Is hedging legal in forex?

Hedging is not legal everywhere. Whether your broker offers hedging depends on your country of residence and the regulatory framework in which the broker operates. In the United States , the NFA has banned hedging for retail forex traders and requires that brokers close trades on a first-in-first-out (FIFO) basis while netting existing client account positions in their backend.

What types of investments can you hedge with a forex broker?

Hedging can be achieved in a variety of ways, both directly and indirectly. Much depends on what your hedging broker offers, the range of markets being accessed, and whether direct hedging is permitted or available for a specific security. If the broker permits direct hedging, you can simply open an opposing trade to sell a forex currency pair or other security (like CFDs , futures, stocks, or crypto ) for an amount based on the percentage you want to hedge. On the other hand, you can hedge indirectly by trading a different instrument for the same asset class, such as buying or selling forex options to hedge spot forex or vice versa. For example, a trader expecting a long-term appreciation in a currency pair may hedge their position against the event of a short-term pullback by purchasing a forex put option on that same pair. Should the market suddenly drop, the trader will profit from the put option and counteract the loss taken in the long-term position.

Do all brokers allow hedging?

No, not all forex brokers allow hedging. Whether hedging is available to you will depend on the individual broker and any applicable regulatory restrictions that may be in place based on your country of residence or the broker’s regulatory location. Even hedging forex brokers may have platforms or account types that need to be adjusted to enable hedging. For example, CMC Markets allows you to enable hedging by disabling account netting from within their NextGeneration platform settings.

What is the best broker for hedging?

IG is the best broker for hedging in 2024. In addition to being our number one broker across nearly every other category, IG makes it easy to enable hedging, where permitted, from within its web platform or mobile app. When testing IG’s hedging capability, my testing found that their platform provides an option to toggle between “net off” (which means an opposing trade will close an existing one) and “force open” (which will open a new hedging position in the opposing direction without closing the initial trade). Check out my IG review to learn more about why IG stands out among the top forex brokers .

Best Hedging Forex Brokers

Written by Steven Hatzakis
Edited by Jeff Anberg
Fact-checked by Joey Shadeck

April 12, 2024

ForexBrokers.com has been reviewing online forex brokers for over six years, and our reviews are the most cited in the industry. Each year, we collect thousands of data points and publish tens of thousands of words of research. Here's how we test.

Hedging is an essential tool in many risk management strategies for forex traders, but your ability to hedge will depend on your broker, account type, trading platform, or even local regulatory restrictions.

I’ve studied hedging for decades, including as a futures trader at a U.S.-regulated broker. This guide will dive into the legality of hedging and explore the differences between hedging and non-hedging brokers. You'll also find my picks for the best hedging forex brokers.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74% and 89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Which forex brokers can I open an account with?

Select your country of residency below to see which regulated forex brokers will accept you as a new customer for trading forex.

Company	Average Spread EUR/USD - Standard	Minimum Deposit	Overall Rating	Visit Site
IG	0.98 info	£250.00		Visit Site
Interactive Brokers	0.63 info	$0		Visit Site
Saxo	1.1 info	$0		Visit Site
CMC Markets	0.61 info	$0
FOREX.com	1.4 info	$100
TD Ameritrade	1.25 info	$0
City Index	1.4 info	£100.00