Forex Brokers for Hedging
- What Is Hedging?
- Hedging means trading both directions(holding both long & short positions) simultaniously on the same currency pair.
- e.g. a trader can long 5 lots of EUR/USD, and then decide to hedge part of his position by shorting 4 lots of EUR/USD. If the market move against him, his gain on the shorting position will offset the part of the loss on the long position.
- Note: All forex brokers regulated in US do not allow hedging according rule of NFA(US). For US traders, one possible way to hedge is to trade with two brokers.(Long on one broker, and short on the other on at the same time)
- Why Hedging?
- It can be used by traders or some trading robots to offset risk.
- Depending on the trading strategy, hedging can be useful during very volatile trading periods (for example,during new announcements), because price can spike in either direction very fast,which make it very risky to trade.
- Forex brokers regulated by NFA from United States do not allow hedging for US traders.
- Almost all other forex brokers allow hedging.