10 Best Hedging Forex Brokers for 2025

The best Forex brokers that allow hedging (or hedging Forex brokers), according to our research, are:

1. Pepperstone
2. FP Markets
3. AvaTrade
4. IC Markets
5. Admirals
6. FxPro
7. FBS
8. HF Markets
9. XM
10. OctaFX

In making this ranking, we have taken the following factors into consideration:

• The platforms available for doing hedging
• The number of forex pairs available
• The total number of tradable assets
• The broker’s commissions
• The quality of order execution

Round-up

What are the best forex brokers for hedging?

Below is our curated selection and review of the best hedging forex brokers, with lists of features and characteristics.

What is hedging in trading?

Hedging as a trading strategy refers to taking an investment position intended to offset potential losses or gains that may be incurred by a companion investment.

In forex trading, a trader could hedge a long position (i.e., a bet that a currency pair’s price will rise) by simultaneously taking a short position in the same currency pair (i.e., a bet that the price will fall). This way, regardless of whether the price rises or falls, the losses from the losing position will be offset by the gains from the winning one.

Hedging helps traders manage risk from uncertain market events, buffer potential losses from major announcements, and maintain long positions by counterbalancing with short-term hedges. It also allows for profiting in stagnant markets through a ‘hedged grid’ of buy/sell orders within a certain price range. Furthermore, it’s instrumental in complex strategies like ‘hedged arbitrage’ for capitalizing on price discrepancies across different markets.

It’s essential to note that not all forex brokers allow hedging due to the risk it carries and its potential to be used abusively. For example, in the United States, the National Futures Association has banned hedging by implementing first-in, first-out (FIFO) rules that prevent traders from holding simultaneous positions in the same currency pair.

How to choose a forex broker for hedging

In order to choose a forex broker for hedging you have to take into consideration the following factors:

1. Choose a regulated forex broker: Choosing a regulated forex broker is always vital, including if your goal is to engage in forex hedging trading techniques. Choosing a broker that is overseen by financial watchdogs is important as it adds another layer of security to your personal data and your money, since everything will be held in segregated bank accounts.
2. Choose a forex broker with deep liquidity: Liquidity in hedging is extremely important as it will prevent slippage and requotes. Which are both a price change between the one you asked, and the actual price of execution. With stable spreads and low requotes, the overall pricing of the assets will be more stable and thus more appealing for hedging techniques.
3. Choose a forex broker with low spread: Since with hedging you are opening two opposing positions on a market, you will have to pay double the commission. In fact Forex brokers charge a number of fees such as spreads, overnight fees and currency conversion fees, so you should absolutely make sure these are the lowest as possible to not undermine the outcome of your trades.

Is hedging illegal?

Hedging is a legal practice, but some brokers may have their own internal policies that prohibit it. In the USA hedging is illegal, as per law brokers must put in place a FIFO (First In First Out) policy in their order management system.

Even though hedging is not actually a harmful or illegal technique per law such as market manipulation or pump and dump, trading brokers often view this as an unfair practice along other trading techniques that take advantage of the market such as scalping or HFT (High Frequency Trading).

When a broker considers this practice unfair, they are going to state this into their T&C (Terms and Conditions). If a trader breaks the T&C, they could face consequences such as being banned from the platform or, in the best-case scenario, they could see their gains revoked.

However, when it comes to trading in the US, hedging is considered illegal for both traders and brokers. This is due to the NFA (National Futures Association), which is one of the financial regulators of the US, that has regulated hedging. The NFA Compliance Rule No. 2-43(b) states:

“Forex Dealer Members (FDM) may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis (FIFO). At the customer’s request, an FDM may offset same-size transactions even if there are older transactions of a different size but must offset the transaction against the oldest transaction of that size.”

Is hedging illegal in Forex?

Hedging in forex is legal, as long as the forex broker does not categorize this practice as unfair.

The forex brokers that may consider hedging illegal are mostly market makers, as they are already the counterpart of the traders in every trade they open or close.

Every other forex broker type, such as ECN, STP or NDD brokers, do not consider this practice illegal.

What are the types of hedging strategies?

There are two main hedging strategies, which are called simple hedging and complex hedging. One involves opening two opposite positions on the same asset (Simple Hedging), while the other involves opening opposite positions on different assets and/or derivatives (Complex Hedging).

In practical terms, a “simple hedging” position involves opening a long (buy) position and a short (sell) position on the same financial instrument, in order to speculate simultaneously on both the growth in value of the asset and its loss in value. In this way the trader neither gains nor loses money, as the positions counterbalance each other.

In contrast, when complex hedging is used, buy and sell positions are opened on different assets (such as EUR/USD and USD/GBP), or on different derivatives (such as CFD and options).

This means that “simple hedging” techniques are indeed the simplest and most straightforward to learn and implement. On the other hand, “Complex hedging” techniques are way more complex and require a high degree of knowledge of the forex market to be performed properly.

Pros and cons of hedging

How much margin is needed for hedging?

The margin needed for hedging depends on the size of the open positions and the leverage used.

To provide a practical example, suppose a trader is performing hedging trades on the EUR/USD pair. The trader’s account is $1000, and he decides to open two opposite positions of 1 micro lot ($1000) using 1:10 leverage.

In both cases, the margin needed is 10%, which corresponds to $100 for each position, for a total of $200.

Once these positions are opened, the trader will have another $800 in his account, and with this free margin he can open more positions on other assets.

Is hedging profitable?

Hedging is not a profitable trading technique as it’s mostly used for risk management. In fact an ideal hedging trading situation would be having 2 opposite positions that 100% offset each other. However, it can be used to limit your market exposure while you wait for a clearer signal from the market.

Imagine you enter two trades on the EUR/USD forex pair: one is a long trade (buying) and the other is a short trade (selling). Both trades have the same value of 1 standard lot. Now, the Euro strengthens against the USD by 10 pips. As a result, the long position gains $100 in profit, while the short position incurs a $100 loss because they move in opposite directions.

If you close both positions simultaneously, you won’t make any profit or loss overall. This is because the gains from the long trade offset the losses from the short trade, and vice versa. This scenario is an example of hedging, which is used as a risk management tool to protect against losses.

However, hedging can also be used to prepare for potential trading opportunities. For instance, if you believe the EUR will appreciate against the USD, but you’re unsure about the timing and extent of the move, you can open a hedged position on the EUR/USD pair. This hedged position will help offset your risk, allowing you to wait for a clearer bullish signal from the market before making any further moves.

Once you see the bullish signal you can close the short EUR/USD position and keep the long one, so you can take advantage of the bullish markets. The same thing can be done when the market will become bearish, as you can simply close the long position by keeping the short one.