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| AT 8:00 AM -------------------------------------------------------- |
| 1. |
EUR/USD trades at 1.3148/50 |
3. |
Client SELLS 5 Lots of EUR/USD at 1.3148 |
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| 2. |
Client BUYS 5 Lots of EUR/USD at 1.3150 |
4. |
Total Open Positions: 10 lots |
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| AT 8:45 AM--------------------------------------------------------- |
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| 1. |
EUR/USD rises to 1.3200/1.3202
| 3. |
Takes 50 Pip Profit On Trade |
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| 2. |
Client Closes 5 lots, Exits (BUY) Position at 1.3200 |
4. |
Total Open Positions: 5 Lots |
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| AT 3:00PM--------------------------------------------------------- |
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| 1. |
EUR/USD falls to 1.3100/02 |
3. |
Take 46 Pips On Trade |
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| 2. |
Client Closes 5 Lots, Exits (SELL) Position 1.3102 |
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How Does Hedging Work?
Account Options
The hedging feature is currently available on all accounts using FXTSPs No Dealing Desk service. If you are interested in taking advantage of this new feature, please follow the instructions in Frequently Asked Questions #5.
Frequently Asked Questions (FAQ)
1. How do I hedge a position on the FX Trading Station?
Hedging a position is as simple as creating an opposing order of the same amount. You can hedge a current position with a Market or Entry order. Placing an order in the opposite direction of your existing position will establish a second ticket.
2. When should I use the hedging feature?
The most effective way to trade a market in which you are not sure if it will continue in the same direction or reverse is to find concrete support and resistance levels.
Trading in such a price environment involves isolating currencies that are trading sideways in ranges (or channels), and then selling at the top and buying at the bottom of the channel. This allows you to pinpoint levels where significant price action will take place.
Currencies that tend to trade sideways are often currencies with low interest rate differentials such the EUR/CHF and the EUR/GBP.
3. Do I limit my risk by hedging?
Hedged positions do not necessarily limit risk as traders can find themselves losing on both sides of the trade. Hedging a position temporarily locks in the floating profit or loss on an existing position.
While this strategy tends to work temporarily in range markets, it does not work well in trending markets. FXTSP advises that you place stop-loss orders on your positions to properly mitigate risk.
4. How do I close a position with the new hedging feature?
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.
5. How do I set up my account to hedge?
In order to use the hedging feature, your account must be setup for FXTSPs No Dealing Desk service. Please e-mail info@fxtsp.com with your account number, and indicate that you would like:
- Your account changed to the No Dealing Desk service
- The Hedging feature activated
6. If I have No Dealing Desk, will it default to the hedging setting?
Your live No Dealing Desk account will not default to the hedging setting.
7. What is the cost to hedge?
The cost to hedge is the additional bid/ask spread.
8. Can I earn interest on my hedged position?
It is important to note that rollover charges will be higher than rollover accruals. When all positions are hedged in an account, although the overall net position may be flat, the account can still sustain losses due to the spread that occurs at the time rollover occurs.
9. What is the margin requirement for maintaining a hedged position?
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.
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