HomeForex Account TypesBest Forex Brokers For Hedging 2021

Best Forex Brokers For Hedging 2021

Forex brokers that allow hedging in a trading account give traders the flexibility to buy and sell simultaneously. In some jurisdictions (regions) around the world, hedging as a strategy is forbidden by the regulators. Hence, not all Forex brokers in the world give traders the possibility to hedge. The forex market is often used as a tool itself to actually hedge an investors portfolio.

Top Forex Brokers That Allow Hedging

1
Min. Deposit
$250
Exclusive promotion
Our score
10
Leverage
400:1
New accounts
Spreads
0.25
PIPs
Regulations
CFTC
Forex Pairs
11+
No Fee
Start trading
Pros:
Regulated by CFTC
Low fees and minimums
A good selection of educational content, including videos and webinars
Payment methods
ACH, Debit Card, Wire Transfer
Full regulations list:
CFTC
Trading on Nadex involves financial risk and may not be appropriate for all investors.
2
Min. Deposit
$10
Exclusive promotion
Our score
9.3
Leverage
500:1
New accounts
Spreads
0.8
PIPs
Regulations
Forex Pairs
55+
No Fee
Start trading
Pros:
55+ currency pairs available
Trade on a trusted platform
24/7 support via live chats, email or phone call
Payment methods
Credit Card, Debit Card, Visa, Bitcoin
Full regulations list:
LonghornFX offers high-leverage trading on a wide variety of assets. Trading with leverage carries a degree of risk which may result in losing more than your investments. Clients should practise risk management to protect themselves from losing more than they can afford when trading with leverage.
3
Min. Deposit
$200
Exclusive promotion
Our score
8.7
Leverage
500:1
New accounts
Spreads
0.5
PIPs
Regulations
FSPR, FMA New Zealand
Forex Pairs
27+
No Fee
Start trading
Pros:
BlackBull Markets’ unique feature lies in its stated goal of delivering an “institutional” trading experience to retail clients
No-Dealing Desk Broker (NDD), with Straight Through Processing (STP) all done on a true ECN
State of the art Equinix servers, based in New York (NY4), London (LD5) and Tokyo (TY3)
Payment methods
Mastercard, Visa, Bank Transfer, Neteller, Skrill, UnionPay, FasaPay
Full regulations list:
FSPR, FMA New Zealand
4
Min. Deposit
$10
Exclusive promotion
Our score
8.5
Leverage
500:1
New accounts
Spreads
0.7
PIPs
Regulations
Forex Pairs
55+
No Fee
Start trading
Pros:
0% Commission Account
Low Spreads
Eco-Account Option
Payment methods
Bitcoin, Credit Card, Debit Card
Full regulations list:
Please ensure that you fully understand the risks involved, taking into account your investments objectives and level of experience, before trading, and if necessary seek independent advice.
5
Min. Deposit
$100
Exclusive promotion
Our score
7.9
Leverage
30:1
New accounts
Spreads
0.7
PIPs
Regulations
NFA, CFTC, FCA
Forex Pairs
No Fee
Start trading
Pros:
Open an account in less than 5 minitues with the global Market leader since 2001
Trade on one of the world's most popular trading platforms with access to dedicated support and integrated trading tools exclusive to FOREX.com
We’ve spent over a decade investing in technology and building a deep network of liquidity partners, so we can consistently quote tight spreads in most market conditions.
Payment methods
Debit Card, Bank Wire, ACH, Credit Card, PayPal
Full regulations list:
NFA, CFTC, FCA, FSA, IIROC, CIMA, FFA Japan, MAS, SFC of Hong Kong
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% 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
Min. Deposit
$10
Exclusive promotion
Our score
7.8
Leverage
500:1
New accounts
Spreads
0.7
PIPs
Regulations
Forex Pairs
55+
No Fee
Start trading
Pros:
Can fund with BTC
64 global companies including Netflix and Amazon
Free deposits and withdrawals
Payment methods
Credit Card, Debit Card, Bitcoin, Wire Transfer
Full regulations list:
EagleFX offers leveraged trading on a range of assets within its platform. CFD and Spot Forex trading do carry a degree of risk which may result in you losing more than your initial investment. Please ensure you fully understand the risks involved with leveraged trading and ensure this is not detrimental to your personal or institution's financial well being.
7
Min. Deposit
$250
Exclusive promotion
Our score
7.5
Leverage
30:1
New accounts
Spreads
0.7
PIPs
Regulations
CySEC
Forex Pairs
45+
No Fee
Start trading
Pros:
No commission charged to clients
Over 250 instruments available
Regular Webinars, education and video tutorials
Payment methods
Bank Wire, Credit Card, Skrill, Neteller
Full regulations list:
CySEC
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Hedging is one of the smartest yet trickiest strategies to apply in Forex trading.

Hedging frees you from dependency on the market direction because with hedging you are trading both ways (up and down, or buy and sell).

All Forex brokers nowadays allow and support hedging, except for US-based brokers (about which you can read below). The most convenient type of platform for hedging is the one that supports OCO orders (order cancels order). Unfortunately, the popular MT4 platform doesn’t have OCO orders, however, MT5 platform does. With MT4 however, hedging can be simplified with the use of an Expert advisor.

On May 15, 2009, the NFA (National futures Association) Rule 2-43(b) banned the use of hedging for traders who trade with US brokerage firms regulated by NFA.

This New Compliance Rule 2-43(b) requires an FDM (Forex Dealer Members) to offset positions in a customer account on a first-in, first-out basis, thereby prohibiting a trading practice commonly referred to as “hedging.”

What Is Hedging?

Hedging is a strategy used to minimize the risk of a reverse price movement against one or several of your open positions. For example, a trader who has a large trading position – Long 50 lots EUR/USD, might decide to hedge a portion of their position by shorting 30 lots of the EURUSD. Now, in the case of an adverse or volatile price movement, a portion of the loss on the long side will be offset by the gain on the short.

However, per the NFA rule, a trader will no longer be able to hedge a position. Instead of simultaneously holding both positions, they will now need to close out those 30 lots. Thus, rather than being long 50 lots EUR/USD and short 30 lots EUR/USD, they will now be simply long 20 remaining lots.

What Is a Hedging Account?

A hedging account is a regular Forex trading account where one can sell or buy the same currency pair simultaneously. A fully hedged account is when the volume traded on the long side equals the one traded on the short side on the same currency pair.

If that’s the case, then the trader only pays the negative swap (if any) at the end of the trading day.

Partial hedging refers to the situation when the volume traded on the same currency pair is different. For example, one may trade one lot EUR/USD on the long side and half a lot on the short side. That’s partial hedging, as the market exposure is the difference in the two trades’ volume.

Why Hedge?

Hedging is seen as a safety net for many Forex traders. Should the market move against them, the impact on the trading account will be less severe than if they had held the position un-hedged. Another important thing to consider is that many Metatrader EAs are programmed to use hedging to offset risk. If you are using one of these trading robots it is very possible that the hedging ban will drastically increase the risk of your EA. For those who bought EAs, it would be wise to contact your EA vendor to find out if any type of hedging is used, and how this ban will affect the EA…

Another reason why hedging can be beneficial is due to the extreme volatility that can often be found in certain trading periods. Specifically, when when the market first opens on Sunday evening or during news announcements, prices can spike drastically in either direction. It can be difficult to get out of a trade as the spreads tend to widen out. By placing a hedge before these volatile times, you may reduce the effect of volatility since you have a position in both directions. This can be beneficial because it allows you to keep your positions open without the fear of being stopped out.

How Can You Use a Hedging Account?

For instance, if you sell short the EUR/USD and go long EUR/USD at the same time.

Why would anyone do such a thing? It depends on the trading strategy.

Traders look at all timeframes for possible trades, and the time needed for a trade to conclude differs. If the trade comes from the bigger timeframes, it takes longer to reach the take profit.

However, in the meantime, a different opportunity may arise on a lower timeframe. Only this time, in the opposite direction. You can trade both trades using a hedging account.

Pros and Cons of a Hedging Account

Pros:

  • Take advantage of all the opportunities provided by the market
  • Gain free margin available instantly for other trades
  • Protect the trading account from unexpected market moves

Cons:

Factors to Consider When Choosing a Broker for a Hedging Account

Typically brokers operating in the United States can’t offer hedging accounts. If that’s the case, FIFO (First In First Out) limitations exist too.

If a broker does allow hedging, the FIFO rule does not apply. It means that there is no closing order for the opening trades, traders having the liberty of using any strategy they want.

Conclusion

A hedging account doesn’t limit the potential of any strategy. Imposing limitations have the effect of driving traders away from brokers that do that.

However, some traders prefer avoiding hedging whatsoever. The psychological pressure of dealing with both a short and a long position is overwhelming. Moreover, for some people, hedging doesn’t make sense at all.

But hedging is a very powerful risk management strategy. When used correctly, it brings tremendous benefits to the trading account.

 

FAQ’s

Do I pay commissions and fees on all trades part of a hedge?

Yes. Any individual trade is subject to commissions and fees, regardless of the reason behind its opening.

When fully hedging a trade, is there any margin still blocked?

Yes. The broker still requires some margin as collateral, albeit not so much as prior to the hedge.

After hedging a position, can I close any one of the trades that are part of a hedge?

Yes. A brokerage house that allows hedging doesn’t have limitations as to what trade to close and when. Simply choose the market direction you want to have exposure to after giving up the hedge and trade accordingly.

Is the FIFO rule imposed on a hedging account?

No. If a broker allows hedging, there’s no FIFO rule to obey.

How to get around this hedging ban?

To continue hedging with NFA regulated brokers, a trader now needs to open 2 accounts with the same one or different brokers. Then he will simple Short a currency pair on one account and Long it on another account hence getting the same hedging effect. The only trouble this time would be: you’ll need to put some more net capital into two new accounts, or at the very least to be prepared to swiftly transfer cash on a regular basis from an account that is showing a healthy profit to one where the trade is experiencing a significant drawdown.

For traders who are dependent on EAs that use hedging heavily and do not want to change trading tactics, there is also an option to consider a broker, who is not regulated with NFA, or simply a broker outside the US.