Forex Trading: The Largest Trading Platform

The Forex has progressed from the humblest of beginnings to the largest market in the world by dollar volume. With many different entry points, hedgers and speculators can find what they are looking for. Whether you follow a more complex strategy or simply want to hedge your daily currency risk, currency markets provide the liquidity and instruments to trade currencies.

Hedging simply involves controlling or reducing risk. It is an investment position that is used to reduce substantial gains or losses suffered by an individual or an organization. This is done by taking a position in the futures market to limit the risks associated with price changes. You can find the Forex Trading in Kenya at Globex360.co.za.

In other words, the hedge is 100% inversely related to the vulnerable asset. A hedge can be built from different types of financial instruments, such as stocks, exchange-traded funds, forward contracts, insurance, futures contracts, and many types of derivative products.

The power of risk/reward and hedging

Since Forex trading is risky, it is imperative in trading to underestimate the use of Stop Loss and Take Profit orders. Stop-Loss (SL) and Take Profit (TP) are used to hedge the risk and rewards of the trader for taking profits and minimizing losses.

There are several methods that wealthy traders/investors implement to reduce the risk of their trades. One of these techniques is called hedging. The coverage basically consists of making double investments, one investment that will constitute the main investment and the other, a lower risk investment that is supposed to offset the potential losses incurred in the main investment. It involves reducing the risk one faces when making a business deal. In short, hedging is primarily a method that ensures future income.

If the rate of your open trade falls below what your investment covers, then the trade is closed automatically using automatic Stop Loss.