Hedging is a way to reduce the amount of loss you would incur if something unexpected happened. With respect to our signals if you intent to protect an existing position from an unwanted move in the opposite direction you could enter into a hedged position.
As we DO NOT use a stop loss (SL) per position we make use of countertrades to balance out our account and stay as beta neutral as possible to reduce our account risk exposure.
If you need a true hedge instead of a countertrade (preferred) you need to remove the take profit target (TP) from the trade signal. Once the target price is reached you enter a stop loss (SL) of your winning position at entry +1 or 2 points for a long trade and – 1 or 2 points for a short trade. This way your original trade stays protected from a further negative curve (drawdown).
You have a long dax position open at 12400 with target to 12500. When the dax is at 12350 we send a new signal to short the dax to 12300 now the easy way is to take that countertrade (not a hedge) if you are short on available equity and need the hedge as the dax could go further down and pass the 12300 target (better not to use a hedge and always scale down your contract size to 1-2% of equity). Instead of the countertrade to 12300 remove the take profit at 12300 from the new position. When the dax hit 12300 you place a stop loss near entry 12350 say 12345. Now you are fully hedged and the dax can go further down to 12000 without you suffering any additional negative impact to your account equity.
When the dax goes back up to hit the original predicted target at 12500 your hedge will close at 12345 and eventually go straight to hit 12500. If not you might need to repeat this operation multiple times until you close your original trade at 12500.
Please always consider counter trading instead of hedging. Scale down your contract size and sit out the negative curve.