Let’s take a look at an example of forex hedging. Suppose a trader opens a long position in the EUR/USD pair. The market moves down, and the position is now in unprofitable territory. Now assume that the trader decided to hedge the position and opened a short position in the EUR/JPY pair at the time the long position was established. The adverse movement in the EUR/USD is now offset by a positive movement in the EUR/JPY, and when the profit on the short position covers the loss on the long position, both positions are closed. This is an example of how forex hedging can be used to reduce or control losses.
Forex hedging has its proponents as well as its opponents. You can find Hedge EA – MetaTrader Expert Advisors that use forex hedging principles here. A standard tester is unable to test all hedge EAs, because multicurrency testing is not supported. However, we have developed a special tester for hedge EAs testing, which comes with our Hedge EA.
As a result of new NFA* rules that forbid hedging, our company has developed a supplementary module for CopyTool, which allows users to copy lock transactions in an additional account (locking is opening orders in the opposite direction on a given currency pair to reduce losses). If your expert advisor or your trading strategy uses lock positions, you can use this tool to continue trading with your broker as you have in the past. You need only open an additional account with your broker.