When is a loss not a loss? When you have hedged your trade

One spread betting technique to use when markets are getting overheated is to 'hedge' your trade. Here's what 'hedging' means and how to use it.

One technique I like to use when markets are getting overheated (and I have a good position), is to hedge that trade. That way, I can keep my original position open and retain the gain already made.

First, let's talk about what hedging actually means. There is so much ill-informed talk decrying 'hedge funds' and their 'nefarious' activities. For starters, most hedge funds that take the flak are not really true hedge funds. Instead, they can and do take mammoth long-only or short-only positions unhedged by offsetting trades elsewhere. They are acting as simple investment funds albeit with a lot of clout.

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.