BECOME A MORE PROFITABLE TRADER WITH THE RIGHT EDUCATION

Get on our mailing list so you know when we release free training, live classes, new courses, and even discounts and promotions.

Hedging Your Portfolio – Don’t You Lose Money with Protection? #HungryForReturns 33

In this post, we’re talking about hedging.

Today’s question from Frank M: What about when the stocks which you have do go the way you want them to go, if your hedging is negatively correlated, doesn’t that mean they will cancel out the profits to some degree?

The answer to this question is YES, absolutely.

This is why that is the case.

When you have a basic portfolio

When you have this basket of stocks that make up your portfolio, typically, the general rule of thumb is that these stocks are heading higher. From time to time, they do have pullbacks.

Then sometimes they have some strong pullbacks. Let’s say Apple is moving really for you, well it’s sometimes wise to hedge. And the whole point behind the hedges to protect the things that are doing well for you.

When things get stretched, eventually, they pull back and come back. What you want to do is take a little bit of cash or capital. It doesn’t have to be your full account size.

Let’s say this is a 100% of your account.

You might break that with:

  • cash
  • investments

Next, you might get rid of some of those investments. Or take some more of that cash and buy yourself some protection. Or some other diversified fund that often moves a little bit opposite of what you typically have.

Of course, if your normal portfolio is heading higher, the other investments that you have maybe pulling back a bit. But it’s not a huge chunk of your investment. It’s a small part, so that way, when things pullback, it’s not as large of a loss or pain.

Focusing on TLT and GLD

Let’s say you have the TLT. Where typically, if stock market sell-off, the TLT or the bonds may had higher.

You can see here the TLT’s and bonds you know continue to increase and are moving well. So, you might be getting some of these. 

Or you could look at the GLD.

It’s been moving sideways here lately, as you can see between 110 and 130. 

This is the GLD spiders gold trust, so it’s an ETF for gold. The market overall has naturally been moving higher lately, But this GLD since 2013 has been moving sideways.

It shows you that it’s been stable, but it hasn’t been moving down and hasn’t been moving up. If the market sells off, it’s quite possible that this could move higher. Having some of this or maybe TLT, which is the US Treasury bond, could be a diversification for your general stock investment.

The whole point is not just to balance it out 50% of this 50% of that. It’s all about reducing your risk because when a pullback happens, what is it that you’re doing to protect yourself.

Moving your money around is important

If you have $20,000 and $5,000 of it is something like this that moves a little bit different than the overall market that might be more of a safer bet in a safer play. Then the other $10,000 or $15,000 that you have is just the overall market.

Moving your money around in different areas and spots in case it moves one big investment moves against you; at least you have some of the other things that help support you. And get you through the tough times.

That’s the whole point. Yeah, you might lose a little bit of money as your normal investments are moving higher. But when your normal investments are pulling back and struggling a bit, those other things could help sustain you. And let you live through to the next day, week, and month.

I hope that you now understand the whole point behind hedging. It’s all about protecting yourself and making sure that you’re a little bit diversified without putting everything in a single basket.

Otherwise, it could get horrifying when you put everything in one pie.

Final Word

Most people diversify after they have a few grand in the market. Otherwise, the better approach might be to get an ETF and keep it simple.

Check those out, and it might work out for you. In either case, if you have a specific question that you want me to answer regarding trading or investing, then submit one here.

Join other stock who get a trading edge each week with our newsletter

Get our free stock market tip, video reviews, and exclusive announcements.

No spam, no gimmicks, no junk - Unsubscribe anytime

I'M SASHA.

Thanks for joining me on my trading website where I share with you about trading stocks and options.

DOWNLOAD 100 Stock trading tips Book

Ready to check out some of our best-selling books that can help you become a better and more profitable trader? Check them out by clicking the link below… 

Video recaps on the recent market trends

Summary of recent market activity looking at swing chart opportunities, potential setups, and technicals.

Stock market picture charts annotated

Quickly review screen captured stock charts with annotations. Includes support, resistance, ABCD patterns, and possible breakouts.

want some helpful advice?

Pay-Per-Minute Coaching

I am scheduling helpful coaching sessions for people who are interested in real-world advice & guidance where you only pay per session. No long term commitment required.

This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Ready to Learn Profitable Strategies to Trading Stocks?

If you are serious to learn how to trade stocks more profitably, make more money, and trade with confidence...

 

Then sign up to get our free educational videos!

AWESOME!

In order for you to get your goodies and freebies you have to confirm your email address.

 

To confirm your email address, just go to your email inbox (or check your spam) and click the link that's inside the email that states you want to receive messages from us.

 

That's its!

Just one more thing... 

Ready to Get Our Educational Videos Each Week?

If you are serious to learn how to trade stocks more profitably, make more money, and trade with confidence...

 

Then sign up to get our free educational videos!

AWESOME!

In order for you to get your goodies and freebies you have to confirm your email address.

 

To confirm your email address, just go to your email inbox (or check your spam) and click the link that's inside the email that states you want to receive messages from us.

 

That's its!

Just one more thing... 

Ready to Get Our Educational Videos Each Week?

If you are serious to learn how to trade stocks more profitably, make more money, and trade with confidence...

 

Then sign up to get our free educational videos!

AWESOME!

In order for you to get your goodies and freebies you have to confirm your email address.

 

To confirm your email address, just go to your email inbox (or check your spam) and click the link that's inside the email that states you want to receive messages from us.

 

That's its!

Just one more thing... 

Portfolio Allocation - Percentage of Each Stock

If you are serious to learn how to trade stocks more profitably, make more money, and trade with confidence...

 

Then sign up to get our free educational videos!

Quickly Calculate Mid-Day Volume

This Excel sheet will allow you to quickly find out if your stock's volume is trading above or below the daily average during the middle of the day.

Top 15 Dividend Stocks for Retirement in 2020

Download our list of the best stocks for retirement. Simply enter your email address below to get the PDF!

Buying or Building a Trading Computer for 2020

Learn how to buy the right computer for your trading needs or choose the perfect parts if you are custom building a trading computer!

 

 

VIDEO COURSE

Top 25 Tech Gear for Traders

If you are serious to learn how to trade stocks more profitably, make more money, and trade with confidence...

 

Then sign up to get our free educational videos!

Awesome Phone Apps for Traders

Discover these awesome phone apps most traders use on trading! Earn money anytime, anywhere with these apps!

Top 7 Dividend Paying ETF's for 2020

Want to know the top 7 ETFs that pays the biggest dividends in 2020? Download this list now and start earning your dollars!

10 Hot Stocks Warren Buffet Loves

Trade and earn like Warren Buffet! Here are the stocks he invests in!

 

Get the list now and start earning your money!

Do you want to download a list of over 125+ popular stocks that you should keep your eye on?

 

Enter your email below and we will email you the list of 125+ hot stocks!

OPTION TRADING GEEKS

Download my easy worksheet so that you can quickly see and know what the greeks will do to your position! 

 

Enter your email address below to download it!

OPTION STRATEGIES

Enter your email address below and get access to our video strategy session on 25+ option strategies and how to set them up!

25

How Long Will it Take to Reach $1,000,000 in The Stock Market?

Want to see for yourself how long it will take you to reach $1,000,000 based on your personal return?

 

Then download my Excel cheatsheet for FREE to see and play with the numbers!

OPTIONS GREEKS

Ready to get a deep understanding of the option Greeks?

 

Get access to my video training by entering your email address below!

VIDEO TRAINING SESSION

Ready to Get Our Educational Videos Each Week?

If you are serious to learn how to trade stocks more profitably, make more money, and trade with confidence...

 

Then sign up to get our free educational videos!

AWESOME!

In order for you to get your goodies and freebies you have to confirm your email address.

 

To confirm your email address, just go to your email inbox (or check your spam) and click the link that's inside the email that states you want to receive messages from us.

 

That's its!

Just one more thing...