Hedged orders, also known as offsetting orders, are orders made for the same instrument in opposite directions.
For example, 1 lot Buy EURUSD and 1 lot Sell EURUSD.
Here’s all you need to know about hedged orders:
Fully hedged vs. Partially hedged:
To understand the difference, let’s take a look at this example:
If you buy 5 lots EURUSD and sell 5 lots EURUSD, these orders are considered fully hedged since the volume is matching in full.
If you buy 5 lots EURUSD and sell 3 lots EURUSD, these orders are considered partially hedged.
The margin is not held for the 3 lots that match in volume, while it will still be held for the remaining 2 lots of the buy order.
What if the margin is being held on my hedged order?
If the margin is being held for hedged orders, it could be due to one of these reasons:
You are trading in suffixes.
Hedged orders must be the same instrument from the same account type.
While different account types offer unique contract specifications for the same trading instrument, orders are not considered hedged for the same instruments if different account suffixes are used for the buy and sell orders, as each account type has its own market conditions.
For example, if you have a buy order in EURUSD and a sell order in EURUSD, the full margin will be held for both orders.
2. You have closed a part of the hedged order.
When two orders are hedged and you close one of them, the other order automatically becomes unhedged. Thus, a full margin is held for it.
Stop out on hedged orders:
It is possible for a hedged order to stop out when using MT5, if the order results in negative equity (equity < 0). In this case, the trading account will stop out and the order will be closed to prevent a negative balance.
Closing a hedged order:
When choosing to close a hedged order, its counterpart becomes unhedged automatically, and a margin is charged for the remaining order.
Why can’t I close a hedged order?
This may happen because you are attempting to close an order during a period of higher margin requirements, usually present during times of high market volatility.