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Hedging
Hedging is often used to
control risk and to eliminate market exposure without
"realizing" a loss.
For
example, if a trader buys 1 lot of USDJPY, he can then eliminate his
exposure to a falling USDJPY by selling a second lot. On the GCI
platform, this can be done by either right-clicking on the long USDJPY
position and selectingn "Hedge" position from the pop-up menu
(as pictured below), or by simply selling another lot from the
"Dealing Rates" window.
This
will result in one long position ("B") and one short positiong
("S") in USDJPY, as shown below. Note that these two
positions do not offset and cancel each other.
The trader can then manage each position
separately, using stops, limits, or market orders to close each
"leg" at the most opportune time.
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