Yes provided the market spikes in the opposite direction. It will not work if the market spikes up and down.
At the end of the day, the hedge will only work if you are lucky.
It works for me on 3 occasions, and I am glad I deployed the hedge.
For a so-called professional with 9 years of experience, you certainly don't know what True Hedging is about, at all.I suggest you do some MAJOR research on the matter or in the very least read @Keith Watford's thread that he supplied right at the beginning of this thread:
No, it cannot! The sooner you learn this and the sooner you learn the math about it, the quicker you will get into actually making a profit instead of trying to find ways to recover your losses.
I let both of you debate. Hedging is purely discretionary and I will only use it as a manual safeguard, rather than "automate" it for every trade.
Depend on situation.
Belief has nothing to do with it! Trading is not a religion that requires faith. It is a numbers game - it is statistics and probabilities - it is math!
When you have a strong feeling the market is going up, but suddenly a high impact news release (not calendar) cause it to spike the other direction way past the bottom price. A hedge can be placed as a safety catch all.
For a trade, it is always accompanied by a stop loss.
In addition to that, a hedge is placed below the stop loss with 2x, 3x the inital lot size, with the aim to recover the initial loss that would have been suffered due to the initial trade.
Hope that clarifies.
What you have described is martingale, not "hedging".
Theoretically, the SL should trigger before the new stop order so you are just left with the opposite order. You are also risking widening spreads during time of volatility and so your losses could grow.
Remember that there is no guarantee that the broker will close the trade at the SL or open the new trade at the stop.
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