Originaly posted by Bogdan G
I’ve been thinking lately: being a good technical analyst but also aware of the fundamental aspects like news and economic data or political events will definitely make you a better trader…but not a complete one. In order to achieve the next level in our trading, we must learn to manage risk. There are different techniques of doing that, ranging from simple ones to extremely complex but the best are the ones that you can understand and comfortably use.
My friend Michael Hodges, aka “The Geek” shares my view on the need for controlling risk and extends a helping hand by explaining in detail a widely respected technique called Hedging. The full article can be found here: http://tmhughes.hubpages.com/hub/Hed...ptions-Traders
Just like I said earlier, the choice of using or not a hedge boils down to personal risk appetite. If you are the type who wants to go into the market with guns blazing and war paint on, forget all about hedging because it limits profits. On the other hand, if you need a shield in battle and a heavy armor, go for the hedge but know that it will slow you down a bit and as a reward, you will get more protection. Finally, I strongly encourage you to read Michael’s article, especially because in the final part he has some great tips about using two brokers to increase the profitability of a hedge as well as some great tips for advanced hedging.