Very often, when opening an account with a broker, we meet the item “Enable the hedging system” or leave the account without it.
Naturally, many traders have a question – what is it and how can you use this feature.
A hedging system is just a permission to have several positions on one asset, otherwise you will not be able to open several orders on one asset even in one direction.
Very often, this system is already enabled by default, it all depends on the specific broker, trading platform and type of asset you are going to trade.
Do you need a hedging system specifically for you?
If you answer this question as briefly as possible, then “Yes”, the included hedging system will not be superfluous with any trading strategy.
Because without it you won’t be able to:
• Add positions to an existing deal on the same asset.
• Lock an existing position if necessary.
• Use most of the automated advisors.
• Apply order grids to improve trading efficiency.
As you can see, the hedging system is currently a rather important element of trading, it is not even clear why you should ask about its activation before opening an account, for example, hedging is enabled by default in MetaTrader4.
At the same time, be careful, because when opening a new account directly in the trading platform, you need to check the box next to “Use hedging when trading”:
An alternative system in this case is “Netting” when using it, a strict rule is applied – One asset one position. That is, if you have an open transaction to buy euro/dollar, you won’t be able to open another position to buy euro, even if you have enough funds.
You will have to close the existing one and open another one of a larger volume, and this is an additional commission and lost profit.
Typically, netting is used when trading on the stock market in specialized platforms designed for trading securities. Since it rarely uses tactics and strategies that are so popular in Forex.
Therefore, always be careful when opening new accounts, you may need to choose a different type of account or a different trading platform.
