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 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.
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 2020
Here’s our ranking of the top 10 forex brokers for hedging:
1. IC Markets
IC Markets is known for being a very open broker when it comes to implementing different trading strategies and is by far the best broker to date that allows traders to hedge. By signing up to trade with IC Markets, traders can also benefit from some of the best ECN market access available in the world, often claiming to be the ‘world’s largest True ECN forex broker’.
All of this comes from a broker who caters to each and every trader with no minimum deposit needed to trade on more than 60 forex pairs in total traded through the trusted MT4 trading platform. An added attraction of scalping with IC Markets is the fact their spread starts from a rock bottom 0 pips and commission of just $3 per lot. As well as hedging being available, they also support algorithmic trading and your own VPS is available.
Pepperstone is another broker known to be very liberal when it comes to trading styles, even stating on their website: ‘All trading styles welcome including EAs and full hedging’. This means there’s nothing holding traders back. Pepperstone were also awarded the UK Forex Award for best Forex ECN Broker in 2018 and their ‘Razor Raw Spread ECN account’, is a popular choice among many.
Trading options abound here at Pepperstone with a total of 61 forex currency pairs available to trade and a really excellent spread that makes hedging worthwhile with spreads from 0 pips and a very competitive commission of $2.50 per lot traded. A minimum deposit of $200 also keeps the broker accessible to all, and both MetaTrader and cTrader platform availability open up a range of top choices. Algorithmic trading availability only adds further to the extensive range of choices open to traders here.
Admiral Markets are a top Australian broker also considered an excellent choice for hedging. They have an enormous range of tradable assets to choose from at more than 4,000 this is perfect for hedging and includes more than 35 forex currency pairs to choose from. The minimum deposit here also provides for an accessible starting point for those new to hedging, at just $100.
The value doesn’t stop here, with spreads starting from an unbeatable 0 pips, and commission of just $1.80 per lot traded on forex with trading taking place through both MT4, and MT5. The broker and those new to hedging are further supported by an extensive educational infrastructure including posts, lessons, and examples of hedging, and more comprehensively, of a range of trading techniques. This makes Admiral Markets an ideal place to learn and grow in hedging.
AvaTrade offers traders 250 tradable instruments to invest in, which is a reasonably diverse number, making hedging a lot easier. Perhaps one feature of AvaTrade that stands out is 24/7 cryptocurrency trading, which is particularly beneficial for those who want to hedge cryptocurrencies. An additional benefit includes the ability to trade via Duplitrade or ZuluTrade. The Irish broker also remains very accessible with their $100 minimum deposit.
Of the more than 250 tradable instruments the broker brings you, are a wide range of 60 forex pairs for scalping from around the world, and the trusted reputation of Metatrader to trade through. The broker offers fixed spreads only on forex, and while this may be marginally more expensive at times, it does mean you can assess your trading cost with more certainty, a fact that is appealing if you are interested in hedging.
FxPro also ranks highly for being very open to different trading styles and strategies. It should be mentioned though that traders who use MT5 will not be able to hedge with them as to do so would just simply close their position. Hedging is available through MT4, and cTrader though. FxPro was also awarded ‘Most Trusted Forex Brand UK’ by Global Brands Magazine and was voted ‘Best FX Broker’ by the Shares Awards. With a minimum deposit of just $100 to get started, they also remain a good value proposition as a top broker for hedging with.
The range of markets available include a healthy 69 forex currency pairs, dealing with major, minor, and exotic markets around the globe with excellent spreads starting from 0 pips if you are hedging with cTrader, and 1 pip through MT4 which offers the flexibility of both variable and fixed spreads.
Hedging with FBS has a variety of benefits. Perhaps what makes it one of the best brokers for hedging is its copy trading features which can allow traders to copy over 10,000,000 other traders. In FBS this can allow you to reduce risk by seeing what other traders are doing and getting a sense of how to diversify your investments. Added to this is the fact that almost anyone can get started hedging or trading through FBS with a minimum deposit from just $1.
To traders outside the EU, a commission-based trading account is also offered with a $500 minimum deposit that is ideal for hedging. Fixed spreads start from 0 pips here and the trading commission is $20 per lot on the range of more than 30 forex pairs offered by FBS. Trading here takes place through the trusted trading platforms from Metatrader.
As a broker that is primarily focused on giving traders what they want, HotForex offers some of the best trading conditions available today and is an excellent choice for hedging. They also offer automated trading via their Auto Account, which can make the process of hedging easier for MT4 traders. HotForex also received the ‘Best Customer Service’ award at the 2015 European CEO Awards. Also along that line is the very accessible minimum deposit here. You can get started on hedging with a minimum deposit of just $10.
Other trading conditions are also very favorable for hedging since the spread on the 49 forex currency markets starts from 0 pips and the commission stands at a super good value $3 per lot. It is clear to see then why HotForex, with trading available through both MT4 and MT5, remains a top broker choice for hedging.
XM is an instantly recognizable name in the world of forex brokers, with more than 1,000 tradable instruments, traders with XM have several ways to hedge their investments and diversify. Plus, aside from a great selection of instruments, XM is also incredibly fast, claiming that ‘99.35% of All Trades are Executed in Less than 1 Second’, which means their 2.5 million traders can more accurately hedge their investment. The minimum XM deposit also makes getting started with hedging very easy at just $10, or a still reasonable $100 for access to the lowest spreads.
These low spreads are again very appealing and start from 0 pips with a commission in place of $3.50 per lot traded on the wide selection of over 55 forex currency pairs and a host of other trading instruments available from this world renowned broker.
Particularly good for traders who live in the Asia-Pacific region, OctaFx offers several ways to hedge investments. A particularly useful tool they offer is their automated trading feature which is available through their MT4 platform and utilises robots (expert advisers) to help traders find the best way to hedge. OctaFx was also awarded ‘Best ECN Broker’ by the UK Forex Awards 2017. An OctaFX minimum deposit starting from just $100 ensures that the broker remains very available to all levels of hedgers and traders alike.
Lower spreads again are possible to access here with a slightly increased minimum deposit of $500 to open an MT5 account. Here you will find spreads perfect for hedging on the more than 28 currency pair markets. This spread starts from just 0.2pips and there is absolutely no commission, making OctaFx an obvious choice for many new and experienced hedgers.
10. FP Markets
FP Markets offers traders a phenomenal 10,000 plus instruments to trade in, which is more than enough to ensure your investment is properly hedged. On top of that, traders can sign up to FP Markets’ ECN account, which gives them the ability to build their own trading algorithms or download ones built by expert advisors, making it easier to orchestrate trades according to the right conditions. All of this at FP Markets is also kept well within reach of all traders with a minimum deposit that starts from only $100.
The low minimum deposit is trumped by an even lower spread, ideal for hedging, starting from 0 pips and a commission of just $3 per lot traded on more than 30 forex pairs. The broker also supports algorithmic trading if you would like to try it, and access to your own VPS with trading through Metatrader platforms.
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 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.