Hedging Technique

Bagi yang suka ama strategy hedging ini ada beberapa metode yg bisa digunakan. Sorry belum sempat terjemahkan dan juga forward testing jadi saya sarankan untuk dicoba di paper trading dulu

Three strategies that lower the risk and generating profit
1- 100% Hedge
This strategy is to hold the highest interest paying currency on one account and hedge it with another account that do not charge interest on Short positions. Is it possible? Yes, I have been doing it for a long time and made many thousands already.

Advantages: Very low risk, making interest every day, this strategy is simple and easy to learn.

Disadvantages: Need two accounts, one paying interest and another one is interest free. Need large investment capital to make good income. Need to watch both accounts to monitor any sign of out of balance. Need to transfer money between accounts to rebalance.


2- GMT Package Hedge
This strategy we don’t need two accounts, and we don’t need interest free account. In fact, we need to find a bank/broker that pays the highest interest (difference bank/broker pay difference rate). And make sure the gap between the interest we pay them and interest they pay us is as small as possible, so that we can keep more of our net interest.

GMT package hedging strategy, we buy the highest interesting paying currency pair (GBP/JPY), and we hedge it with a lowest interest paying pair (CHF/JPY) so that after they paid us and we paid them, we still have a good chunk of net interest to keep.

Advantages: We don’t need two accounts to hedge. No need for interest free account. Need smaller investment capital to collect more interest than the 100% hedging method. No need to transfer fund to rebalance the account. Best of all, we can liquidate the hedging pair for profit when market swing positive to our side.

Disadvantages: A little higher risk than 100% hedge due to the uncertainty of currency correlation. But if we keep enough margins to hold the trade during negative swing, eventually, it will swing back to positive side.

GMT Package Hedging strategy detail:
Buy 100k GBP/JPY and sell 180K CHF/JPY at the same time. Make sure you keep enough margins for about 200 pips swing. I never have more than 200 pip swing against me, but I reserve enough margins in the account just in case.

You can do dollar averaging technique. Instead of buying all at the same time, you can buy 1 lot each time. The ratio is 1 GBP/JPY and 1.8 CHF/JPY. Enter the hedging pair at the same time. The best time to enter is during negative swing.

I also use one hedging pair on a different demo account as my reference signal. I watch it for a period of time to get a feel of the swing. Then when I see it swing to negative, I enter the trade, more negative, I keep adding more, because eventually it will swing back to positive side, then I can liquidate those hedging pairs for profit. If not, just sit tight and collect interest.

***We are in the process of research and testing new ratio to improve our hedging stability. GMT members have contributed many great ideas to improve our hedging system. The new ratio is 1:2.2 would have a smaller swing and thus require smaller margin to hold the trade during negative swing. Soon we also will have a build in security mechanism on top of the hedge to even better protect our hedging pair from unpredictable market volatility. So stay tune and login to Golden Money Tree group often for the update.

To view my GMT package hedging in action:
1- Download FXDD Meta Trader 4 Demo at : http://www.fxdd.com/meta_trader.html
2- Log in to account id: 409412
3- Password: Gmt12
Once you log in, you can view my trades.


3- GMT Picky back trade
This one is fun and challenging. I suggest you do this trade with your interest free account to keep your interest free bank/broker happy. If you only hedge your position with interest free and do not do any trade, the bank/broker is not making any profit and they may close your interest free account. So do some trade with Interest free broker to make them happy and you can also make money using this picky back trade.

Since Interest free account carry all Short trades or Sell, it draw down your margin if the market going up, and gaining margin when market going down. So what you do is to buy a few lots if you think the market will move up. Close it for profit when it reaches your take profit limit.

If the market move against you, don’t sell it at a lost, just hold it, you will be ok because your hedge position is cover the margin, you never get a margin call if you don’t over buy more than your sell positions. If I have 10 standard lots short in my interest free account, I only do this picky back trade with 3 to 4 lot max.

Disclaimer: This information is intended to be used for educational purposes only and is not a solicitation. Trading the forex market with or without using leverage is risky. Forex and forex options trading is highly risky and should not be traded by anyone who does not understand the risks involved. One should not use funds which he/she can not afford to lose.