Are you looking for the best forex brokers for hedging because you want to mitigate risk by diversifying your trades?
We can help you.
Unfortunately, not all brokers allow traders to hedge, so when browsing for different forex brokers, ensure that the broker you are interested in offers that ability.
You also need to consider what benefits come with signing up to a broker. Though one broker may allow you to hedge, it may lack the liquidity and trading tools you want or just not fit in with your trading style.
That’s why we made this list.
Table of contents
What is hedging in forex?
Hedging at the most basic level is the opening of both a short and long position on the same asset, often at the same time (Direct Hedging). This means you can be assured to try and make some gains regardless of the direction in which the market moves.
If the asset rises in value then you will gain on the long position, and vice versa. Hedging helps you as a trader in reducing your risk.
Is hedging legal? Do forex brokers allow Hedging?
Hedging in forex trading is not technically illegal in any area. It is widely seen as quite a common technique of traders who are trying to balance their risk effectively. Having said that, some individual brokers may not allow hedging based on their own policy. Some regulatory bodies who employ the use of FIFO (First in First Out) executions, for example in the US, also make hedging virtually impossible.
Top 10 Of The Best Forex Brokers For Hedging Of 2021
Here’s our ranking of the top 10 forex brokers for hedging.
How to choose a broker for Hedging?
Due to the nature of hedging, the fees and spreads of a forex broker become very important when you are selecting the best hedging broker. Because you are opening two opposing positions on a market, both long and short, at the same time and on the same asset, you will have to pay double the commission if there is any.
You will also be paying the spread on these two positions as well as any other fees that may come up including overnight fees or trading fees if they are applicable. Keeping all of these costs down is imperative if you want your hedged position to come out on top. Trading commissions and other fees may be more on CFDs so this is also something you should remain mindful of when choosing your hedging broker and markets.
The final thing to look out for if you are engaged in hedging are any slippage that may occur. This is a price change between order and execution that can happen when markets are volatile. Requotes are another minor price change which you should try to avoid. Many top forex brokers offer no requotes or hidden fees along with ECN execution which makes the pricing more stable, transparent, and the order process generally runs smoothly with less chance of slippage.