4 Best Forex Brokers for Hedging: 2024 Edition

List of Top Forex Brokers that Allow Hedging

What is Hedging in Forex Trading?

Hedging is a risk management strategy designed to reduce the risk of loss in a portfolio. For example, a trader can open two simultaneous positions on correlated markets to reduce the overall risk of their position.

A simple hedge could be going short on a currency pair that you are already long on. Any gains on the short position will offset any losses on the long position thereby reducing your overall risk which can be useful when trading around uncertain news events. A more advanced hedge is to identify positively correlated currency pairs to other markets such as indices, commodities, and bonds, and trade them in opposite directions.

How did FX Empire choose the best forex brokers for hedging?

• We only selected brokers that achieved an overall top score of 4+ from our 250-point data broker reviews.
• We ensured that each broker offers a trading account with hedging capabilities.
• We checked the authorization and licenses from each broker to confirm their regulatory status.
• We opened live trading accounts to test the trading fees of the instruments available.
• We researched and tested the speed of order execution to ensure you can trade at the best possible price.
• We explored the different trading platforms available and tested their usability.
• We ensured the broker provides a variety of tradable instruments to perform hedging strategies on.
• We tested the broker’s customer support for speed, efficiency, and knowledge.

Our team of experts has identified each broker’s strengths and weaknesses using FX Empire’s comprehensive methodology. Here’s how we test.

Now let’s dive into the selected brokers.

How to Choose the Best Forex Broker for Hedging?

Hedging is a risk management strategy used in forex trading to protect a current position moving in the opposite direction of your trade. It involves offsetting potential losses to try and limit any drawdowns.

To effectively implement a hedging strategy, you need a reliable forex broker. Here are some factors to consider when choosing a forex broker for hedging:

1. Choose a safe, regulated forex broker

When it comes to hedging in forex trading, safety is paramount. After all, you’re entrusting your hard-earned money to a broker, and you want to ensure that your investment is secure.

Look for a broker that is regulated by a reputable financial authority. A regulator from a well-known financial jurisdiction, such as the UK FCA, ASIC, or CySEC, sets strict standards that brokers must adhere to, which helps to protect your capital from fraud and negligence.

In our broker rating reviews, we classify regulators into four categories and tiers:

• Tier-1: These regulators are situated in well-known financial centers and have a strong track record of protecting traders. Examples of Tier-1 regulators include the UK Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), and others.
• Tier-2: These regulators are situated in established but smaller financial centers. Examples of Tier-2 regulators include the Cyprus Securities and Exchange Commission (CySEC) and the Financial Markets Authority (FMA) of New Zealand.
• Tier-3: These regulators are situated in offshore countries. They may have a lower level of regulatory oversight than Tier-1 or Tier-2 regulators. Examples of Tier 3 regulators include the International Financial Services Commission of Belize (IFSC), among others.
• Unregulated: Some brokers are not regulated by any financial authority and are based in offshore locations such as St. Vincent and the Grenadines, St. Lucia, and many others. These brokers are considered to be high-risk and are best avoided.

Brokers regulated by Tier-1 financial regulators, such as the UK FCA, CySEC, and ASIC, offer the highest level of protection for traders. These regulators require brokers to segregate client funds from their own, which means that your money is kept separate from the broker’s money. You can check out our detailed guides on the best FCA, best CySEC and best ASIC-regulated forex brokers.

Tier-1 regulators also require brokers to offer negative balance protection, which means that your account cannot go below zero. Consequently, you cannot lose more than you’ve deposited.

In addition, the FCA and CySEC require brokers to be part of a compensation scheme, which means that you are protected up to a certain amount if the broker becomes insolvent.

Be sure to check the terms and conditions of the broker entity you are opening an account with, as many brokers will have entities all over the world. You can confirm the regulatory status of a broker by visiting the regulator’s online register. To save you time, we have created a comprehensive guide on the best regulated forex brokers.

2. Check for transparent and low fees

There are a range of fees that you should be aware of when choosing a forex broker to trade with. These fees can be categorized into trading fees and non-trading fees.

Trading fees are charged for opening, closing, and holding a trade. They include:

• Spread: The spread is the difference between the buy price and the sell price of a financial instrument. It is the main source of income for most forex brokers. The spread should be as low as possible. See our guide for the best lowest spread and best zero spread forex brokers.
• Commission: Commission is a flat fee charged by the broker for opening and closing a trade. It is typically charged per lot, or 100,000 units of the base currency. The commission should also be as low as possible.
• Swaps: Swaps are fees charged for holding a leveraged or margined position overnight. The swap fee is based on the two different interest rates of the currency pair you are trading on, plus a broker’s markup. Discover Best forex brokers with low spreads.
• Non-trading fees are charged for things like account opening, deposit and withdrawal, inactivity, and in some cases, education, and research. These fees can vary depending on the broker, so it is important to check them before you open an account.

The best way to test the fees for yourself is to use a demo trading account or open a live account with the minimum deposit first. Alternatively, you can read the review of a broker from the FX Empire website, in which our team of analysts has tested the spreads for you.

3. Explore the different account types available

Brokers will often provide a range of different account types. Each account type will come with different features, services, and products. It is important to check that the account type you are opening allows for hedging.

For some fixed-spread trading accounts, hedging may not be allowed as the broker is already hedging your trades to provide you with a fixed spread. Most brokers will offer accounts that have floating spreads based on the underlying market. These types of accounts are more likely to allow hedging.

Many brokers offer the use of a demo trading account nowadays. This allows you to test each trading account without risk, providing an excellent starting point. Explore forex brokers with the best forex trading demo account in our guide.

4. Be careful of leverage

The invention of CFDs has led to a huge rise in the popularity of forex market trading. CFDs, or contracts for difference, allow traders to trade long and short using leverage.

Leverage is a powerful tool that can amplify both profits and losses. If a broker offers 1:30 leverage, this means that you can control a position 30 times larger than your deposit. So, with a $1,000 deposit, you could manage a $30,000 position. You can check out FX Empire’s carefully selected list of the best forex brokers with high leverage.

The amount of leverage that a broker offers depends on your categorization as a client (retail or professional) and which financial regulator the broker falls under.

In 2018, the MiFID II European Market Act Directive legally required Tier-1 regulators to impose a 1:30 leverage restriction on retail clients trading forex. This is because many retail traders were wiping out their trading accounts using too much leverage.

If you’re classified as a professional trader, brokers overseen by Tier-1 regulators can provide higher leverage, sometimes reaching 1:500 for forex. However, you may lose some of the protections afforded to retail traders, such as negative balance protection.

5. Test the different trading platforms

Brokers typically offer a range of trading platforms. Here are some of the most common platforms that provide hedging capabilities:

• MetaTrader 4: Considered to be the ‘go-to’ forex trading platform with an extensive range of inbuilt indicators and drawing tools.
• MetaTrader 5: An updated version of MT4 with more timeframes, indicators, and algorithmic trading capabilities.
• cTrader: Designed with day traders and scalpers in mind, this is the go-to platform for high-frequency traders.
• TradingView: Fully browser-based charting and social networking platform that is now the most used platform in the world, with 50 million users a month.
• Broker Platform: Some brokers invest in creating their own proprietary trading platforms for their clients.

It is wise to test each trading platform using a demo account first. Utilize the broker’s educational materials to find the platform that works best for you. Read more about the platforms in our detailed guides on the best MT4 brokers, best MT5 brokers, and best cTrader brokers.

What to avoid when choosing a Forex broker for Hedging?

When selecting a Forex broker for hedging, there are some red flags that you should be aware of. These include:

• Lack of regulation. Avoid brokers that are not authorized by a reputable regulatory body. Unregulated brokers may not adhere to the strict rules and standards that protect your capital.
• Restrictions on hedging. Some brokers may have restrictions on hedging or may not allow it at all. Avoid these brokers if hedging is a key part of your trading strategy.
• Low fee transparency. Be wary of brokers whose fees are not transparent. If you have to search too far to find broker’s fees, then it is a red flag.
• Poor customer service. Avoid brokers that offer poor customer service. You need a broker who can provide prompt and helpful support when you have issues with your hedging trades.

Hedging is an advanced trading strategy that requires a reliable and supportive broker. By avoiding these red flags, you can increase your chances of success when hedging with Forex.

How to avoid forex and CFD scams?

The Forex market is a global marketplace where traders can buy and sell currencies. However, there are many scam brokers out there who prey on unsuspecting traders. Here are some tips on how to protect yourself from scam Forex brokers:

• Only trade with regulated brokers. A regulated broker is one that is authorized to operate by a financial regulator. This means that the broker is subject to certain rules and regulations that help to protect traders.
• Check the broker’s website for contact information. A legitimate broker will have a physical address and phone number that you can contact. If you cannot find this information on the broker’s website, it is a red flag.
• Use a demo account before you start trading with real money. A demo account is a free account that allows you to trade with virtual money. This is a great way to test out a broker’s platform and learn how to trade before you risk any real money.
• Read the broker’s terms and conditions carefully. This document will outline the broker’s policies and procedures. It is important to understand these policies before you start trading.
• Start with a small amount of capital. This will help you to minimize your losses if you do experience a scam.

By following these tips, you can better protect yourself from scam Forex brokers.

Our Methodology

FX Empire has been pioneering the broker rating review industry for many years. Our review process has expanded and diversified over the years and now includes 250 data points covering nine core categories – Trust, Fees, Platforms and Tools, Tradable Instruments, Customer Service, Deposit and Withdrawals, Account Types, Research, and Education.

Our team of analysts identified the best forex brokers for hedging by utilizing the results of our live testing on each of these categories, as well as the following factors:

• Overall score of 4+ in our rating review
• Broker entities that offer regulatory oversight
• Account types that allow hedging
• A wide range of tradable instruments
• Competitive trading fees
• Easy-to-access trading platforms
• Good customer support

We believe that these factors are essential for traders who are looking for a safe and reliable broker to trade with. Our reviews are designed to help you make an informed decision about which broker is right for you.

Meet Our Writers

The team of forex and CFD writers and editors at FX Empire is composed of trading industry professionals and seasoned financial journalists. Our writers have been published on leading financial websites such as Investopedia and Forbes. In addition, they all have extensive trading experience.

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