I see so many people on this forums saying that they "don't want to give the broker their money" but by hedging you are essentially locking in your negative balance on the equity side which is exactly the same as closing the trade right away.
If you want to believe that the trade could be profitable in the future and currently is just a correction why not close and reopen the trade later on?
If you hedge a long position by entering a short trade you still have to buy back the lots if you want to release the hedge leading exactly to the situation as opening a fresh buy at this time.
There even is the downside that you have to pay interest on open position and for some broker you reduce your margin you can use.
I understand that there are a few scenarios where hedging can be useful:
- If you construct some kind of payout profile (e.g. options) and partially hedge risk
- you use another financial instrument due to lack of liquidity in one market or because of distributed money in different accounts
- you want to hedge against a certain type of risk / dollar neutral or sector risk etc...
but in regards to the perfect 1:1 perfect hedge in forex this does not apply.
Hedging lets you manipulate your statistics by postponing a loss, altering your win/loose statistics or some other ratios but overall it will not have a positive effect on your account.
What am I missing here?
The only reason I can see here is that it simplifies your order management if you have multiple positions open in different directions with different sls and tps. This also could be achieved by using a little bit of math and partially closing or adding positions on the fly. It does not matter at what price you entered a position as long as the time you hold your net exposure is the same.