Very wise advice. Now you and Merchant seem to be quite knowledgeable in Forex matters. I'm more of an entrepreneur so I cannot refer to myself as a career trader. Nevertheless, I explore automated/ systematized/ equation driven trading. Has any of you used hedging strategies before? Do you mind sharing here what hedging strategies you use and how they have worked out so far?

Am listening too....

yes agreed with merchant...hedging by definition implies commercial and not speculative activity..u cud however spec on products sold for hedging purposes(derivatives et al)...extraprenuer u raise an interesting point..algo/system based trading is getting rather popular of late...can ne rather complex and messy lakini if u hav mob acpital it can be rather profitable

I have been using a purely hedging formula and so far, so good. However, it is not in a speculative way, hoping for time to correct mistakes made in other trades. My strategy works on the principle that the market is aways cyclic, whether in the short term or long term. Now, I open two opposite positions simultaneously. It would be best if they had the same market entry so you do not lose out on any small change that could happen before you open the opposite trade. I then have a take profit amount that is what I'm willing to take, plus spread. No stop losses. I set two pending trades based on my T/P in case the market goes on a Bull run (my buy position), and two trades on the T/P value if the market goes on a Bear run (on my sell position). These four new positions also have T/P values using the same formula for the initial (now open) positions. For the buy, +n, and for the sell, -n pips. If the market decides to go up and the T/P for my Buy position is hit, the other two Buy&Sell positions immediately kick in. If the trend continues, I set other similar pending opposite trades with increasing values based on (n). Now, at some point, the trend will reverse. When this happens, you have two options, for every losing sell position, you can open a buy so that when the sell turns to a profit, the new buy becomes a loss and you cancel out both at zero loss. (Remember you had already locked in your profit so settling your open trades at zero is to be desired). You can do this until all your losing trades have been neutralized. Alternatively, you can decide to switch loses and keep riding the now opposite trend. i.e. for every Sell position that has now reversed, you can let it hit it's take profit and retain the losing buy position. At the end of that trend, you'll have the same amount of loss, only in the opposite direction but now you have double profits. If you decide to close all your loss making positions at this point, you will retain half of your total profits. If you decide to continue riding the trend, you can continue this indefinitely. However, be warned, it is better to resolve your trades maybe once every week or two weeks because switching trades can get rather complex especially when you have trends reversing haphazardly.

I am not advocating hedging as a speculative mode of trading rather a risk management system. Note that I do not mention hedging until one discover their losses may be spiralling out of control. If you want to use hedging to trade you are looking for small pricing differences in the currencies which is called arbitrage trading. Check out stephen alala's posts. You seem to have a few things in common. Maybe I could learn something also.