| Updated: June 13, 2024Forex hedging is a risk management tool that enables traders to open additional positions to guard against unfavorable movements in the market. Through buying or selling financial instruments to offset their current positions, traders can reduce the amount of risk they are exposing themselves to. Many Forex brokers allow hedging, with specific details for each company depending on its internal policy and the regulations set by the financial regulatory authorities in its target markets. Following an in-depth analysis, we have identified the 10 best Forex Brokers that allow hedging.
IC Markets70.64% of retail investor accounts lose money
FP Markets73.85% of retail investor accounts lose money
AvaTrade76% of retail investor accounts lose money
Pepperstone75.5% of retail investor accounts lose money
CMC Markets71% of retail investor accounts lose money
City Index69% of retail investor accounts lose money
eToro51% of retail investor accounts lose money
IG70% of retail client accounts lose money
Admirals73% of retail investor accounts lose money
Saxo Bank65% of retail investor accounts lose moneyTop 10 Forex Brokers for Hedging
- 1. IG
As a trustworthy and properly regulated broker, IG is at the forefront when it comes to hedging Forex. Whether traders prefer the brand’s web trading platform or mobile app, they can toggle into Hedge mode through the “force open” option on their platform. It enables them to keep a long and short position simultaneously for their selected trading pair. As the broker suggests, the easiest way to learn more about hedging is to open an IG demo account.
CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. - 2. Saxo Bank
As a reliable and highly-ranked broker, Saxo Bank is another premier choice for traders looking to hedge their Forex trades. The company provides a comprehensive guide on how they can hedge their Forex trades. It can be done by picking “force open” once they have enabled the real-time first-in-first-out (FIFO) or by allowing end-of-day FIFO as the netting method. The user-friendly SaxoTraderGO platform supports these settings, making it fairly straightforward to switch hedging on and off.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money. - 3. CMC Markets
Established in 1989, CMC Markets is among the largest global brokers, supporting a varied portfolio of more than 9,500 CFDs across Forex, shares, and indices with competitive spreads starting from 0.7 pips and no commission fees. Customers of the trading platform can choose between the MT4 and the Next Generation platforms. To hedge currency, traders can either open a live account or practice Forex hedging techniques through the demo account. They can choose between 330 Forex pairs, including major, minor, and exotic ones. To apply their Forex hedging strategy properly, they must keep abreast of economic news.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. - 4. Admirals
With 8,000+ trading instruments, spreads starting from 0 pips, and a seamless regulatory reputation, Admiral Markets is another top choice for Forex traders looking to hedge their trades and mitigate risk. The broker allows hedging on more than 4,000 financial assets. Traders can choose between the MT4 and MT5 platforms to hedge on Admirals. The company offers multiple educational resources, including articles and tutorials for Forex hedging and how traders can use it to their advantage.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 5. City Index
City Index is a brand boasting more than 1 million account holders, over 13,500 financial markets, and an average execution speed of 0.02 seconds. Authorized and regulated by several financial bodies, including the CySEC, FCA, and FSA, the brokerage provides a safe and transparent trading environment. City Index offers a proprietary trading platform equipped with advanced research tools, and an abundance of educational resources, including ones associated with hedging. Average trading costs start from just 0.9 pips for the EUR/USD pair. Besides Forex, traders can hedge their positions on commodities and stocks.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 6. FP Markets
FP Markets is a globally renowned leader, with a diverse portfolio encompassing CFDs on Forex, shares, indices, commodities, metals, crypto, and ETFs. The broker offers its hedging services on more than 10,000 financial instruments, including 70 Forex pairs, with competitive spreads starting from 0 pips. Traders can either opt first for a Demo account or create a live trading account, with minimum deposit requirements of just $100.
10 per quarter for non-AU traders; 20 per quarter and notional volume of AU$1,000,000 per 4 quarters in the last 1 year 73.85% of retail CFD accounts lose money - 7. IC Markets
Another top-tier Forex broker we can recommend to traders looking to hedge their open Forex positions is IC Markets. The company offers a broad range of financial instruments, including 61 Forex CFDs products and the MT4, MT5, and cTrader powerful trading terminals. Traders willing to hedge on IC Markets will find ECN execution and spreads starting from just 0.0 pips. New traders can begin their trading experience by opening free Demo accounts. The minimum deposit requirements for live account holders start from just $200.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.64% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 8. AvaTrade
AvaTrade is a well-established broker, with an enviable experience of more than 17 years in the financial industry. The highly regulated broker offers a diverse portfolio of more than 1,250 financial instruments, including Forex, commodities, indices, and more. The broker offers 60 Forex pairs for hedging. With Forex spreads starting from 0.9 pips for retail clients and 0.6 pips for professional clients, they will enjoy favorable trading conditions. The company provides several trading platforms for hedging, including MT4. Traders can easily open their live trading accounts, with minimum deposit requirements starting from just $100.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. - 9. eToro
Etoro is another trading brand that helps its customers manage the risks of trading by allowing hedging. Furthermore, the brand offers the eToro Academy, helping new traders learn more about investing. The brand’s user-friendly platform gives traders access to more than 40 different currency pairs. Based on the country users are residing in, eToro’s minimum deposit requirements vary. In most jurisdictions where the company operates, the minimums are set between $50 and $200.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. - 10. Pepperstone
Pepperstone unlocks a world of trading opportunities, with more than 1,000 trading CFD instruments, including Forex, indices, shares, and more. The company has gained the regulatory approval of multiple financial authorities, including the ASIC, CySEC, and BaFin, among others. The brokers’ spreads are competitive, starting from 0.0 pips on its Razor accounts. Traders are allowed to hedge their Forex positions on the MT4, MT5, and cTrader platforms. They can choose among more than 100 assets to hedge, including 60 Forex pairs.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Comprehensive Comparison of the Top 10 Forex Brokers for Hedging
| Forex Broker | Min Deposit | Spread | Markets | FX Pairs | Direct Hedging | Commission | Other Fees | Max Leverage | Negative Balance Protection | Regulators | Platforms | Trust Pilot Rating |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1. IC Markets | $200 | 0.8 pips Standard, 0.0 pips Raw Accounts | CFDs on Forex, Commodities, Index, Bond, Cryptocurrencies, Stock, Futures | 61 | Permitted | $0 Standard MT; $6 round turn on Raw cTrader; $7 round turn on Raw MT | Swap on overnight open positions | 1:30 (European and Australian Retail Accounts); 1:500 (Pro); 1:1000 (FSA Clients) | Yes (European and Australian Retail traders) | FSA (Seychelles), CySEC, ASIC | MetaTrader4, MetaTrader5, cTrader, ZuluTrade | 4.8 ⭐ |
| 2. FP Markets | $50 (AU$100) | 1.0 pips Standard; 0.0 pips Raw | Forex CFDs, Shares CFDs, Metals CFDs, Commodities CFDs, Indices CFDs, Crypto CFDs, ETF CFDs | 70+ | Permitted | $0 Standard Account; $6 round turn on Pro Account | Swap on overnight open positions | 30:1 (Retail)500:1 (Professional) | Yes (Retail traders) | ASIC, CySEC, FSA (Seychelles), FSCA | MetaTrader4, MetaTrader5, WebTrader, IRESS | 4.8 ⭐ |
| 3. AvaTrade | $100 | From 0.9 pips (retail), 0.6 pips (pro) | Forex, Major stock indices, Cryptocurrencies, Commodities, Bonds, Individual Shares, ETFs | 250+ | Permitted | $0 | $50 inactivity fee after 3 months of no activity Swap on overnight open positions | 30:1 (400:1 for Pro and Non-EU Accounts) | Yes (European and Australian Retail traders) | FFAJ (License No.1574),CySEC (No. 347/17) ISA (No. 514666577), IIROC, ADGM / FSRA (No.190018), CBI (No.C53877), BVIFSC (No. SIBA/L/13/1049), FSCA(No.45984), ASIC(No.406684) | MetaTrader4, MetaTrader5, WebTrader, AvaTadeGO, AvaSocial | 4.5 ⭐ |
| 4. Pepperstone | $0 | From 0.0 pips (Razor Accounts), 1 pip (Standard Accounts) | Forex, Indices, Commodities, Cryptocurrencies, Share CFDs, ETFs | 100 | Permitted | $0 (Standard Account), $7 round-turn (Razor Account) | Swaps on overnight open positions | 1:30 (Retail ASIC, CySEC, FCA); 1:500 (Professional); 1:400 (CMA) | Yes (Retail traders) | UK FCA (No.684312), CySEC (No. 388/20), ASIC (No. 414530), BaFin (No.151148), DFSA, CMA | TradingView, MT5, MT4, cTrader | 4.5 ⭐ |
| 5. CMC Markets | $0 | From 0.0 pips (UK), 0.3 pips (SG, AU), 0.2 pips (IE) | CFDs on Forex, Indices, Shares, Commodities, Treasuries, Cryptocurrencies, Share baskets Investments on ETFs, Shares, Managed funds, Options, and more | 330+ | Permitted | $2.50 per lot | Swap on overnight open positions Market data fees $10 inactivity fee | 30:1 (Retail) 500:1 (Professional) | Yes (EU Retail traders) | ASIC, MAS, FCA, BaFin, IIROC | CMC Markets’ Next Generation, MetaTrader 4 | 4.2 ⭐ |
| 6. City Index | $0 | From 0.3 pips (UK), 0.5 pips (AU) | Forex, Indices, Shares, Gold and Silver, Commodities | 84 | Permitted | $0 | 2% on deposits via credit/debit cards overnight financing fee on open positions of 2.5% +/- interest rate $15 inactivity fee per month after 24 months of no activity | 30:1 (Retail)400:1 (Professional) | Yes (Retail traders) | FCA (No. 446717), CySEC (No. 400/21), MAS, ASIC | MT4, WebTrader, Trading App, TradingView | 4.2 ⭐ |
| 7. eToro | $10 | 1 pip | Crypto, CFDs on Forex, Stocks, Commodities, Crypto, ETFs, and Indices | 55 | Permitted | $0 | Overnight fees $10 per month inactivity fee after 1 year of no activity $5 withdrawal fee | 1:30 (FCA, ASIC, CySEC); 1:50 (FINRA); 1:500 (FSA) | Yes (Retail traders) | FCA, CySEC, ASIC, MFSA, ADGM, FSA, FINRA/FinCEN | eToro Investing, eToro App, TradingView, eToro CopyTrader | 4.2 ⭐ |
| 8. IG | $50 | 0.6 pips CFD trading; 0.165 pips DMA trading | CFDs on Indices, Forex, Shares, Crypto, Futures, Commodities, Options, Interest Rates, Sectors, Bonds, Knock-out trading | 80+ | Permitted | $0 | Guaranteed stop premium charge Swap on overnight open positions | 30:1 (Retail)500:1 (Professional) | Yes (for limited risk accounts) | ASIC (No. 515106), FCA (No. 114059), CFTC, DFSA (No. F001780), MAS, BMA | MT4, L2 Dealer, ProRealTime, IG proprietary software | 4.1 ⭐ |
| 9. Admirals | $100 ($1 for Invest MT5 Account) | From 0.0 pips (Invest and Zero Accounts), 0.5 pips (Trade Accounts) | CFDs on Forex, Indices, Stocks, Commodities, Bonds, ETFs, Cryptocurrencies | 82 | Permitted | $3 per lot | Inactivity fee of $10 per month Swap on overnight open positions | 30:1 (Retail)500:1 (Professional) | Yes (Trade and Zero MT5 /MT4 Accounts) | CySEC (No. 201/13), ASIC (No. 410681), FCA (No. 595450), JSC (No. 57026), FSCA (No. FSP51311) | MT4, MT5, WebTrader, MT Supreme Edition, StereoTrader | 4.1 ⭐ |
| 10. Saxo Bank | $0 Classic$200,000 + Platinum $1,000,000 + VIP | 0.9 pips (Classic), 0.8 (Platinum), 0.7 pips (VIP) | Stocks, ETFs, Bonds, Mutual funds, Crypto ETPs, Options, Futures, Forex, Forex options, Crypto FX, CFDs, Commodities | 185+ | Permitted | $3 per lot | Swap on overnight open positions | 1:30 (Retail, EU traders); 1:200 (FSA) | Yes (EU, UK, and MENA regions) | FCA (No. 551422), FSA Denmark (No. 1149), MAS (No. 200601141M), ASIC (No. 32110128286), SFC Hong Kong (No. 1395901), FSA Japan (No. 0104-01-082810) | SaxoTraderGO, SaxoTraderPRO, TradingView | 3.7 ⭐ |
Hedging Trading Strategy Explained in Brief
Forex hedging is a strategy utilized by traders to safeguard their positions in a currency pair from unfavorable market moves by opening additional positions. It is usually a short-term protection mechanism traders resort to when they see potential risks ensuing from news and events triggering volatility in currency markets. As a result, the reduced exposure to currency risk leads to reduced potential profits.
While hedging does not prevent the risk of adverse price movement entirely, a properly applied strategy can help mitigate the loss or limit it to a known amount. Before traders start to hedge Forex, they must pick a currency pair. Major currency pairs give more options for hedging strategies compared to minor ones.
Furthermore, traders must consider the capital they are willing to invest, as opening additional positions is associated with more trading costs. Last but not least, traders must carefully consider the amount of time they can spend monitoring the markets. Opening a demo account first to test one’s hedging strategy is highly recommended.
Types of Hedging
Forex traders can resort to a diverse range of risk management strategies to keep their potential losses under control, and hedging is among the most favored ones. Some of the most common hedging strategies include simple (direct) Forex hedging and multiple currencies hedging.
With a simple Forex hedging strategy, also known as a direct hedge, traders open an opposing position to a current trade. In other words, a long position on a currency pair can be offset by opening a short position on the same currency pair. Taking a long and short position on the EUR/USD currency pair simultaneously is an example of a simple Forex hedging strategy. While the profit from direct hedges is reduced to zero, traders manage to maintain their original position on the market in anticipation of a trend reversal.
The multiple currencies hedging is yet another popular strategy that requires picking two positively correlated currency pairs and taking opposite positions on both pairs. For instance, a trader can buy the GBP/USD currency pair to hedge against EUR/USD. When properly applied, this strategy reduces the risk and might even yield a small profit. However, it if fails, traders would face losses from multiple positions.
Who Should Use Hedging?
A diverse range of market participants utilize Forex hedging. Retail traders with a good understanding of the financial markets and the related economic news apply hedging as a risk management strategy. Professional traders and institutional investors also tend to utilize hedging to protect large amounts of money and their portfolios. Ultimately, hedging is meant to protect profits, rather than generate them.
Is Hedging Legal Everywhere?
Hedging is legal in most financial markets around the globe. Whether your broker of choice will allow Forex hedging depends on the respective country and the regulations of the financial regulatory authority. The US, for example, has restrictions on hedging while Forex trading. To ensure that brokers adhere to the regulations, the Commodity Futures Trading Commission (CFTC) has implemented several restrictions on traders, preventing them from hedging a position on the same currency pair. On the other hand, hedging is considered a legal activity by a variety of brokers in Europe, Asia, and Australia.
Factors to Consider When Choosing Forex Brokers for Hedging
When picking a Forex broker for hedging, traders must consider several important factors. In the first place, they are advised to check the broker’s regulatory status, license, and reputation. Authorization from a reputable financial authority ensures a high level of security and investor protection.
To execute one’s hedging strategies effectively, traders must pick a broker offering a user-friendly and feature-rich trading platform. Brokers with fast execution speeds and a wide range of liquidity providers ensure prompt execution of trades and competitive prices. Average spreads, minimum deposit requirements, and the range of supported account types are to be considered as well.
Another important factor to bear in mind while selecting a Forex broker for hedging is the assortment of financial instruments and the number of supported currency pairs for hedging. Last but not least, advanced research tools and educational resources, especially ones dedicated to Forex hedging, would be greatly appreciated.
Trading Software Suitable for Hedging
The best Forex brokers typically offer several trading platforms suitable for hedging. The risk management strategy is permitted across various white-label trading platforms, including MT4, MT5, TradingView, and cTrader, as well as their proprietary trading platforms. However, it is of essential importance to make sure that the broker facilitates hedging on its platform, especially for live trading accounts. Determining which software is best depends on traders’ individual preferences and trading style.
Why Hedge Your Forex Trades?
There are many reasons why traders prefer to hedge their positions while Forex trading. Hedging is a risk mitigation strategy that offsets losses in one investment with profits in another, thus protecting traders from substantial losses during unfavorable market conditions. Moreover, the strategy is legal in most markets, with the USA being a notable exception, where direct hedging is restricted under CFTC regulations. Last but not least, currency pairs, both major and minor, are among the best tradable instruments for hedging, as they feature high liquidity and low spreads.
Does Hedging Guarantee Success in Forex Trading?
Similar to insurance, hedging is a risk management tool that brings losses to a known amount. Therefore, it cannot guarantee success in Forex trading and prevent unfavorable market movements. Instead, it can protect traders if the worst-case scenario comes into play. Rather than generating profits, traders hedge to minimize their losses. The capital that traders have at their disposal to hedge is yet another important consideration. It will vary from trader to trader, based on their risk tolerance. Forex hedging can be a useful strategy that enables traders to secure their long positions during periods of short-term volatility. However, it should not be considered a straightforward way to make profits and rule out any risk in the long term.