.
If you see your window with no profit,no loss till evening,when clear move occures.
You will end with some profit in end of the day.
some fellows are overtrader,
hedging keep them engaged with no loss.
Good observation starts with no fear at all DURING HEDGING.
You may not miss any big reversal, if you are in regular hedging(morning & evening)
There are some problems also,
Hedging cuts your profit to half,but you can get it frequently with 1/4th risk.
beginners are very very confused in hedging due to emotional involvement,So don't worry and face first 10bad day for lifelong tensionfree skill.
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