Floating, Averaging , Hedging

FLOATING

Term referring to unrealized Profit/Loss. It's the potential gain or loss on open positions valued at current market rates. A floating position is constantly changing in value as market prices change and once closed it becomes an actual win or loss.
On online broker platforms, floating positions are reflected in the account's equity but are not yet reflected in the account's balance.


Basically for all positions (BUY or SELL) must be having a floating, but in fact we can take advantage of the floating becomes an opportunity to continue our trading Strategy. examples:

What to do when having floating. Before committing the transaction we'd have to predict market direction we choose.

When you open a position Sell EUR / USD at 1.1117 points with predictions EUR will drop (Bearish) to 1.1050 position, but when a few hours later the position of EUR firmed to 1.1137 so that you have floating with -20 points. Do not panic, because the current position can be utilized to open a new position (AVERAGING) so that if at the end of our predictions in accordance with the beginning, you will get more profit.

Key in this condition is a "do not panic" and "CONFIDENT"

AVERAGING

Do while have a floating position. Here is an example that can be easily understood.
We have prediction for EUR/USD pair, for condition EUR will be growth up (Bullish) today. 

BUY 1.1050
Curent Posistion 1.1030
Floating -20 in a few hours
Averaging Buy 1.1025
Close Posistion 1.1110

for the above sample we make profit for the 140 poin (pips)

HEDGING

When a currency trader enters into a trade with the intent of protecting an existing or anticipated position from an unwanted move in the foreign currency exchange rates, they can be said to have entered into a forex hedge. By utilizing a forex hedge properly, a trader that is long a foreign currency pair, can protect themselves from downside risk. while the trader that is short a foreign currency pair, can protect against upside risk.

Forex hedging strategy 
A forex hedging strategy is developed in four parts, including an analysis of the forex trader's risk exposure, risk tolerance and preference of strategy. These components make up the forex hedge:

1. Analyze risk: The trader must identify what types of risk (s)he is taking in the current or proposed position. From there, the trader must identify what the implications could be of taking on this risk un-hedged, and determine whether the risk is high or low in the current forex currency market.
2. Determine risk tolerance: In this step, the trader uses their own risk tolerance levels, to determine how much of the position's risk needs to be hedged. No trade will ever have zero risk, it is up to the trader to determine the level of risk they are willing to take, and how much they are willing to pay to remove the excess risks.
3. Determine forex hedging strategy: If using foreign currency options to hedge the risk of the currency trade, the trader must determine which strategy is the most cost effective.
4. Implement and monitor the strategy: By making sure that the strategy works the way it should, risk will stay minimized.

The above explanation I took from the investopedia.com and it makes sense. An example of this is:

When we predict of EUR/USD pair and  EUR will be growth up (Bullish), in  few hours is a NEWS coming with subject "Initial Jobless Claims (with result is increasing number from the previous : Actual 315.0K Previous 274.0K)" that occurs in one of the countries that use EURO currency. Because that, the result of EUR will be drop (Bearish). Ohh no...., what should we do???

This technic will give you opportunity to protect your Balance and might make us a profit :), but by using this strategy we are required to monitor the progress market. This is the sample:

BUY 1.2150
Current Posistion 1.2110
Floating -40
Hedging SELL 1.2110
if the NEWS prediction  will be continue we must close the BUY position and continue the Hedging SELL stragey and predict the new trategy.


I think all of the traders have the experienced above. "Learn hard and keep Confident"

Best regards.