Hedging is defined as holding two or more places at the same time, in which the purpose is to compensate for losses in the first position with a portion of the profits received from other locations.
Usually the ‘ hedging is to open a position for a given currency pair, then the opening of a position opposed to always the same currency pair. This type of coverage protects the operator from a position resulting from the loss. Traders have developed hedging techniques in order to benefit from hedging to make profits, rather than merely compensate for losses.
In this article we will discuss one of the techniques cover the most comprehensive that we can use, or the 100% hedging.
This technique is the safest it can be used with the ‘ hedging , as well as one of the most profitable of all hedging techniques, making it possible to keep risks to a minimum. This technique uses the arbitrage of interest rates, or roll over interest rates, among the brokers. In this type of coverage is necessary to use two brokers. A broker who pays interest at the end of the day, and a broker that does not charge interest. In these cases, the trader must try to maximize profit, or in other words make the most of this type of coverage.
The main idea about this type of hedging is to open a position on which a broker will pay a high interest rate during the night, and open an opposite position to that position, again for the same currency pair, with a broker who does not pay interest.
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