Hedging
Posted: 08 Feb 2016 15:46
Hedging
Both NanoTrader Free and NanoTrader Full offers hedging of CFD and forex positions. Hedging means that the trader can have a long and a short position at the same time on the same instrument. These long and short positions can be the same size or a different size.
The TradeGuard function in the platform allows traders to manage open positions. A classic way to manage an open position is by using bracket orders: a profit target (sell limit order) above the position and a stop (sell stop order) below the position. As you will discover the NanoTrader platform is capable of managing both hedging and bracket orders on hedged positions.
Opening a hedged position
A trader with a long position of 1 DAX CFD must be both capable of placing a sell order to close the position or to place a sell order to open a hedged position. To indicate that an order is intended to create a hedged position, the trader selects “Force open” in the order ticket.
Fully hedged
When the long and the short positions are the same size the investor is said to be fully hedged. His combined P&L (profit or loss) will no longer evolve. The loses on the short position is counter-balanced by the profit on the long position or vice versa.
In this example the investor is fully hedged. Being long 1 DAX CFD and short 1 DAX CFD his combined position is flat (0). The combined P&L is -2,60 € (= 3,80 - 6,40). The combined P&L will remain static unless the trader changes the size of the positions or if there is a change in the spread.
Both NanoTrader Free and NanoTrader Full offers hedging of CFD and forex positions. Hedging means that the trader can have a long and a short position at the same time on the same instrument. These long and short positions can be the same size or a different size.
The TradeGuard function in the platform allows traders to manage open positions. A classic way to manage an open position is by using bracket orders: a profit target (sell limit order) above the position and a stop (sell stop order) below the position. As you will discover the NanoTrader platform is capable of managing both hedging and bracket orders on hedged positions.
Opening a hedged position
A trader with a long position of 1 DAX CFD must be both capable of placing a sell order to close the position or to place a sell order to open a hedged position. To indicate that an order is intended to create a hedged position, the trader selects “Force open” in the order ticket.
Fully hedged
When the long and the short positions are the same size the investor is said to be fully hedged. His combined P&L (profit or loss) will no longer evolve. The loses on the short position is counter-balanced by the profit on the long position or vice versa.
In this example the investor is fully hedged. Being long 1 DAX CFD and short 1 DAX CFD his combined position is flat (0). The combined P&L is -2,60 € (= 3,80 - 6,40). The combined P&L will remain static unless the trader changes the size of the positions or if there is a change in the spread.