{"id":24049,"date":"2018-08-31T08:15:02","date_gmt":"2018-08-31T06:15:02","guid":{"rendered":"https:\/\/ftmo.com\/?p=24049"},"modified":"2024-01-26T17:00:54","modified_gmt":"2024-01-26T16:00:54","slug":"how-to-save-while-you-hedge","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/how-to-save-while-you-hedge\/","title":{"rendered":"How to save while you hedge?"},"content":{"rendered":"

Do you practice hedging in your trading? If yes, then you are the right person who might be interested in the article we\u2019ve prepared for you today. The article will describe how to save money if you have some hedged positions. We know about the MT4 function that many traders are unfamiliar with or haven\u2019t explored it yet and that\u2019s why they pay double the amount of commissions and spreads to the broker.<\/em><\/p>\n

What is hedging<\/h2>\n

For the beginners, we will now explain the term \u201chedging<\/strong>\u201d. It is a situation, where we have a position open in both directions. In other words, we have a buy (long) and sell (short) position with the same volume. By doing this, our trade is secured against the future price development. The typical hedged position in your MT4 terminal looks like this:<\/p>\n

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As you can see, the result of both positions equals to -$12. We often hear the opinions that if our positions are hedged<\/strong>, the result of the positions doesn\u2019t change. However, that is not true nowadays<\/strong>. Let\u2019s not forget that spreads are floating. If the spread widens, the cumulative result of our positions will be worse, even if these positions are hedged! While trading higher volumes, the spread movements can be absolutely crucial so we recommend being aware of this.<\/p>\n

How to save on hedging?<\/h2>\n

Let\u2019s finally get to the core of this article and learn how to save while hedging. A common practice to close the hedged position<\/strong> is that we close both open positions. Beware of such a wrong practice!<\/strong> You end up paying the costs (spreads and commissions) for both positions. On the other hand, if you close one position by the other hedged position, you will save money as the broker will only charge you the cost for one position<\/strong>. Why is that? Simply because you close your long trade with your short trade and you don\u2019t open any new position that anybody would charge you for.<\/p>\n

Technical hedging execution in MT4<\/h2>\n

In your MT4 Terminal, simply right-click on one of your open positions and choose \u201eModify or Delete order\u201c. Then the dialog window will open where we head over to \u201cType: Close by\u201d and we select the offered counter-positions. When you look into the Account history of your Terminal, you can see that one position is closed with a proper result and the second counter-trade is printed with a volume result of 0.<\/p>\n

For a better understanding of the situation, we have made the following short video which takes you step-by-step on how to practice the proper hedging.<\/p>\n