Looking for hedging strategie/s

Hi,

I have been looking for a hedging strategy for a long time now. All I was able to find so far are explanations about EUR/USD and USD/CHF correlation and how you can hedge your positions using them, but there are also many who are against this saying this is not a real hedging ...

Can anyone help me with a web site or reading material on this topic?

Thank you guys,
branac

A lot of the ideas were spawned in forums just like this. The method you are talking about is called correlation hedging. You can get an idea of what correlation is (if you're unfamiliar with it) from investopedia or google. In any event, the idea is to pick 2 extremely negatively pairs (I would venture to say anything with a -90% correlation is extreme), ideally with 1 having a small swap and the other having a rather large swap. This way you "hedge" against extreme movements from either pair while gaining interest.

From a purists' stand point, it isn't true hedging because negative correlation doesn't mean that both pairs will produce inversely correlated profits or losses. It is entirely possible for both pairs you choose to go up or down at the same time...sometimes even accelerating your position profit or loss.

A true hedge is to actually buy and sell the same currency pair either in the same account or in multiple accounts. There are some swap-reaping ideas currently being tossed around on this forum, however, there are other ways of using hedges in ranging markets. You can start here to see if anything comes up...other forums have also had good resources on the subject.

Good luck.

Thank you for the reply mrmikal, I will continue the "googling" and forum seraching.

What I am still looking for are some entry and exit strategies, like, should I open positions on both currencies at the same time, when should I close the profitable position and what to do with the other one which is now all alone and in negative ... stuff like that.


branac

Well, I'm sure there are plenty of systems out there for hedging. I'm not terribly familiar with all of them.

On the swap hedges, especially the ones using the same currency pair, you want to open as close to same OPENING price as possible. Therefore, ideally, you'd want your short entry to have the same exact open price as your buy entry (so you'd need the price to clear the spread before opening the other position)...however, once you have a hedge in place, in theory for every pip one currency moves up, the other one will move down accordingly...SO...entries can occur whenever.

Good luck.

thank you

Don't know if this thread is active anymore, but anyhow I have a hedging strategy. I posted it here:

http://www.forexfactory.com/showthre...t=56671&page=3

I elaborated on it on posts 37, 38 and 39.