What is the difference between locking and hedging?
Most novice traders mistakenly believe that locking and hedging open positions are no different.
In fact, these techniques have an identical purpose - risk diversification, but the methods for achieving the task are fundamentally different.
What is hedging and how to use it?
Hedging involves opening two or more trading positions on assets with a zero correlation coefficient, that is, the pricing of these financial instruments does not depend on each other.
To understand the principle and feasibility of using hedging in practice, several examples should be considered:
1. The simplest and most well-known strategy for trading stock assets is “ Buy and Hold ”.
The optimal structure of an investment portfolio is a distribution of investments between shares of reliable international companies and government bonds in a ratio of 70 to 30.
Warren Buffett 
himself is rumored to use this trading tactic .
2. In futures trading, hedging risks by purchasing an option after placing an order is popular.
An option is an agreement between the buyer and seller of a liquid financial instrument at a predetermined price at a specific time. Typically, the asset price corresponds to the market price at the time the agreement is signed.
This price is final and does not depend on the market price at the time of the actual transaction. The asset sale period is specified in the agreement and can be anywhere from a month to several years.
Such transactions are beneficial to both parties. Entering into an option contract is a reliable way for a trader to safeguard funds.
Learn more about Hedging - http://time-forex.com/terminy/hedging-na-forex
The essence of hedging: Locking
orders can be considered a type of hedging, which is popular primarily among Forex traders.
This tactic is necessary to secure the current financial result and is often used to meet the broker's margin requirements and prevent the forced closure of unprofitable orders.
To achieve this, the trader opens a second trade on the same currency pair with an identical volume. As a result, the financial result is secured, and closing the orders is not required.
This tactic is only permissible in extreme cases and is not recommended for novice traders. Thus, locking differs from hedging in that both trades are opened on the same financial instrument in opposite directions.
Important! If locking is implemented on a pair with negative swaps, it will lead to a steady loss of funds in the medium term.
If swaps are positive, this method can be used to generate passive income.
For this purpose, it is recommended to focus on currency pairs with a negative correlation coefficient.
Practical examples of hedging - http://time-forex.com/praktika/lokirovanie-forex
Conclusion:
Hedging and hedging are used by traders to minimize trading risks. In practice, the use of such tactics does not imply profit.
The main purpose of hedging is to secure the financial result of open orders without having to close them.
Hedging involves opening trades on independent instruments to insure orders with moderate risks. Profit is generated through other instruments, such as dividends - http://time-forex.com/inv/zarabotok-akcii
