{"id":640,"date":"2017-09-19T17:51:57","date_gmt":"2017-09-19T09:51:57","guid":{"rendered":"https:\/\/swingfish.trade\/wblog\/?p=640"},"modified":"2018-07-30T04:02:42","modified_gmt":"2018-07-29T20:02:42","slug":"hedging-101-protecting-profits-or-pause-a-trade","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/library\/good-to-know\/2017\/09\/hedging-101-protecting-profits-or-pause-a-trade\/","title":{"rendered":"Hedging 101 (protecting profits or pause a trade)"},"content":{"rendered":"<p>Hedging occurs when a transaction is entered to reduce exposure to a prior trade turning against you and eliminating profits or increasing losses. Hedging is done to decrease the risks and hold a position until the markets begin to move in the original trade&#8217;s favored direction.<\/p>\n<p>Just like finding entries, it is even more important finding exits.<\/p>\n<p>It is especially important in the case a Day-trade turns into a swing trade.<\/p>\n<blockquote><p>Swing trades usually carry much smaller size because the stop-levels are much wider.<br \/>\nUsing the same size on a much wider stop would massively increase the risk of the trade.<\/p><\/blockquote>\n<p><!--more-->As seen in the picture below, the blue line is a support from a larger time frame, so the possibility that price may bounce there is very high. There is a chance that the bounce may completely eliminate the gains made.<\/p>\n<p><a href=\"https:\/\/swingfish.trade\/wblog\/wp-content\/uploads\/2017\/09\/ct_cs_2009121_de30_2017-09-19_14-58-07-1.png\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-643 aligncenter\" src=\"https:\/\/swingfish.trade\/wblog\/wp-content\/uploads\/2017\/09\/ct_cs_2009121_de30_2017-09-19_14-58-07-1.png\" alt=\"\" width=\"576\" height=\"267\" srcset=\"https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2017\/09\/ct_cs_2009121_de30_2017-09-19_14-58-07-1.png 576w, https:\/\/swingfish.nullx8.com\/swingfish\/blog\/2017\/09\/ct_cs_2009121_de30_2017-09-19_14-58-07-1-300x139.png 300w\" sizes=\"auto, (max-width: 576px) 100vw, 576px\" \/><\/a><\/p>\n<p>Taking profits out at this point would be a wise choice.<\/p>\n<p>However, we expect the price to fall even more and turn this day-trade into a longer lasting Swing-trade.<\/p>\n<p>We could then:<\/p>\n<ul>\n<li>Take part of the profits out to meet the size requirement of having a much wider stop-loss.<\/li>\n<li>Hedge at the possible turning point, ensuring the gains we have made on the trade stay with us, even if the price moves against us.<\/li>\n<\/ul>\n<p>What can we do next?<\/p>\n<ol>\n<li>Wait for the breakout.<\/li>\n<li>Wait for the retest of the support as resistance.<\/li>\n<li>Once the downside is confirmed, close the long position at small profit or loss.<\/li>\n<li>The original trade can continue with the same size &amp; risk.<\/li>\n<\/ol>\n<ul>\n<li>The loss of the Hedge position is paid already with the gain of the original trade.<\/li>\n<li>Cost of doing this is spread + Swap (if the continuation takes overnight)<\/li>\n<\/ul>\n<p>What if there is no breakout?<\/p>\n<ul>\n<li>Then you just close both trades. Realising the original profits (minus spread &amp; swap of the hedge trade)<\/li>\n<li>Losses generated by either original or hedge trade are not relevant as they cancel each other out.<\/li>\n<\/ul>\n<blockquote><p>The loss of one position will be the gain of the other.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Hedging occurs when a transaction is entered to reduce exposure to a prior trade turning against you and eliminating profits or increasing losses. Hedging is done to decrease the risks and hold a position until the markets begin to move in the original trade&#8217;s favored direction. Just like finding entries, it is even more important [&hellip;]<\/p>\n","protected":false},"author":152,"featured_media":643,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41],"tags":[],"class_list":["post-640","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-good-to-know"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/640","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/152"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=640"}],"version-history":[{"count":14,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/640\/revisions"}],"predecessor-version":[{"id":9137,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/640\/revisions\/9137"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media\/643"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}