When to Remove Your Hedge

Alan Solosh here, the passive income guru, in this video tutorial explains to you what to do if you're hedged at the top of a resistance level or if you hedged at the bottom of a support level, if you're hedged off a resistance level, or if you hit at the bottom of a support level. Right? So let's look at the chart and we can see here, okay, that this level here, okay, we were in a sidewards channel and I placed a manual hedge over there, okay? Now when you get into a profit of this bar trade and you're at the top of a resistance level, this is where you get emotional and you think to yourself, I have to close out the trade. This is where it gets very, very dangerous. Because now what happens is, is that let's say there's a news and a news announcement and then the price goes through this level over here and carries on spiking north. So you've closed out your buy trade in a profit. What's happened to your account? Your balance increases, your equity increases, and your margin percentage increases at that level. Okay? When the currency then spikes through this resistance and starts to create a new point of resistance, what happens to your account is that your drawdown gets larger, okay? And your margin percentage decreases. Then you hedge at a higher level. And then when you hedge, the price retracts, retraces, and then you now stuck with a new hedge right at the top of the trade and of the trend. And this is very, very dangerous. Okay? So what we do is you don't close your buy trade when the price is going north and you don't close your sell trade if the price is still going south. Okay? The only time that you're going to close your trade is when the second candle opens below the atma. Or this is for an uptrend. You would close your buy trade when the second candle opens below the atma. Or, or.

When. If you're in a sell position, when would you close your cell trades? Only when the second candle opens above the 8 EMA. Okay? Those are the only times that you would close your hedge trades. Now let's say the price goes up and then all of a sudden it retraces all the way down. So let's take a screenshot of this over here and let's just draw it out for you. Okay, so let's say we have some candles, okay? The, we, we. The price goes south all the way down to here. Okay, here's the atma over there. So we're gonna just Draw a little circle there. This is the atma, that line over there, right? So what happens to your.

Your atma? Let me show you what's going to happen to the atma. Right? So your atma will do this, okay?

All right. So there's the ATM over there. So this is the first candle that goes down. So here's the second candle or the first candle that's going to open below the atma. Let me just do that again. Here is the first candle that opens below the ATM over there, right? And then.

Then we get another candle that opens over here. All right? So let's just change that back to the atma. All right? So this is candle one, and this is candle two. All right? And your atma continues to go down. Now this trade over here, or if you've placed another trade, let's just open another trade over there, okay? This is another trade. We'll make this yellow, all right? And now this trade is in negative, right? Because the currency has reversed. So now what you would do is you would then wait, okay, until the trend reverses again from a sell trade from a sell position. So we're going to go down. So let's say we get another candle that opens below here, and then we get another candle that opens above and goes green, all right? So that candles green. Let's change that back to the atmo again, okay? And then.

Your atma then changes direction and starts going north, okay? And then we get another green candle.

We get another green candle.

So this will be candle one above the atma. This is candle two above the atmo. And if you can, if some of your sell positions are in profit, you can then close them, okay? All the sell positions that are in profit that are from here, okay, from this line over here, let's just draw you a line, yellow line.

From here. So when the second candle opens above the atma, and if you've got any trades in profit at that level, these trades, any sell trades that are in profit, okay, you would that. So any trades that are above here, okay, that are sell, you would then close them in profit. Those are the only trades that you can close in in profit. And that's it. That's all that you need to do. And then you just need to wait for the currency to pick a direction. When it picks a direction, then you can start closing out your trade properly, right? So imagine now that you had closed this trade out, okay, when you hit this resistance level, and then the news announcement came and then the price spiked north, okay? And now you're in a panic, you've run out of margin percentage, you can't even open your hedge. And if you can't open your hedge, you're going to blow your account. Okay? So it's very, very important that you remove your hedge trade at the correct time and don't be trading with emotion. Now, I know that it's very difficult just to say that. Very difficult to say don't trade with emotion. But if you have money rules and you have trading rules, then that takes the emotion out of trading. So we've got money rules and trading rules. The trading rule is, is that you trade when the second candle opens above the atma or the second candle opens below the atm. That's it. That's the trading rule. There's nothing more to discuss. Okay? So stick to the trading rules. It'll take a lot of stress off you.

I just want to add something. The next problem that you got, one of the main reasons why you guys are closing this trade in profit is because you're focusing on these, this number over here. You're focusing on the numbers. You see blue and you get all excited. It's like having shiny, shiny object syndrome. Okay? You just want to play with the, with the new numbers and the new profit and what can I do with that profit? And that's not the way to be trading. Well, how you need to be trading is you need to be focusing only on the chart. Do not focus on these numbers over here. Focus on the chart. Focus on learning how to trade. Focus on learning how to read a forex chart and that will change the way that you trade in totality. Okay? So go and learn how to read a forex chart. Go and follow my course. Go and follow the strategy, make your own trading rules, and then you can trade safely. Right? So this is exactly what we've been looking for. We've been looking for a massive spike in the currency so that the price moves away from your trade. And then when it retraces and the second candle opens below the atma, then and only then will you remove your hedge. Okay? That's the only time that you're going to do it. Okay. If you, if you in the sideways channel, you need to just relax and wait for direction. Only when you've got direction can you then remove your hedge trade. So this is fantastic that we've now got direction. And then when the time comes, when the second candle opens below the atma, I will then remove my hedge trade. So I hope that you found this video interesting. If you've got any questions, please comment in the comment section of this video. Please like this video and subscribe to my channel so that you don't miss out on any future content that I come out with. And I'll see you on the next video.