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, from trading tools and fees to ease of use and investor suitability.
| Expert Editor 
Eugene Lee, CFA
Eugene Lee, CFA, is the Head of Research at BestBrokers.com, where he applies more than two decades of experience in global markets, portfolio management, derivatives and fintech analysis to the evaluation of online brokers. His background in institutional investing and quantitative research helps ensure broker reviews are based on data, risk assessment and practical 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 the specifics for hedging will depend on each company’s internal policy and the regulations from financial regulatory authorities in its target markets. This article examines a range of Forex brokers that allow hedging.
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 money
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 moneyTop 12 Forex Brokers for Hedging
- 1. Global Prime
Traders looking to reduce their risk exposure when trading forex CFDs can look at 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 usage of Expert Advisors, are also permitted. With around 60 currency pairs, traders will 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 the EUR/USD with spreads of around 1 pip with the Standard ECN account. We also traded pairs that are negatively correlated with the EUR/USD, like the 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 include gold with raw spreads of 7.9 pips. In addition to trading both buy and sell prices, we focused on simultaneously trading the USD/JPY due to its negative correlation with XAU/USD, and the pair had spreads of around 0.30-pip. We also hedged the US500 index, whose raw spreads were around 4.01 pips.
We found hedging strategies to be efficient in minimizing the risks associated with holding positions overnight and can reduce 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. - 2. 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 while using the Standard account, and 0.07 pips when using 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). Our standard 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, FSAS, 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 with licenses obtained from the regulatory authorities of 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 for 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 of over 1,800 shares from 25+ global markets.
Following our creation of an ECN Standard account, we opened buy and sell positions when trading the 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 the 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 utilized the MT5 over the course of our evaluation process, but the broker also supports platforms like MT4 and cTrader that are also 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.- 4. Pepperstone
Pepperstone features more than 1,000 CFD instruments, including forex, indices, shares, and more. The company has gained the regulatory approval of multiple financial authorities, 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 as the broker supports negative balance protection.
Our team found the brand’s spreads to be competitive. Trading long and short positions when focusing on the 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 the 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 would average 23 pips, while the 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. - 5. 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 the EUR/USD, our reviewers worked with spreads of 0.8 pips. To indirectly hedge EUR/USD long positions, we also focused on the pair USD/CAD, whose spreads were higher at 1.8 pips.
Gold trading costs stood at 37 pips, while the S&P 500 index’s over market spreads were 5 pips. The roster of instruments is the same when using the Pro account, but spreads drop significantly, with the EUR/USD’s trading costs being 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 the course of 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. - 6. IG
IG is a regulated broker that enables its users to toggle into 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 the USD/CHF as an indirect hedge to the EUR/USD, and its spreads were around 1.95 pips throughout testing. Our spreads when trading XAU/USD would drop to 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 the 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. Saxo Bank
Saxo Bank is an option for traders looking to hedge their forex trades. FX trading can be done by selecting “force open” once they have enabled the real-time first-in-first-out (FIFO) or by allowing end-of-day FIFO as the netting method.
After we created a live Classic account, we opened long and short positions on the 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 the aforementioned instruments, we also traded the 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 the aforementioned 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. - 8. 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 out the broker’s services. We went long and short on the EUR/USD to hedge potential losses, and our FX spreads averaged around 0.6 pips. Additionally, we would short the 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 shorting the 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 is 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 out 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. - 9. City Index
City Index is a brand accommodating 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 bodies, 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 those associated with 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 would go as low as 0.7 pips during high market activity. USD/CHF spreads’ averages were close at 2.5 pips but could 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 the lowest cost of 6 pips.
Based on our findings, City Index’s proprietary trading platform is equipped with advanced research tools such as Performance Analytics, and it enables one-click trading. MT4 and TradingView are supported as well. The broker offers an abundance of educational resources, including guides centered around 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. - 10. IC Markets
Another forex broker that traders can look to hedge their open Forex positions is IC Markets. The company offers a broad range of 2,250+ financial instruments, including 60+ forex CFD products, and the choice of platforms includes MT4, MT5, TradingView, and cTrader.
Traders willing to hedge on IC Markets will find ECN execution with speeds of under 30 ms based on our extensive testing. We have found the broker to offer spreads of 0.82 pips on average while trading the 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 the USD/CAD pair, whose spreads were 1.05 pips during the hands-on evaluation period, and short positions on the 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 stand at 0.0 pips. We saw EUR/USD pricing drop to 0.02 pips on average, while USD/GBP 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 either not ready to try live trading as a whole or are unfamiliar with hedging strategies can open a free demo account. Once they move on 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. - 11. eToro
eToro is a reputable trading brand that holds licenses from regulators like the FCA, ASIC, CySEC, FSAS, and more. The brand’s user-friendly platform gives users access to more than 60 different currency pairs. Its trading conditions are favorable towards hedging strategies, and our testers could go both long and short on the EUR/USD, which had spreads of 1.0 pips during testing.
Other pairs we used to hedge the 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 the 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. Based 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 locations have to adhere to deposit minimums 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. - 12. ActivTrades
ActivTrades is a multi-regulated broker offering CFDs for over 1,500 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 the 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 the 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. SP 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. 71% 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 | Trust Pilot Rating |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1. FP Markets | $50 (AU$100) | 1.0 pips Standard; 0.0 pips Raw | Forex CFDs, Shares CFDs, Metals CFDs, Commodities CFDs, Indices CFDs, Crypto CFDs, ETF CFDs | 70+ | Permitted | $0 Standard Account; $6 round turn on Pro Account | Swap on overnight open positions | 1:30 (Retail)1:500 (Professional) | Yes (Retail traders) | ASIC, CySEC, FSA (Seychelles), FSCA, FSA (St. Vincent and the Grenadines), SCB (Bahamas), FSCM (Mauritius) | MetaTrader4, MetaTrader5, WebTrader, IRESS, cTrader, TradingView | 4.9 ⭐ |
| 2. IC Markets | $200 | 0.8 pips Standard, 0.0 pips Raw Accounts | CFDs on Forex, Commodities, Index, Bond, Cryptocurrencies, Stock, Futures | 62 | Permitted | $0 Standard MT; $6 round turn on Raw cTrader; $7 round turn on Raw MT | Swap on overnight open positions | 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) | MetaTrader4, MetaTrader5, cTrader, ZuluTrade | 4.8 ⭐ |
| 3. AvaTrade | $100 | From 0.9 pips (retail), 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 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) | MetaTrader4, MetaTrader5, WebTrader, AvaTade App, AvaSocial, AvaOptions, DupliTrade | 4.7 ⭐ |
| 4. Pepperstone | $0 | From 0.0 pips (Razor Accounts), 1 pip (Standard Accounts) | 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 | 4.4 ⭐ |
| 5. CMC Markets | $0 | From 0.0 pips (UK), 0.3 pips (SG, AU), 0.2 pips (IE) | CFDs on Forex, Indices, Shares, Commodities, Treasuries, Cryptocurrencies, Share Baskets, Investments on ETFs, Managed funds, Options, and more | 330+ | Permitted | $0 for forex trading | GSLO premium, 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 | 4.3 ⭐ |
| 6. 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 | 4.2 ⭐ |
| 7. eToro | $50 or $100 based on country ($10 for 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; a 1% fee for buying/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 | 4.2 ⭐ |
| 8. IG | $0 | from 0.6 pips Forex trading; 0.165 pips av. spread 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 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) | MetaTrader4, L2 Dealer, ProRealTime, IG proprietary software, TradingView, | 3.9 ⭐ |
| 9. Admirals | $100 ($1 for Invest MT5 Account) | From 0.0 pips (Invest and Zero Accounts), 0.5 pips (Trade Accounts) | CFDs on Forex, Indices, Stocks, Commodities, Bonds, ETFs, Cryptocurrencies | 82 | Permitted | $3 per lot | Inactivity fee of $10 per month Swap 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) | MetaTrader4, MetaTrader5, WebTrader, MT Supreme Edition, StereoTrader | 3.8 ⭐ |
| 10. 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 | 3.6 ⭐ |
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 flipside is that the reduced exposure to currency risk leads to lower potential profits as well.
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 currency pair. Major currency pairs give more options for hedging strategies compared to minor ones, mostly because of availability.
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 exist for forex traders to help protect against currency losses, with hedging among the most favored. 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 on 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 buy the GBP/USD currency pair to hedge against the EUR/USD. If it is properly applied, this strategy can reduce the 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 utilize forex hedging. Retail traders who understand financial markets and the related economic news can apply hedging as a risk management strategy. Professional traders and institutional investors also tend to use hedging to protect large amounts of money and their portfolios, especially if their portfolio 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 will allow forex hedging depends on the country and the regulations of its financial authorities.
The US, for example, has restrictions on hedging while forex trading. The Commodity Futures Trading Commission (CFTC) has implemented several restrictions on traders so that brokers adhere to the regulations. 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 usually means a high 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 usually come with prompt execution of trades and competitive prices. 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 assortment of financial instruments and the number of supported currency pairs for hedging. 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 white-label trading platforms, including MT4, MT5, TradingView, and cTrader, as well as many brokers’ proprietary trading platforms.
Traders should verify that the broker facilitates 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 while forex trading.
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.
And finally, currency pairs, both major and minor, are among the most suitable tradable instruments for hedging, with high liquidity and low spreads.
Does Hedging Guarantee Success in Forex Trading?
Similar to 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 their worst-case scenario comes into play. Essentially, rather than generating profits, traders hedge to minimize losses.
The capital that traders have at their disposal to hedge is another important consideration. It will vary from trader to trader, based on their risk tolerance.
Forex hedging can be a useful strategy for traders to secure their long positions during periods of short-term volatility. However, it is not a straightforward way to make profits and rule out risk in the long term.