Currency/Forex Hedging using Momemtum Strategy

External question — Quantitative Finance Stack Exchange Author: user9343456 Original post: https://quant.stackexchange.com/questions/32145 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Mainly the two ways I could find on currency hedging are using forwards (to lock in a future exchange rate) and options. However, I'm curious whether currency can be hedged via some commonly known trading strategies. For example, I know that a trading strategy based on momentum can be used for FX, but how exactly can the momentum strategy be used for currency hedging ?

External answer — Quantitative Finance Stack Exchange Author: rupweb Original post: https://quant.stackexchange.com/a/32162 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. The point of currency hedging is that the bid / offer spread paid by the client includes hedging costs. Having said that, in the interbank market spreads are so tight due to increased competition that it's difficult to cover hedging costs. So you have to take more risk.