# Hedging Swing Trades (Advanced Theory): 15% in Oil & Energy So You NEVER Sell - Part 4

https://www.youtube.com/watch?v=9jsh_Jc91NA

[00:01] Hi traders, this is Mond. This is part
[00:02] four of the best swing trading course.
[00:03] Let's go over hedging.
[00:05] So for hedging guys, 15% of your capital
[00:08] needs to go in hedges.
[00:11] And
[00:12] 99% of traders that I speak to and
[00:15] teach, they have no idea what this
[00:17] means. All right? From beginners all the
[00:19] way up to folks that have been in the
[00:21] markets for 3 5 years, okay? They they
[00:23] still don't understand what hedging is.
[00:26] So what is hedging guys? Hedging is
[00:28] basically when you have a ton of profits
[00:30] or a ton of stocks that you went long
[00:33] on.
[00:34] So you have maybe five, six, seven
[00:36] positions all going the same direction.
[00:39] Hedging is actually taking the opposite
[00:41] direction. So you're basically if the
[00:44] markets, right? Topped out and it goes
[00:46] down, your hedge
[00:48] that you took that trade on going the
[00:51] opposite way will actually
[00:53] do very well. Okay? Will actually do
[00:56] very well.
[00:57] So
[00:58] when do you start hedging? Why is it so
[01:00] important psychologically? Well, the
[01:03] theory behind hedging is that
[01:06] if the markets go up, let's say the S&P
[01:08] 500 goes up, the hedge that you want to
[01:10] take is always in oil or energy.
[01:14] So you're buying energy stocks, guys.
[01:16] You're buying energy stocks.
[01:19] Like for instance, XOM, Exxon Mobil,
[01:22] Chevron,
[01:24] okay? These typically go the opposite
[01:26] direction of the overall markets.
[01:31] So if the S&P 500 keeps going up and you
[01:34] start feeling like it's way too high, I
[01:37] don't want to lose any profits, then
[01:40] what you do is you start buying oil
[01:43] to round out your portfolio. Because if
[01:45] the markets go down,
[01:48] you are hedged 15%, you make money on
[01:51] the way down.
[01:52] And the great thing is is that you don't
[01:54] have to sell any of your stocks because
[01:56] you're already hedged 15%. Somebody just
[01:58] mean this means that you don't lose your
[02:01] great entries because you probably
[02:03] bought at really good entries. The
[02:04] markets have gone up, skyrocketed. So,
[02:08] instead of
[02:09] understanding, oh, I need to sell right
[02:10] now. I need to sell my stocks. No.
[02:13] Right? Because if you sell, you're going
[02:14] to lose your amazing entries. You're
[02:16] going to have to pay taxes.
[02:18] Okay?
[02:19] You're going to have loss sales.
[02:22] These are all things that people don't
[02:24] consider. That's why instead of selling
[02:26] your stocks, you hedge and buy oil
[02:29] stocks instead.
[02:31] Because then if the markets go down, oil
[02:32] stocks go up.
[02:34] Right? And you raise capital. So, then
[02:35] now what happens is
[02:37] you have a 15% hedge, your money, you
[02:40] start having good money, and then again,
[02:43] you use the money that you
[02:45] made on the hedges, and then you buy
[02:47] even more of the S&P 500 stocks because
[02:50] now they're at good levels. They're at
[02:52] mean reversions. They're at
[02:53] accumulation.
[02:55] Okay? This is a cycle, guys. A cycle. It
[02:58] goes round and around.
[03:01] So, you buy
[03:02] great momentum stocks, great mean
[03:04] reversions, great accumulation.
[03:06] Then as the markets continue going
[03:08] higher, you start hedging and buying oil
[03:11] stocks. And if the markets go down, you
[03:13] use the money that you've made in the
[03:15] oil stocks, and you hedge it and put the
[03:17] profits back in
[03:19] into
[03:21] the uh
[03:23] the other four types of trades.
[03:25] Right? This is a cycle. This is how you
[03:26] never lose.
[03:28] So, this is why hedging is so important.