Naylyan NazifovaNaylyan Nazifova is a Financial Research and Platform Testing Analyst at BestBrokers.com, where she reviews and tests online brokers across forex, stocks, investing and personal finance. Her experience in online trading content and broker analysis helps readers understand how platforms perform in practice, including their trading tools, fees, ease of use and suitability for different types of investors.
| Expert Editor 
Eugene Lee, CFA
Eugene Lee, CFA, is the Head of Research at BestBrokers.com, where he draws on more than two decades of experience in global markets, portfolio management, derivatives, and fintech to evaluate online brokers. His background in institutional investing and quantitative research helps ensure that broker reviews are based on data, risk assessment, and real-world trading conditions. 
| Updated: Forex hedging is a risk management tool that allows traders to open positions designed to protect against unfavorable market moves. The goal is to reduce portfolio risk by buying or selling financial instruments that partially or completely offset existing exposure. Many forex brokers allow hedging, but hedging terms depend on each company’s internal policy and the regulations set by financial authorities in its target markets. This article examines a range of forex brokers that allow hedging.
Fusion Markets74-89% of retail's CFD accounts lose money
FP Markets73.33% of retail investor accounts lose money
BlackBull MarketsTrading leveraged products is risky
Eightcap59.57% of retail investor accounts lose money when trading CFDs with this provider.
Global Prime74-89% of retail CFD accounts lose money
Capital.com69% of retail investor accounts lose money when trading CFDs with this provider.
IG67% of retail client accounts lose money when trading CFDs with this investment provider.
AvaTrade57% of retail investor accounts lose money
Plus500 USThis content applies only to Plus500 US and clients from the United States. Trading futures involves the risk of loss.
eToro52% of retail investor accounts lose moneyTop 12 Forex Brokers for Hedging
- 1. FP Markets
Established in 2005, FP Markets is an Australian-based forex and CFD broker regulated by ASIC, CySEC, and FSCA. The broker provides access to over 60 forex pairs alongside commodities, indices, cryptocurrencies, and shares. FP Markets has built a strong reputation with a 4.9 Trustpilot rating and 40+ industry awards.
Based on our findings, the broker permits hedging on forex positions and offers multiple account types with competitive spreads. We could go long and short on EUR/USD CFDs with spreads of 1.17 pips when using the Standard account and 0.07 pips with the Raw account.
The average spreads of pairs like USD/CAD and USD/JPY, which are negatively correlated with EUR/USD, stood at just over 1.60 pips (Standard) and 0.50 pips (Raw). On the Standard account, our spreads when trading XAU/USD and the US500 index were 23 pips and 2.5 pips, respectively. We indirectly hedged gold by trading USD/CHF with spreads of 1.67 pips and USD/SEK with an average spread of 41.42 pips.
The Standard account is commission-free. Going with the Raw account required our testers to pay a commission of $3 per lot, per side, but as established, this account type comes with significantly lower spreads.
Our choice of platforms at FP Markets included MT4, MT5, and cTrader. Each provides the advanced charting tools and order types hedgers require. The minimum deposit requirement we had to meet was $50, and the broker holds licenses from ASIC, CySEC, FSCA, and more, providing clients with regulatory protections across multiple regions.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.33% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Launched in 2014, BlackBull Markets has customers from over 180 jurisdictions and is licensed by regulatory authorities in New Zealand and Seychelles. The ECN broker features execution of under 75 milliseconds according to our hands-on assessments and provides narrow spreads from 0.8 pips for commission-free accounts across thousands of tradable symbols. The catalog encompasses over 60 forex pairs, 20 cryptocurrencies, 15+ indices, and more than a dozen commodities. Customers can also speculate on price fluctuations in over 1,800 shares from 25+ global markets.
After creating an ECN Standard account, we opened buy and sell positions when trading EUR/USD and USD/JPY with spreads of 0.8 pips. Our hedging strategy also involved short and long positions on XAU/USD, whose spreads averaged 12 pips, and USD/CHF with spreads of 0.3 pips. The SPX500 index, meanwhile, had trading costs of 6 pips during testing. Upgrading to ECN Prime lowered our average FX spreads to 0.1 pips, but the broker imposed a round-turn commission of $6 per lot on our trades. Neither account type required us to meet a minimum deposit requirement.
In addition to having no restrictions on hedging, BlackBull Markets offers risk management guides and negative balance protection. We used MT5 during our evaluation process, but the broker also supports platforms like MT4 and cTrader, which are highly regarded among hedgers due to their advanced order types and charting capabilities. Hedgers of the Muslim faith can also use swap-free accounts at BlackBull Markets.
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any questions or concerns as to how a loss would affect your lifestyle.- 3. Pepperstone
Pepperstone features more than 1,000 CFD instruments, including forex, indices, shares, and more. The company has gained regulatory approval from multiple financial authorities, including ASIC, CySEC, and BaFin, among others. We were allowed to hedge positions on the MT4, MT5, and cTrader platforms. We could choose from over 100 tradable assets, including 90+ forex pairs, and our account balance could not drop below $0 because the broker supports negative balance protection.
Our team found the brand’s spreads to be competitive. Trading long and short positions on EUR/USD involved average spreads of 1.10 pips with the Standard account and 0.10 pips with the commission-based Razor account. Our indirect EUR/USD hedging strategies incorporated USD/CAD and USD/JPY.
The former’s spreads were around 1.40 pips (Standard), while trading the latter cost a spread of 1.20 pips on average (Standard). Their Razor spreads were 0.40 and 0.20 pips, respectively. When hedging XAU/USD on the Standard account, our spreads averaged 23 pips, while USD/CHF had spreads of 1.30 pips. The US500 index’s spreads averaged 4 pips.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.7% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 4. Global Prime
Traders looking to reduce risk exposure when trading forex CFDs can consider what Global Prime has to offer. Based on our testing, the broker’s internal policy does not impose restrictions on hedging. Other strategies, such as scalping, swing trading, and the use of Expert Advisors, are also permitted. With around 60 currency pairs, traders have opportunities to hedge against potential losses and open positions in correlated currency pairs. Beyond forex, the extended roster of instruments includes bond CFDs, indices, cryptocurrencies, US shares, and commodities.
Throughout our review process, we opened buy and sell positions on EUR/USD with spreads of around 1 pip with the Standard ECN account. We also traded pairs that are negatively correlated with EUR/USD, such as USD/CAD, whose spreads averaged 1.10 pips. Switching to the Raw ECN account resulted in even lower EUR/USD and USD/CAD spreads of 0.10 and 0.20 pips, respectively, and our reviewers were charged a commission of $3.50 per side.
Other instrument types we covered included gold with raw spreads of 7.9 pips. In addition to opening both buy and sell positions, we focused on simultaneously trading USD/JPY due to its negative correlation with XAU/USD; the pair had spreads of around 0.30 pips. We also hedged the US500 index, whose raw spreads were around 4.01 pips.
We found hedging strategies to be useful for managing the risks associated with holding positions overnight and for accounting for the impact of swap fees on Global Prime users’ account balances. Furthermore, the broker offers additional risk management tools like stop-loss orders, take-profit orders, and negative balance protection.
Global Prime is a trading name of FMGP Trading Group Pty Ltd (ABN 74 146 086 017) and is regulated by ASIC and licensed to carry on a financial services business in Australia under Australian Financial Services License No. 385620. Gleneagle Securities Pty Limited trading as Global Prime FX, is a registered Vanuatu company (Company Number 40256) and is regulated by the VFSC. The website is owned and operated by FMGP Trading Group Pty Ltd, ABN 74 146 086 017. - 5. ActivTrades
ActivTrades is a multi-regulated broker offering CFDs on over 1,500 instruments, including forex pairs, commodities, stocks, indices, cryptocurrencies, bonds, and exchange-traded funds. Our reviewers have verified that the broker permits hedging across all available platforms, including MT4 and MT5.
We were able to hold opposing positions when trading EUR/USD, and our spreads stood at around 0.50 pips on average. Trading pairs like USD/JPY and USD/CAD, which have a negative correlation with EUR/USD, involved spreads of 0.50 pips and 1 pip, respectively. Spreads on long and short gold positions averaged 43 pips but would fall to 25 pips during high-liquidity periods. S&P 500 spreads, meanwhile, were around 2.3 pips. All of our trading costs on positions closed prior to the daily rollover were fully built into the spread.
ActivTrades offers flexible leverage and margin conditions, with maximum ratios of 1:1000 for FSC clients and 1:200 for SCB customers. Retail traders from Europe and the UK can leverage their hedged positions at a maximum ratio of 1:30, and the broker features negative balance protection.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 6. IG
IG is a regulated broker that enables its users to switch to Hedge mode through the “force open” option, regardless of whether they prefer the brand’s web trading platform or mobile app. It allowed our reviewers to maintain buy and sell positions simultaneously for the selected trading pair.
On average, our long and short EUR/USD positions had spreads of around 0.86 pips with the CFD account. We also traded USD/CHF as an indirect hedge to EUR/USD, and its spreads were around 1.95 pips throughout testing. Our spreads when trading XAU/USD were around 30 pips, while for the US 500, the minimum was 1 pip.
Lower spreads are available when trading with the DMA account, which offers spreads of around 0.165 pips for the EUR/USD and 0.399 pips for USD/CHF. However, a commission of $3 per side applies, and the account type is only available for clients using the L2 Dealer platform.
As the broker suggests, beginner traders can learn more about hedging by opening an IG demo account. The broker also offers dedicated guides about risk management. Moreover, retail users can take advantage of negative balance protection.
CFDs are complex instruments. 67% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. - 7. AvaTrade
AvaTrade is a broker with around 20 years of experience in the financial industry. The regulated broker has a diverse portfolio of more than 1,250 financial instruments, including forex, commodities, indices, and more.
AvaTrade’s Retail account offers 50+ FX pairs for hedging. In the case of EUR/USD, our reviewers worked with spreads of 0.8 pips. To indirectly hedge EUR/USD long positions, we also focused on the USD/CAD pair, whose spreads were higher at 1.8 pips.
Gold trading costs stood at 37 pips, while the S&P 500 index’s spreads were 5 pips. The roster of instruments is the same when using the Pro account, but spreads drop significantly, with EUR/USD trading costs at 0.6 pips. Regardless of the account type we tested, we were not charged any commissions on top of the spreads.
The company provides several trading platforms for hedging, including MetaTrader 4, MetaTrader 5, and the proprietary WebTrader. To open a live account, we had to meet a minimum deposit requirement of $100. Beyond hedging, we also utilized the AvaProtect feature, which offers reimbursement of up to one million dollars for a chosen position over a specific timeframe. Furthermore, our balance could not drop below $0 thanks to AvaTrade’s negative balance protection.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 57% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 8. IC Markets
Another forex broker that traders can use to hedge open forex positions is IC Markets. The company offers a broad range of 2,250+ financial instruments, including 60+ forex CFD products, and the available platforms include MT4, MT5, TradingView, and cTrader.
Traders looking to hedge with IC Markets will find ECN execution with speeds of under 30 ms based on our extensive testing. We found the broker offered spreads of 0.82 pips on average while trading EUR/USD with the Standard account, and we were able to open buy and sell positions without restrictions. To indirectly hedge EUR/USD long positions, we also opened buy positions on USD/CAD, whose spreads were 1.05 pips during the hands-on evaluation period, and short positions on GBP/USD, which had average spreads of 1.03 pips. XAU/USD spreads, meanwhile, averaged 10 pips, and our US500 spreads were around 3.6 pips.
Our reviewers also examined the MetaTrader Raw account, where minimum FX spreads start at 0.0 pips. We saw EUR/USD pricing drop to 0.02 pips on average, while GBP/USD spreads were around 0.23 pips. We were charged a commission of $3.5 per lot, per side. Both Standard and Raw accounts have a minimum deposit requirement of $200.
New traders who are not ready for live trading or are unfamiliar with hedging strategies can open a free demo account. Once they move to live accounts, they will be entitled to negative balance protection as retail customers.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.64% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 9. Saxo Bank
Saxo Bank is an option for traders looking to hedge their forex trades. FX trading can be done by selecting “force open” after enabling real-time first-in-first-out (FIFO), or by using end-of-day FIFO as the netting method.
After we created a live Classic account, we opened long and short positions on EUR/USD with average spreads of 1.1 pips. Another asset we focused on was XAU/USD, which had an average spread of 63 pips. To employ indirect hedging of these instruments, we also traded USD/CAD, which had average spreads of 1.5 pips during testing. As for the US500 index, we went long and short with spreads of roughly 7.5 pips.
Based on our testing, the user-friendly SaxoTraderGO platform supports all of these settings and instruments, making it straightforward to switch hedging on and off. The company also provides a comprehensive guide on forex hedging for novice traders, and retail account holders are entitled to negative balance protection.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money. - 10. CMC Markets
Founded in 1989, CMC Markets is a global broker that supports a varied portfolio of more than 12,000 tradable markets, including forex, shares, and indices. To hedge currencies, traders can choose between 300+ forex CFDs, including major, minor, and exotic pairs.
We opened a live CFD account to test the broker’s services. We went long and short on EUR/USD to hedge potential losses, and our FX spreads averaged around 0.6 pips. Additionally, we shorted GBP/USD while our EUR/USD buy positions were open, and the GBP/USD spread stood at around 0.9 pips.
We also had access to gold CFDs with spreads from 20 pips, and our main hedging technique involved either going long or short on XAU/USD directly. We also traded assets negatively correlated with gold, like CFDs on USD/CAD and USD/CHF, with average spreads of 2.50 pips for the former and 1.50 pips for the latter. Another popular instrument that was commonly hedged by our reviewers was the US SPX 500 with spreads as low as 5 pips.
We mainly used MT5, but customers of the broker can also choose between the proprietary Next Generation platform or options like MT4 and TradingView. Additionally, traders can test forex hedging techniques through a demo account before switching to live trading.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. - 11. City Index
City Index is a brand serving more than 1 million account holders in over 13,500 financial markets and has an average execution speed of 0.05 seconds. The brokerage is authorized and regulated by several financial authorities, including the FCA, CySEC, and the FSA.
City Index offers a proprietary trading platform equipped with advanced research tools and an abundance of educational resources, including resources related to hedging. Besides forex, traders can hedge their positions on commodities and stocks.
During our testing of the broker’s Standard account, its EUR/USD spreads on buy and sell positions averaged 2.4 pips, but they went as low as 0.7 pips during high market activity. USD/CHF spreads averaged close to 2.5 pips and did not drop below 1.3 pips. Besides forex, we also hedged our XAU/USD positions. Our typical gold spread when going long and short was around 50 pips, while the minimum stood at 20 pips. When we hedged the S&P 500, our spreads tended to hover near 6 pips.
Based on our findings, City Index’s proprietary trading platform is equipped with advanced research tools such as Performance Analytics and enables one-click trading. MT4 and TradingView are supported as well. The broker offers an abundance of educational resources, including guides centered on hedging, and demo accounts are also available. The balances of retail clients who open live trading accounts are safeguarded via negative balance protection.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 12. eToro
eToro is a reputable trading brand that holds licenses from regulators like the FCA, ASIC, CySEC, FSA, and more. The brand’s user-friendly platform gives users access to more than 60 different currency pairs. Its trading conditions are favorable for hedging strategies, and our testers could go both long and short on EUR/USD, which had spreads of 1.0 pips during testing.
Other pairs we used to hedge EUR/USD include USD/CHF and USD/CAD, and both featured spreads of around 1.5 pips. While going long and short on gold, our testers found the spreads to be relatively high at around 102.5 pips. For indirect gold hedging, we also traded the pair USD/CHF with spreads of around 1.5 pips. Hedging SPX500 involved a spread of around 11 pips.
In addition to allowing currency hedging, the brokerage offers its eToro Academy to help new traders learn more about investing and trading. Depending on the country a user resides in, eToro’s minimum deposit requirements vary. Our initial minimum when opening an account at the EU-regulated entity was $50, and the same requirement applies in most jurisdictions. However, users in some locations have to meet minimum deposits ranging from $100 to $2,000.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 52% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Comprehensive Comparison of the Top 10 Forex Brokers for Hedging
| Forex Broker | Min Deposit | Spread | Markets | FX Pairs | Direct Hedging | Commission | Other Fees | Max Leverage | Negative Balance Protection | Regulators | Platforms | Our Score |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1. FP Markets | $50 (AU$100) | From 1.0 pips (Standard); from 0.0 pips (Raw) | Forex CFDs, Share CFDs, Metal CFDs, Commodity CFDs, Index CFDs, Crypto CFDs, ETF CFDs | 70+ | Permitted | Standard account: $0; Raw account: $6 round-turn per lot | Swap fees on positions held overnight | 1:30 for retail clients1:500 for professional clients | Yes (retail clients) | ASIC, CySEC, FSA (Seychelles), FSCA, FSA (St. Vincent and the Grenadines), SCB (Bahamas), FSC (Mauritius) | MetaTrader 4, MetaTrader 5, WebTrader, IRESS, cTrader, TradingView | 4.37 ⭐ |
| 2. Pepperstone | $0 | From 0.0 pips (Razor Account), 1 pip (Standard Account) | Forex, Indices, Commodities, Cryptocurrencies, Share CFDs, ETFs | 90+ | Permitted | $0 (Standard Account), $7 round-turn (Razor Account) | Swaps on overnight positions | 1:30 (retail: ASIC, CySEC, FCA); 1:500 (professional); 1:400 (CMA) | Yes (retail traders) | ASIC (No. 414530), UK FCA (No. 684312), CySEC (No. 388/20), BaFin (No. 151148), DFSA (F004356), CMA (128), SCB Bahamas (SIA-F217), FSA (SD108) | MetaTrader 4, MetaTrader 5, cTrader, TradingView | 4.19 ⭐ |
| 3. IG | $0 | From 0.6 pips for forex trading; 0.165 pips avg. spread for DMA trading | CFDs on Indices, Shares, Crypto, Futures, Commodities, Options, Interest Rates, Sectors, Bonds, Knock-Out Trading | 90+ | Permitted | $0 | Guaranteed stop premium charge; swap fees on overnight open positions | 1:30 (retail)1:500 (professional) | Yes (for limited risk accounts) | ASIC, FCA, DFSA, CFTC, FMA, FINMA, BaFin, MAS, JFSA, FSCA, BMA (Bermuda) | MetaTrader 4, L2 Dealer, ProRealTime, IG proprietary software, TradingView | 4.05 ⭐ |
| 4. AvaTrade | $100 | From 0.9 pips (retail) and 0.6 pips (pro) | Forex, major stock indices, cryptocurrencies, commodities, bonds, individual shares, ETFs | 50+ | Permitted | $0 | $100 dormancy fee after 12 months of no activity; swap fees on overnight open positions | 1:30 (1:400 for Pro and non-EU accounts) | Yes (European and Australian retail traders) | CBI (No. C53877), ASIC (No. 406684), FFAJ (No. 1574), ADGM/FSRA (No. 190018), BVIFSC (No. SIBA/L/13/1049), FSCA (No. 45984), CySEC (No. 347/17), ISA (No. 514666577), SFC (No. 0261/2024) | MetaTrader 4, MetaTrader 5, WebTrader, AvaTrade App, AvaSocial, AvaOptions, DupliTrade | 4.04 ⭐ |
| 5. IC Markets | $200 | 0.8 pips for Standard accounts, 0.0 pips for Raw accounts | CFDs on Forex, Commodities, Indices, Bonds, Cryptocurrencies, Stocks, and Futures | 62 | Permitted | Standard MT: $0; Raw cTrader: $6 per round turn; Raw MT: $7 per round turn | Swap fees on positions held overnight | 1:30 (European and Australian retail accounts); 1:500 (Pro); 1:1000 (FSA clients) | Yes (European and Australian retail traders) | FSA (Seychelles), CySEC (Cyprus), ASIC (Australia), SCB (Bahamas), CMA (Kenya) | MetaTrader 4, MetaTrader 5, cTrader, ZuluTrade | 4 ⭐ |
| 6. Admirals | $100 ($1 for the Invest MT5 account) | From 0.0 pips (Invest and Zero accounts), 0.5 pips (Trade accounts) | CFDs on forex, indices, stocks, commodities, bonds, ETFs, and cryptocurrencies | 82 | Permitted | $3 per lot | Inactivity fee of $10 per month; swap fees on overnight open positions | 1:30 (Retail)1:500 (Professional) | Yes (Trade and Zero MT5/MT4 accounts) | CySEC (No. 201/13), ASIC (No. 410681), FCA (No. 595450), JSC (No. 57026), FSCA (No. FSP51311), EFSA (No. 4.1-1/46), CMA (No. 178), CIRO, FSA (No. SD073) | MetaTrader 4, MetaTrader 5, WebTrader, MT Supreme Edition, StereoTrader | 3.99 ⭐ |
| 7. Saxo Bank | $0 Classic$200,000 + Platinum $1,000,000 + VIP | 0.9 pips (Classic), 0.8 (Platinum), 0.7 pips (VIP) | Stocks, ETFs, Bonds, Mutual funds, Crypto ETPs, Options, Futures, Forex, Forex options, Crypto FX, CFDs, Commodities | 185+ | Permitted | $3 per lot | Swap on overnight open positions | 1:30 (Retail, EU traders); 1:200 (FSA) | Yes (EU, UK, and MENA regions) | FCA (No. 551422), FSA Denmark (No. 1149), MAS (No. 200601141M), ASIC (No. 32110128286), SFC Hong Kong (No. 1395901), FSA Japan (No. 0104-01-082810), Registered with CONSOB (no. 296) | Proprietary, SaxoTraderGO, SaxoTraderPRO, TradingView, SaxoInvestor | 3.90 ⭐ |
| 8. CMC Markets | $0 | From 0.0 pips (UK), 0.3 pips (SG, AU), and 0.2 pips (IE) | CFDs on Forex, Indices, Shares, Commodities, Treasuries, Cryptocurrencies, and Share Baskets; Investments in ETFs, Managed Funds, Options, and more | 330+ | Permitted | $0 for forex trading | GSLO premiums, market data fees | 1:30 (Retail)1:500 (Professional) | Yes (retail traders) | FCA, ASIC, MAS, CIRO, BaFin, FMA, BMA, DFSA | MT4, MT5, TradingView, Next Generation (proprietary) | 3.83 ⭐ |
| 9. City Index | $0 ($150 for Singapore and Australia) | From 0.7 pips (UK); 0.5 pips (Singapore and Australia) | Forex, Indices, Shares, Gold, Silver, Commodities, Cryptocurrencies, Bonds, Thematic Indices, Interest Rates | 84+ | Permitted | $0 on forex trades; 1.8 CPS for US shares ($10 minimum); 0.08% for other shares ($10 or A$5 minimum) | +/- 2.5% overnight financing fees; 1.5 x CFD for triggered GSLOs | 1:30 (Retail, 1:20 for Singapore)1:400 (Professional) | Yes (Retail traders) | FCA (No. 446717), MAS (No. 201130598R), ASIC (No. 345646), HKFSC (BCQ152), JFSA (2010401047199), DFSA (F000542) | MT4, WebTrader, Trading App, TradingView | 3.81 ⭐ |
| 10. eToro | $50 or $100, depending on the country ($10 in the UK, $1 in the US) | From 1 pip | CFDs on forex, stocks, commodities, crypto, ETFs, and indices | 60+ | Permitted | $1 or $2 (stocks only) | A $10 monthly inactivity fee; a $5 withdrawal fee; a 2% fee for transferring crypto assets to eToro Money; and a 1% fee for buying or selling crypto. | 1:30 (FCA, ASIC, CySEC); 1:400 (FSA) | Yes (retail traders) | FCA, CySEC, ASIC, MFSA, FSRA, FSA, FINRA/FinCEN, AMF, SEC, GFSC | eToro Investing, eToro App, TradingView, eToro CopyTrader, proprietary platform | 3.24 ⭐ |
Best Forex Brokers for Hedging Ranked by Trustpilot Score
| Forex Broker | Trustpilot Reviews | |
|---|---|---|
| 1. FP Markets | 9,422 | 4.9 ⭐ |
| 2. IC Markets | 48,248 | 4.8 ⭐ |
| 3. AvaTrade | 11,076 | 4.7 ⭐ |
| 4. Pepperstone | 3,144 | 4.4 ⭐ |
| 5. CMC Markets | 2,571 | 4.3 ⭐ |
| 6. City Index | 393 | 4.2 ⭐ |
| 7. eToro | 29,171 | 4.2 ⭐ |
| 8. IG | 8,324 | 3.9 ⭐ |
| 9. Admirals | 2,046 | 3.8 ⭐ |
| 10. Saxo Bank | 7,617 | 3.6 ⭐ |
Hedging Trading Strategy Explained in Brief
Forex hedging is a strategy used by traders to help manage or reduce exposure to unfavorable market moves by opening additional positions. Normally, this is a short-term protection mechanism that traders use when they see potential risks from news and events that may trigger volatility in currency markets. The tradeoff is that reduced exposure to currency risk can also lead to lower potential profits.
While hedging may not eliminate the risk of adverse price movement entirely, a properly applied strategy can help mitigate losses or limit them to a known amount. The first step is to select a currency pair. Major currency pairs give traders more options for hedging strategies than minor pairs, mostly because they are more widely available.
Traders should also consider the capital they are willing to invest, as opening additional positions incurs additional trading costs.
Finally, traders should consider the amount of time they can spend monitoring the markets. Opening a demo account first can help test a hedging strategy ahead of time.
Types of Hedging
Many types of risk management strategies are available to forex traders to help protect against currency losses, with hedging among the common options. Some of the most common hedging strategies include simple (direct) forex hedging and multiple-currency hedging.
With a simple forex hedging strategy, also known as a direct hedge, traders open the opposite position to a current trade. In other words, a long position on a currency pair can be offset by opening a short position on the same currency pair, and vice versa.
An example of a simple forex hedging strategy is taking a long and short position on the EUR/USD currency pair simultaneously. While the profit from direct hedges can be reduced to zero, traders can maintain their original position in the market in anticipation of a trend reversal without selling outright.
The multiple-currency hedging strategy is also popular. It requires picking two positively correlated currency pairs and taking opposite positions on both pairs. For instance, a trader can use the GBP/USD currency pair to hedge exposure to the EUR/USD. If properly applied, this strategy can reduce risk and might even yield a small profit. However, if it fails, traders can face losses from multiple positions, so careful application is warranted, with thorough analysis of correlated pairs.
Who Should Use Hedging?
Many market participants use forex hedging. Retail traders who understand financial markets and related economic news can apply hedging as a risk management strategy. Professional traders and institutional investors also tend to use hedging to protect large portfolios, especially if their strategies are more conservative. Ultimately, hedging is used to help limit potential losses rather than generate profits.
Is Hedging Legal Everywhere?
Hedging is legal in most financial markets around the globe. Whether your broker allows forex hedging depends on the country and the regulations of its financial authorities.
The U.S., for example, has restrictions on hedging in forex trading. The Commodity Futures Trading Commission (CFTC) has implemented several restrictions that brokers must follow. For example, traders cannot hedge a position on the same currency pair. However, hedging is considered a legal activity in many countries across Europe, Asia, and Australia.
Factors to Consider When Choosing Forex Brokers for Hedging
Several important factors should be considered when selecting a forex broker for hedging. First, check the broker’s regulatory status, license, and reputation. Authorization from a reputable financial authority can indicate a higher level of security and investor protection.
To execute your hedging strategies effectively, select a broker offering a user-friendly trading platform. Brokers with fast execution speeds and a wide range of liquidity providers can provide prompt trade execution and competitive pricing. Average spreads, minimum deposit requirements, and the range of supported account types should also be considered.
Additional important factors when selecting a forex broker for hedging include the range of financial instruments and the number of supported currency pairs for hedging. In addition, advanced research tools and educational resources dedicated to forex hedging are important considerations.
Trading Software Suitable for Hedging
Reputable forex brokers typically offer several trading platforms that are suitable for hedging. Forex hedging is permitted across various third-party trading platforms, including MT4, MT5, TradingView, and cTrader, as well as many brokers’ proprietary trading platforms.
Traders should verify that the broker permits hedging on its platform, especially for live trading accounts. Platform choice should align with the trader’s style and preferences.
Why Hedge Your Forex Trades?
There are several reasons why traders prefer to hedge their positions when trading forex.
Hedging is a risk mitigation strategy that reduces exposure to unfavorable price movements, helping traders limit potential losses during unfavorable market conditions.
While direct hedging is restricted in the USA under CFTC regulations, hedging your forex trades is legal in most markets.
Finally, major and minor currency pairs are among the most suitable tradable instruments for hedging, with high liquidity and low spreads.
Does Hedging Guarantee Success in Forex Trading?
Like insurance, hedging is a risk management tool that serves to mitigate losses. It cannot guarantee success or prevent unfavorable market movements entirely. Instead, it can protect traders if an adverse scenario occurs. Essentially, rather than generating profits, traders hedge to minimize losses.
The capital traders have available for hedging is another important consideration. It varies from trader to trader based on risk tolerance.
Forex hedging can be a useful strategy for traders who want to protect their positions during periods of short-term volatility. However, it is not a straightforward way to generate profits or eliminate risk in the long term.