One last important note: While the government mandates that all businesses that have anything to do with investment carry the following information.

 

†† The information on this document is for educational purpose only. Forex trading has large potential reward, but also has serious of  loss as well. If you wish to invest in the forex market, you must aware of the risks and willing to accept them. Don't trade with your money you can't afford to losen. This is neither solicitation nor an offer to buy or sell securities. There is no promise or representation that any acount will or likely to achieve profits or  losses similar to those discussed throughout the program documentation or web site. The past performance of any trading system or method does not necessarily indicate future results. There is a potential that an investor ia at risk to lose some or all his principal when investing in the forex market.

Hedge Strategy

A brief introduction to forex:

Forex or Foreign Exchange is the largest financial market in the world, where world banking institutes exchange around 1.3 trillions worth of currencies every single day. It is a little more like stock trading, but much easier and more volatile - presenting fast profit opportunities.

Thanks to the internet technology, everyone has a chance† to be part of this huge market. We can now trade forex at the comfort of our own home through online retail brokerís platforms.

 

How to take advantage of this huge opportunity?

Forex trading is risky if you donít have the right tools or system, especially for novice. Fortunately, the True North Group has come up with a way to take trading easy, gain steady profits far better than our local banks can give us. After years of research, trial & error, we came up with 3 hedge strategy that will surely beat the market.

†† These 3 strategies that we put into a excel file are:

 The 2 pairs hedge. Which is among our favorites. Safe and steady.

 The 3 pairs hedge. A little more aggressive than the 2 pairs hedge.

 And lastly for long term trade, the 4 cross pair balance hedge method can help you gain maximum overnight interest (swap), while keeping hedge balanced.

 

 

 

Let's start with defining the word hedging and correlation:


Hedging is a strategy designed to minimize exposure to an unwanted financial risk, while still allowing the assets involved to profit from their investment activity.

 

The EUR/USD and USD/CHF had a near-perfect negative correlation of Ė0.98. This implies that 98% of the time, when EUR/USD rallies, USD/CHF pair will undergo a selloff. This relationship even holds true over longer periods as the correlation figures remain relatively stable.

 

This is where our hedge calculator comes in. A trader can use different pip or point values for his or her advantage. Lets consider the EURUSD and USDCHF once again.  They have a near-perfect negative correlation, but the value of a pip move in the EURUSD is $10 for a lot of 100,000 units while the value of a pip move in USDCHF is $8.34 for the same number of units. This implies traders can use USDCHF to hedge EURUSD exposure.
 

Here's how the hedge would work:  A trader had a portfolio of one long EUR/USD lot of 100,000 units and one long USD/CHF lot of 100,000 units. When the EUR/USD increases by ten pips or points, the trader would be up $100 on the position. However, since USDCHF moves opposite to the EURUSD, the short USDCHF position would be in negative, likely moving close to ten pips lower, down $83.40. This would turn the net profit of the portfolio into $16.60. As long as there is a price discrepancy and gaining position gains is far greater than the losing position loss, then we're in business. As long as both positions are in BUY, we are also earning overnight interest or swap everyday. Of course, this hedge could also mean smaller profits in the event of a strong EUR/USD sell-off, but in the worst-case scenario, risk become relatively lower compare to trading the naked EUR/CHF pair. 

 

Now that we know the logic behind the powerful system. We will need the help of the hedge calculator to tell us how many lots to buy on a particular pair to get the closest hedge as possible.

 

 

 

 

 

 

Turn your PC or even your mobile phone into a powerful money making machine!

 

 

 

 

 

Take the guess work out off trading. No more charting.

 

 

 

 

 

 

 

The software will do the calculation for you!

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