Best Forex Brokers That Allow Hedging
In forex trading, prices can shift drastically in mere seconds. While this price shift can work in favour of a trader, it can also lead to significant losses. Hedging is a popular trading strategy that involves taking a position to mitigate possible losses from price movements. This is a very common strategy used by all types of investors. However, not all brokers allow hedging on their trading platforms. It is important to also note that while hedging is legal in most countries, it is illegal to hedge while forex trading in the United States.
In this review, we will look at some of the best forex brokers that allow hedging. In Particular, we will look at their regulations, their collection of market instruments, the spreads they offer, and the trading platforms available.
Pepperstone is a reputable forex and CFDs broker that allows hedging on its trading platforms. On a good note, Pepperstone is under the regulation of the Australian ASIC, the British FCA, the German BaFin, and the CMA, among others. Having licenses from multiple regulators is always a good sign.
Positively, this broker offers access to a variety of trading instruments. These include CFDs on forex, shares, currency indices, cryptocurrencies, indices, commodities, and ETFs. On this broker site, traders gain access to four world-class trading platforms including TradingView, cTrader, MetaTrader 4, and MetaTrader 5. On a positive note, these trading platforms on Pepperstone have some of the fastest order execution times in the market.
Further, this broker site offers traders competitive spreads when investing. There are two main accounts, the standard and the raw account. The standard account features spreads from as low as 1.0 pips for major currency pairs. On the other hand, the raw account features spreads from 0.0 pips plus a commission that depends on the trading platform a trader uses. Particularly, traders using the MT4 and MT5 platforms pay a commission of $3.5 per side per lot. In contrast, traders using cTrader and TradingView pay a slightly lower commission of $3 per side per lot. Interestingly, Pepperstone is one of the brokers that does not charge inactivity fees.
74.6% of retail CFD accounts lose money
FP Markets support the trading of over 10,000 different trading instruments. These instruments are in 8 major markets including forex, metals, commodities, shares, indices, cryptocurrencies, ETFs, and bonds. FP Markets allows traders to hedge their positions on various markets. The broker suggests that derivatives are often used for hedging purposes as investors can trade in both rising and falling price fluctuations. In its education section, traders can find a tutorial to further educate themselves on this trading strategy.
On a positive note, FP Markets offers traders competitively low spreads. On the standard account, investors trade with spreads as low as 1.0 pips for major currency pairs. In contrast, the raw account has spreads that start from 0.0 pips with a small commission of $3 per side per lot. The trading platforms available to use include MetaTrader 4, MetaTrader 5, Iress, and cTrader.
To close out on this broker, let’s look at how its activities are supervised. Positively, this trading platform is regulated by the CySEC and the ASIC, two stringent regulators in the market. It also has regulations from the FSCA and the FSA.
73.85% of retail CFD accounts lose money
Forex.com operates with regulations from various organizations around the world. These include the FCA in the UK, the IIROC in Canada, the CySEC in Cyprus, and the ASIC in Australia, among others. These regulations are some of the attractive features that draw people to Forex.com. Additionally, people come to this broker site because it allows the use of various trading strategies, including hedging. Notably, this broker also provides some educational material on this trading strategy to ensure its clients are well-informed before they invest their money.
There are various markets available to trade on Forex.com. These include forex, cryptocurrencies, indices, stocks, commodities, and precious metals. With this broker, traders can greatly diversify their portfolios. To place orders on these markets, traders can choose to use MetaTrader 4, MetaTrader 5, and Forex.com Trader platforms.
Further, the spreads involved are industry standard and competitively low. They start from as low as 0.8 pips for major currency pairs. However, traders can access even lower spreads on the commission account and the DMA account. The commission account has spreads that start from 0.2 pips and a commission of $5 per 100k traded. In comparison, the DMA account has spreads from 0.0 pips with a commission that depends on the trading volume. The commission for a trader with a trading volume of $0M – $100M per month is $60 per $1 million traded.
81% of retail investor accounts lose money when trading CFDs with this provider.
eToro is one of the most heavily regulated forex and CFD brokers in the world. This broker is under the regulatory oversight of the FCA, the CySEC, the ASIC, and the FINRA. With regulations like these, it is easy to see why eToro has attracted over 30 million users. Moreover, eToro supports the use of a variety of trading strategies, including hedging. Better yet, the broker offers some educational material to its clients in the trading strategy. Traders can find a video covering the trading strategy under advanced-level trading resources.
A characteristic of tier-one brokers in the market is that they always allow their clients to diversify their portfolios. Well, eToro is not left behind. With this broker site, clients can trade real stocks and cryptocurrencies alongside CFDs on forex, stocks, cryptocurrencies, ETFs, commodities, and indices. However, the only trading platform accessible is the proprietary eToro trading platform.
The eToro trading platform comes with state-of-the-art CopyTrader technology. This technology allows traders to copy the moves of more successful investors in the market. Notably, this is one of the features that attracts millions of traders to eToro. Moreover, the broker offers industry-standard spreads that start from as low as 1.0 pips for major currency pairs.
76% of retail investor accounts lose money when trading CFDs with this provider.
On the XTB trading site, traders can use hedging on a variety of markets. In its education section, XTB offers traders some material to help them understand hedging specifically on the stock and the forex markets. However, these are not the only markets accessible through XTB. The full range of assets available on the broker site includes CFDs on forex, commodities, indices, cryptocurrencies, stocks, and ETFs. In total, there are over 2,200 different trading instruments on this broker site.
The spreads for trading on this broker site are some of the lowest in the market today. They start from as low as 0.5 pips for major currency pairs with no commission required. Further, the only trading platform available to traders to use is the in-house-built xStation 5.
In terms of regulations, this broker is licensed by the FCA and the CySEC. These are two of the most reputable regulators in the market today. On top of that, the broker has regulations from the FSCA.
78% of retail investor accounts lose money when trading CFDs with this provider.
XM is another tier-one broker that allows hedging on its trading platforms. Traders are free to hedge on any positions on any trading account. However, traders are not allowed to hedge between two different accounts. When hedging forex, gold and silver on this broker site, traders can open positions even when the margin level is below 100%. This is because the margin requirement for hedged positions is zero. When hedging all other instruments, the margin requirement for the hedged position is 50%. Traders can open new positions if the final margin requirement is equal to or less than the total equity in their trading account.
XM offers its traders a great collection of market instruments to trade. Specifically, investors have access to over 1,000 different assets that include CFDs on forex, stocks, commodities, energies, and equity indices. The spreads on this broker site are fairly low starting from 0.6 pips for major currencies on the XM ultra-low account.
On regulations, XM has good standing. This broker operates with regulations from the ASIC, CySEC and IFSC. Having regulatory licenses from these two organizations helps boost the reputation of XM.
72.89% of retail investor accounts lose money when trading CFDs with this provider.
FXCM is a global broker with over 20 years in the market. It has regulations from some of the most reputable organizations in the world. These include the FCA, the CySEC, and the ASIC. It also has regulations from other organizations like the FSCA. While regulations alone are not enough, it is always refreshing to trade with a broker that follows stringent laws.
Some of the markets available to trade using this broker site include forex, shares, indices, and commodities. This broker allows traders to use hedging as a strategy on the various markets. Better yet, it provides some educational material in an attempt to give its clients an edge in the market.
Further, the spreads are competitively low and industry-standard starting from as low as 1.0 pips. The trading platforms available to choose from include Trading Station and MetaTrader 4. On top of that, traders get access to a variety of trading tools including Capitalise.ai for automated trading.
AvaTrade is one of the biggest forex and CFDs brokers in the world that allows hedging on its website. This broker sees a trading volume of over $ 70 Billion each month. AvaTrade supports a plethora of trading strategies including arbitrage, high-frequency trading, and hedging, among others. To support traders who want to use hedging as a trading strategy, AvaTrade provides an article detailing what the strategy entails in its education section.
Traders can deploy their various hedging strategies on a variety of global markets. On the AvaTrade broker site, investors can trade CFDs on forex, cryptocurrencies, commodities, indices, equities, bonds, and ETFs. Notably, traders can hedge their positions by opening positions in different markets. Further, this broker offers some of the lowest spreads in the market today. Investors can trade using spreads as low as 0.9 pips for major currency pairs.
The trading platforms available to use include MetaTrader 4, MetaTrader 5, and AvaTardeGo. On top of that, the broker gives its traders access to various trading tools including ZuluTrade, DupliTrade, and AvaProtect.
Finally, let’s look at the regulatory status of AvaTrade. This broker’s activities are under the strict supervision of the CySEC, the ASIC, the Central Bank of Ireland, and others. It is always a safer bet to trade with a broker with regulations from reputable organizations like we have here.
76% of retail CFD accounts lose money
We will close out our list with Admiral Markets which also supports hedging. Specifically, Admiral Markets allows hedging on all of its accounts except the Invest.MT5 account. Therefore, hedging is allowed in the Trade.MT5 account, Trade.MT4 account, Zero.MT5 account, and the Zero.MT4 account. Therefore, traders can use both MetaTrader 4 and MetaTrader 5 alongside StereoTrader.
Like the other brokers on this list, Admiral Markets also gives access to a variety of global markets. These include CFDs on forex, indices, commodities, stocks, ETFs, and bonds. Trading on this broker site involves competitively low spreads starting from 0.6 pips on the Trade.MT5 account. On the Trade.MT4 account, they start from 1.2 pips. However, on the rest of the accounts, the spreads start from 0.0 pips with commissions that range from $1.8 to $3 per lot on forex and metals.
As we did for the other brokers on this list, let’s also look at the regulatory status of Admiral Markets. Well, this broker operates under the keen supervision of the FCA, the CySEC, the ASFL, the JSC, and the FSCA.
Hedging is a very popular trading strategy that traders use to mitigate risk in a given position by entering another position. While there are many brokers that support this trading strategy, it is important to pick out the best from the rest. The brokers we have on this list stand out because of their regulations, low spreads, world-class trading platforms, and the availability of multiple global markets.
Nonetheless, we must emphasize that all trading strategies carry risks. Hedging is merely a tool to minimize risk, but it is not perfect. As such, traders should ensure they understand all the risks involved before investing their hard-earned cash with any broker. Additionally, note that hedging on forex is not permitted in the USA. However, some forms of hedging are allowed. All traders should understand the rules that apply when they are trading from their jurisdictions so as to not break financial laws.