market moves in your favour, you make less than you would have made without the hedge. How much should you hedge? The concept of combining correlated positions in order to offset risk, is where Forex hedge funds originally got their name.
Depending on the circumstances, a hedge might be more convenient than simply closing out. Hedge and hold forex strategy explained. You would therefore need to buy 7,279/100,000.07279 contracts. Note that you could also trade a different currency pair:.the key aspect is shorting sterling, because it is sterling volatility you were seeking to avoid. Hedging means taking a position in order to offset the risk of future price fluctuations. If you are interested in doing something like this, try it out yourself with.