Disliked{quote} This isn't hedging, this is LITERALLY closing out your existing position. Whoever thinks differently, please explain me HOW exactly is it different? They even say this themselves but because they don't want to accept the fact that it's just closing out a trade, they construct this sentence: "While you could just close your initial trade, and then re-enter the market later, using a hedge means you can keep your first trade on the market, and make money with a second."Ignored
There are various ways to do achieve this, the easiest is to simply close all or part of your positions (e.g. stop loss), then there are derivatives like options that you can use, you can also achieve this by opening a trade in the opposite direction (which is essentially also a stop loss), all these methods achieve the goal of a hedge which is to limit your directional exposure .
So they are not really wrong by saying that opening a trade in the opposite direction is a hedge. The question really is if that is a good method of hedging, and I would agree with you that it is kind of a silly way to trade / hedge, since buying both directions mean paying twice the spread, and for pairs that have very low interest rate differential with low swap from the broker, you would lose more on swap too.
You normally see this being used for those that do not accept loses, they use the positions in the opposite direction to bring their net exposure to zero, locking in the unrealized loses, wait for the next entry opportunity, close their hedge positions, enter in the original direction again in the hopes that they get it right this time, so that they make a little from the hedge position, and if it really goes their way this time, their original losing position becomes break even or profitable due to cost averaging. That's the ideal, but what usually happens is that they get the second entry wrong again, and is forced to hedge again, locking in an even bigger unrealized loses, and the repeat this process until they have no more margin available and force to blown the account over one trade that they got wrong. Might as well keep it simple and just go martingale to achieve the same result.
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