No, this post isn’t about profiting from Forex by using the ”hedging” (grid) strategies. Two weeks ago I’ve asked my readers about their thoughts on trading Forex without stop-loss and, while I still believe that it’s generally a very bad idea, there is at least one case when trading without a stop-loss is very important — hedging.
Forex market isn’t only a good place to make money, it’s also a perfect financial instrument to hedge your currency risks. For example, you live in Germany but earn your salary in US dollars. This situation makes your income very vulnerable to EUR/USD fluctuations — a rise from 1.2000 to 1.4000 would mean a drop in the euro-value of your income by 14.3%, while a drop from 1.2000 to 1.1000 would mean a rise by 9.1%. Your dollar savings would also be affected by the change of EUR/USD rate (unless, of course, you aren’t going to spend them in US).
Many foreign contractors, transnational businessmen and outsource workers often get themselves into