Hi
i'm still looking for a way to protect trading against sudden moves that won't trigger the SL because of low liquidity.
I've looked into asymmetrical hedging, but got not luck with it and as far as i understood, risk can be reduced but not canceled. And if you hedge, you disminish profits, so i'm not sure about this one.
But i recently discovered that you can protect trades with options : for instance you are on a buy on GBPUSD at 1.30 and you put a put option at strike 1.20. if the price crashes down, you can use your right to sell GBPUSD at 1.20, thus limiting the risk and not crashing your whole account.
There is one thing i'm not sure about, though, because most of the time, the strike price won't be hit of course so you'll have to pay premium.
How does it work in real life trading ? how expensive if the premium ? I have trouble finding that info.
I suppose that the higher the timeframe, the less you'll pay ? because you'll trade less but will get higher returns ?
Also the farther the strike price the cheaper the option price ? so it's better once again to use higher TF ?
I'm a newbie guys but i'm trying to understand this.
thanks
Jeff
i'm still looking for a way to protect trading against sudden moves that won't trigger the SL because of low liquidity.
I've looked into asymmetrical hedging, but got not luck with it and as far as i understood, risk can be reduced but not canceled. And if you hedge, you disminish profits, so i'm not sure about this one.
But i recently discovered that you can protect trades with options : for instance you are on a buy on GBPUSD at 1.30 and you put a put option at strike 1.20. if the price crashes down, you can use your right to sell GBPUSD at 1.20, thus limiting the risk and not crashing your whole account.
There is one thing i'm not sure about, though, because most of the time, the strike price won't be hit of course so you'll have to pay premium.
How does it work in real life trading ? how expensive if the premium ? I have trouble finding that info.
I suppose that the higher the timeframe, the less you'll pay ? because you'll trade less but will get higher returns ?
Also the farther the strike price the cheaper the option price ? so it's better once again to use higher TF ?
I'm a newbie guys but i'm trying to understand this.
thanks
Jeff