Forex trading is one of those instruments that are very flexible on what you want to do with it. It can be a wealth accumulator, a protection or a hedge. Hedging is a strategy by investors in which they “bet” on a currency in which they think will do good, while being invested in other things that will go bad.

Let me give you an example, Oil companies consistently hedge their oil. Since they buy a lot of oil as inventory, a lot of oil, not bought in the market will result in losses as time goes by. Because of regulation, unpredictability of the market and such.. So what these company does, is “hedge” oil, which means, they take a “SELL” position on the market, such that, either way the market goes, they never lose money. They may lose money on the physical oil inventory, but they will gain money from the SHORT positions in the market.

Forex Trading as Hedging for Stocks

I will give you a personal example. Lately, I have been investing in stocks. Not just local, but also international. And the War in the middle east has been on the news lately. Its not just news, but they actually affect the economies of countries affected by the war. That includes the US. Since I am invested in the US. What can I do to protect myself from this unpredictability? So I hedge the EURUSD. I know that allowing refugees inside Europe is a bad decision. So I bet SHORT on that currency pair… And, months later, proved to be right. As seen in my position for the pair. So now I’m in a very good position currently at 803 pips in profit.. If the companies I hold in the US are affected by the instability of EUROPE, then I will still make money from my forex trading because its a hedge from my US investments.

Philippine Stocks Hedging Dollars

I also started investing in Philippine stocks. But we all know that the current president is not that business savvy. Before he sat on the presidential seat I already thought of him as a man of the people than a business/economic president. And will do anything to prioritise the people than businesses. Which means, comes a time, it might NOT be good for the stocks I hold. Or it could be that the PSE stocks is just that overhyped. But what ever the reason is, I am afraid of it going down. In which it is currently happening.

Philippine stocks is at a downward fall.

Knowing that, I immediately went to my bank and exchanged my PESO to DOLLAR, just before the new President elect take office. That was the hedge. Since I fear that the stocks would drop, the hedge would be — buying dollars hoping that $ would do better than Peso. And months later, I am again proved to be right. I bought dollars at P45.00 and it is now currently trading at P49.92. A 500 pip profit as of this moment.

While USDPHP is going up.

This is not about telling you people that I am right all the time. This blog has been a journal from the beginning. And this is just my way of explaining to you how you can make use of forex trading as a protection of your money. Remember that rule #1 is to not lose money..

So when you start making money out of your forex trading, you should also think about protecting what you have gained. And that is where hedging comes in.

Total Earnings in PIPS 800 + 500 = 1,300 pips

I hope you learned something of value from this post. If you want a primer on how to trade forex, you can read this page for a short course on forex trading.

Or if you’re looking for a reliable broker, visit the forex brokers page or try out brokers that accepts paypal.

Large bars are quite a fascinating sight especially if you’re riding it. And it can also be a fishy one. I always think of it with a grain of salt and always think that nothing lasts forever. Having said that, the large bar on EURUSD that formed on the 8 hour chart seems to be a bluff and it will now go down.

This days passed. I lost quite a bit this week because of some positive news about the Eurozone and news about the USD and all good news. I was short on EUR USD and it hit me with a loss. But I’m still in this game. And will probably for a long time. This week has been so emotional for me. Not because I lost and I’m down emotionally, but because I have never felt so determined like it feels like a burning passion inside.

This is the exact same feeling that I felt before. Its a burning passion to change. To get the things that I want, and to do whatever it takes to get it. Seeing things that I want and know that there’s no chance to get it until I change myself, my attitudes or habits, makes me mad in a good way. Makes me crave for change. Makes me risk. Makes me live life.

I know you would probably not understand what I’m talking right now. But for those of you who have done something in their life at a roll of a dice and risk everything just for that one moment, I know you understand. Its a great feeling to risk something and be rewarded. Its a great feeling to pursue something, no matter how impossible it may seem, and just enjoy the journey. Because at this point, I’m living life.

Simply put, I think I have found my purpose and real goal for the next 10 years. And I thank Forex Trading for making me realize all that.

Taking advantage of the EURO Zone Debt Crisis.

Do you know what makes great professional poker players great? Its their money management. The reason why there are few great poker players and a lot of people just gambling using luck is because great poker players know how to use money management.

They know the probabilities of each card they are dealt. They don’t try to push their luck even with a bad card hoping that their competition has worse. In forex trading, try to make wait for the right moment to open position, rather than trying your luck just because you want to open a position. The downfall of most forex traders is that they tend to over trade. They want to open a position just for the sake of opening a position. This is detrimental to a good trading strategy, whatever the strategy is.

Money management, i believe, is the best part and makes the most part of a forex trading strategy. Systems for entry and exit like fibonacci, technical analysis and whatnot are just the small portion. A poker player does the same thing, to survive the table, he must manage the money if there comes a time when he suffers consistent losses. Trading is the same way, you must survive consistent losses until the next big trend comes where you can make back your losses and then some.

EURUSD 8 Hour Chart

There is a strong resistance at near 1.3400. At this moment, it could be a good time to short.

People who are new to forex trading or people who are aspiring to trade in the forex market always baffles me. You know the typical people who have 9 hour job Monday to Friday and thinks that they can self sustain themselves with their job and become a millionaire in forex trading.

There is nothing wrong with this train of thought and many people have started with this. But to think deeper, if you’re going to divide your time with forex trading and your day job, doesn’t that make it only a half assed effort to begin with? You’re half assing your work and half assing your trading. So you get, nothing done at all… I’m not saying you should quit your job to do forex. What I’m trying to instill to new forex traders is the open mindedness and the real expectations in forex trading. If you’re dividing your time, juggling trading and work, you’ll achieve your “self sustenance” in forex trading more than a few tens of years.

Never ever underestimate forex and say “I can do this part time and maybe someday, I’ll be rich”. C’mon man, you are competing against the most competitive traders in the world who do this job for full time, with millions of money depending on them . And to think that you’ll be rich with half ass effort is like trying to go to the moon with a bicycle.

If you want to succeed in forex trading, you should be competitive, have focus and never ever underestimate the market. You can do part time work part time trading all you want, but nothing comes out anything good about being a wishy washy son of a gun.