Orders placed for the same instrument in opposite directions are known as hedged orders
Fully hedged vs. partially hedged
- Fully hedged: Buying and selling the same volume of the same instrument (e.g., 5 lots buy EURUSD and 5 lots sell EURUSD). There is no margin held for fully hedged orders for all account types.
- Partially hedged: Buying and selling different volumes of the same instrument (e.g., 5 lots buy EURUSD and 3 lots sell EURUSD). Margin is held only for the unmatched portion (2 lots in this case).
To calculate margin for unmatched and unhedged orders check out our article on margin calculations.
Stop out on hedged orders
Hedged orders may stop out if:
- Equity becomes negative (equity < 0).
- Margin level falls below the trading account’s margin requirement.
Closing a part of a hedged order
Closing one side of a hedged order unhedges the other side, and margin is charged for the remaining order.
If you have 3 lots buy EURUSD and 3 lots Sell EURUSD (fully hedged), closing the buy order will unhedge the sell order, and full margin will be held for those 3 lots.
Why can’t I close a hedged order?
During high market volatility, higher margin requirements may apply. If there’s not enough free margin, the system won’t allow you to close a hedged order.
You deposit 100 USD and open 1 lot buy and 1 lot sell EURUSD at 1:2000 leverage, leaving 86 USD free margin. When leverage changes to 1:200 due to higher margin requirements, closing the sell order requires 550 USD margin for the buy order which will be unhedged due to this action. With only 86 USD free margin, you’ll have a deficit of -464 USD, so the sell order cannot be closed.