Hedging Strategy – Requirement Specification Document

1. Purpose and Objectives

Goal: Develop an automated trading system that implements a Hedging Strategy to achieve consistent profits by hedging positions in response to market movements.

Primary Objective:

To minimize or remove directional market risk through offsetting long and short positions.

To systematically recover losses from previous trades through controlled position sizing and incremental hedging.

To automate entry, exit, and hedging logic with configurable risk parameters.

2. Scope

The system will:

Operate on one or multiple trading instruments (e.g., EUR/USD, XAU/USD , Forex pairs).

it has to Support both backtesting and live trading.

3. Strategy Overview

Concept Summary:

The Hedging Strategy opens an initial position in one direction. Lets say its buy order, If price moves against the trade by a set distance (e.g., X pips), an opposite hedge position is opened with a larger lot size (e.g., multiplier M). When the market reverses, the combined profit from the positions offsets previous losses.

Once target profit is achieved, all positions are closed and the system resets.