Average Technique

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Hedging techniques
Hedging is a situation where we open a second position against the currency and the same number of lots. Often hedging is used if the price reverses direction and the trader did not want to cut losses grew up without a loss (to close these positions despite the loss). In general, they use this technique without a stop loss. Another term of the hedging is locking.

Example: A trader open Buy EUR / USD 1 lot then the price moves do not fit expectations (down) and the position is still floating loss (loss of floating) 20 points, the trader can open Sell EUR / USD 1 lot in the same currency so that the losses is locked by only 20 points. Although the price moves in any direction, the floating loss remained 20 points

Average Technique
Averaging is one way to minimize losses by opening similar positions at different levels. The purpose of this averaging is to use the average of the differences in price levels are ordered to minimize loss.

Example: A trader open Buy EUR / USD 1 lot at a price of 2.0100, but the price goes down to as low as 2.0000 so that the experience of floating-point loss -100. The trader can perform averaging by opening a Buy EUR / USD 1 lot at 2.0000 on the spot price. This means that there are two open positions. The first floating loss position -100 points. The second position is 0 points. (Assuming no spread).

If then the price moves up towards 2.0050 first then the floating loss position -50 points, second place 50 points profit. In total the two positions are break-even (BEP). When the price moves up above 2.0050. It means the trader has a profit.