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Should I Hedge Swing Trading Stocks? is the biggest dilemma for investors. As the Swing Trading is sort of short term investment, therefore, the profit target is not high. Hedging of swing trades will eat into the profit of the investor. Therefore, to answer Should I Hedge Swing Trading Stocks?. The ans is not for all stocks. In this video, I shared a specific case where to hedge the short term stock investment is advisable.
1. If you are buying stocks in large quantity i.e. in cash segment, the quantity is at least equal to the lot size of futures trade. For non F&O stocks, selling index future is the best way to hedge the position.
2. High beta and highly volatile stocks
3. If the correlation of the stock price is very high with the index movement then the decision to hedge also depends on the analysis of future index movement.
4. If you are buying near long term resistance or near the Fibonacci retracement levels then hedging is a must.
5. If the accuracy of your analysis is very low then you should minimize risk.
Lastly, cost benefit analysis can help you to answer the question Should I Hedge Swing Trading Stocks?
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