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Hedging against base currency fluctuations
Started:December 4th, 2012 (04:14 AM) by zktier Views / Replies:548 / 2
Last Reply:December 17th, 2012 (07:05 PM) Attachments:0

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Hedging against base currency fluctuations

Old December 4th, 2012, 04:14 AM   #1 (permalink)
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Hedging against base currency fluctuations

I live in Sweden and canīt use the krona for my base currency at most of the brokers out there. If I use USD as base and the krona strenghten during the time I trade I have a problem when it comes to a longer timescale. I am thinking that a hedge is the best way to avoid loses in in fluctuations between my base currency and broker account currency. For example. If I use USD as base I am long USD as long I have the account. Should I then short the USD against the krona for the same amount that is in my acount to avoid getting trapped if the krona strenghtens? Or am I thinking the wrong way about this?

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Old December 4th, 2012, 04:14 AM   #2 (permalink)
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Old December 17th, 2012, 07:05 PM   #3 (permalink)
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The easy way to understand that is to take a piece of paper and a pencil and do the math yourself:
- on day 1
-> stock A value: $100
-> USD/Krone : $2 for 1 Krone (not idea of symbol/value)
- on day 10:
-> stock A: $110
-> USD/Krone: $1.5 for 1 Krone

I let you think about what you should have done to make a 10% profit in Krone .

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