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Binary Options: Hedging

Hedging is a strategy that the trader uses by opening up two positions in opposite directions. The reason that you do this is to lower the risks when you trade. It provides the trader with guaranteed insurance on trades and removes the risk to turn into a straight profit.

If the market goes against one of the positions, the trader can sell the other trader and let the other position stay open to make the profit or break even and not lose or at least lose minimally.

This technique is best used when the market is in a “Range”.

[Reference: Lesson on the Channel.]

Hedging strat

First you need to identify the range. ( Support When investors and traders use the term support When investors and traders use the term support When investors and traders use the term support, or support level, they are often speaking about a p... More , or support level, they are often speaking about a p... More , or support level, they are often speaking about a p... More – Bottom line, Resistant – Top line)

In the image above, example 1 is a situation where you will profit on both of the trades. You take a “call” position when the market is low in the range (close to the support line) and a “put” position when the market reaches the high part of the range (close to the resistant line). Both positions expiry times are the same. As long as the support and resistant lines are held, 99% of the time the price is going to close in between the support and resistance When investors and traders use the term resistance When investors and traders use the term resistance When investors and traders use the term resistance, or resistance level, they are often speaking abo... More , or resistance level, they are often speaking abo... More , or resistance level, they are often speaking abo... More .

Example 2 will be a situation where you will profit a position and lose another one. Just like Example 1 you open 2 positions (Put and Call) and after the call position the support line is broken. In that case you profit from your “put” position, but lose on the “call” position. That way making your losses minimal instead of losing on the entire trade.