Locking positions on (Lock, lock)
What is position locking?
Locking Lock (Lock, lock) - one of the basic concepts of capital management at , which is the methodology of insurance (hedging) of an open position using usually a trade of the same volume, but in the opposite direction. Sometimes this method is called a lock from the English Lock. Rarely is locking used for additional income.
In simple words, locking means opening an opposite (in the opposite direction) position of the same volume as the main order.
Locking is a method capital management on the which requires considerable skill in its application. It is also not available to everyone trading terminalsIt is an over-the-counter hedging methodology, which is actually an over-the-counter hedge.
Types of locking on Forex
There are three types of locking in trading:
- Zero locking
It is used in trading on a flat market and represents a simultaneous entry in different directions by the same trades. In this case the trader pays double spread. Profit is achieved by closing a negative position when the direction of movement is determined.
- Positive locking
It is used as a hedging position for an order with already gained profit. By placing the opposite trade, the trader protects his profit from a possible price reversal.
- Negative locking
Often used as an alternative StopLoss order. In this case there is a fixing of losses already received at the expense of opening the opposite order of the same or even greater volume in order to win back. There may be several such overlapping locks, and their main purpose is to wait for the losses to overlap.
What are the advantages and disadvantages of locking positions?
Locking positions on has a number of advantages and disadvantages.
- The benefits of locking:
Locking positions allows you to reduce the risk of loss or to neutralize a loss if there is one. In general, such manipulation does not directly improve trading results, increase profits or improve trading. Locking only indirectly affects trading in the Forex market and allows you to reduce psychological pressure in the process of work.
The main feature of locking positions is the ability to establish a floating loss, if any. Such a loss is not reflected in the balance of the trading account, which generally improves the statistics of the trade of an individual trader. The advantages of locking can also include the probable closing of a losing trade with profit.
- Disadvantages of locking:
The disadvantages of this technique include high risk. Despite the fact that locking positions allows you to protect or reduce the consequences of possible losses, if used incorrectly, such manipulation can cause considerable harm to the novice trader.