- Hold buy and sell positions in the same currency pair at the same time
- Enter the market without choosing a direction for the currency pair
- Opening two positions requires margin for only one position
Hedging is an advanced feature of FXCM's No Dealing Desk system. Hedging is enabled on all FXCM Asia live and demo accounts.
How to Set Up a Hedged Forex Trade
Hypothetical example of hedging a position.
Simply buy or sell a currency pair, then do the opposite. For example: buy 10 lots of EUR/USD:
Then, sell 10 lots of EUR/USD:
Now you have a hedged trade in EUR/USD. You can see in the "S/B" column the one position that you bought and the one that you sold. If the EUR/USD rises, you have a profit in the buy position and a loss in the sell position. If it falls, the exact opposite applies.
You can see your required margin in the "Usd Maint Mr" column in the "Accounts" window. You are holding 20 lots of EUR/USD, but since this is a hedged trade, in this example used margin of EUR/USD was considered as $130, you need only to set aside $3,900 of used maintenance margin, which is the margin requirement for only holding 10 lots.
What is the margin requirement for maintaining a hedged position?
The margin requirement on the initial trade will be the standard required margin for trades on your account. For hedged positions, once the second leg of the trade is added, the margin requirement will be divided among the two positions.
How to Close a Hedged Trade?
Simply use a close, stop, or limit order as you would with any other trade. Each of the buy and sell positions needs to be closed separately.
Can Hedging Be Turned Off?
Yes, hedging is an optional feature on live accounts. To disable hedging on your live FXCM Asia account, simply contact us.
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While the ability to hedge is an appealing feature, traders should be aware of the various factors that can affect their accounts. Spreads may widen, causing margin to diminish, potentially leading to the danger of a margin call. Pip costs and rollover may also cause a decrease in account equity, adversely affecting hedged positions. For more information about hedging strategies associated with the FXCM No Dealing Desk platform, please contact one of our sales representatives.