Hedging * 13

The hedging feature allows traders to have both a buy and a sell position on one currency pair at the same time. To establish a hedged trade, you can simply place a market order in the opposite direction of your existing position. This will establish a second ticket.

hedging

The margin requirement on the initial trade will be the standard required margin for trades on your account. For hedged positions, once the second leg of the trade is added, the margin requirement will be divided among the two positions.

A position can still be closed with a stop-loss order, a limit order, or by left-clicking on the close price in the Open Positions window. You can also close a trade by left-clicking on the ticket number that you would like to close, then clicking the close button at the top of the trading station.

Clicking on the Sell or Buy buttons at the top of the trading station will NOT close out an existing ticket. Clicking on a quote in the Dealing Rates window will also NOT close out an existing ticket.

Entry orders that are triggered will also NOT effect existing positions. When executed, an Entry order will simply create a new position regardless if the client has an existing position in that currency pair.

Hypothetical example of hedging a position.

8 am

  1. EUR/USD trades at 1.3148/50
  2. Client BUYS 5 Lots of EUR/USD at 1.3150
  3. Client SELLS 5 Lots of EUR/USD at 1.3148
  4. Total Open Positions: 10 lots

open positions
8 45 am

  1. EUR/USD rises to 1.3200/1.3202
  2. Client Closes 5 lots, Exits (BUY) Position at 1.3200
  3. Takes 50 Pip Profit On Trade
  4. Total Open Positions: 5 Lots

closed positions

3 pm

  1. EUR/USD falls to 1.3200/1.3202
  2. Client Closes 5 lots, Exits (SELL) Position at 1.3202
  3. Takes 46 Pips On Trade
  4. Total Open Positions: 0 Lots

closed positions

Having the ability to hedge is an account specific setting. If you would not like the ability to hedge on your account, simply email admin@fxcm.co.uk for FXCM UK accounts or FXCMAustralia@fxcm.com if your trading account is with FXCM Australia Ltd.

While the ability to hedge is an appealing feature, traders should be aware of the various factors that can affect their accounts. Spreads may widen causing margin to diminish leading to the potential danger of a margin call. Pip costs and rollover may also cause a decrease in account equity, adversely effecting hedged positions. For more information about hedging strategies associated with the FXCM No Dealing Desk platform please contact one of our sales representatives.*

* Please note that after May 15, 2009, this feature will no longer be available to clients of Forex Capital Markets, LLC (”FXCM LLC”). Our industry self-regulatory organization in the United States, the National Futures Association (”NFA”) has informed all Forex Dealer Members (FDMs), which includes FXCM, that it has adopted new Compliance Rule 2-43 regarding forex trading. After May 15, 2009, forex customers of FDMs will no longer be allowed to open “hedged” positions in their accounts. However, hedging feature is available through Forex Capital Markets Ltd. (FXCM UK) and FXCM Australia Ltd (FXCM AU).
13 Heading is not functional on the Forex Captial Markets LLC FX Trading Station as it is not compliant with the National Futures Association (NFA) Compliance Rule 2-43