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TrustFinance
Oct 15, 2026
17 min read
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In the US, NFA-member Forex brokers do not allow clients to hold both Buy and Sell positions for the same currency pair simultaneously in a single account. Compliance Rule 2-43(b) mandates the first-in, first-out (FIFO) method for offsetting positions (NFA Rulebook). However, on platforms like MT5, in hedging accounts, opening positions on both sides simultaneously is normally possible.
Thai traders call this practice "locking orders," and many believe it's a way to stop losses without having to cut them. This article explains what Forex hedging is, how profit and loss move when opening positions on both sides, how much margin is used, what hidden costs are involved, and why some accounts cannot do it at all. We are not recommending whether to use or not use hedging, but merely explaining the complete mechanism.
Forex hedging is opening an opposite position to an existing one in the same instrument. For example, if you hold a Buy EUR/USD position, you open an additional Sell EUR/USD position of the same or smaller size. This is done so that the profit from one leg offsets the loss from the other. The result is that the total profit/loss moves less or remains stable, but the risk does not disappear, and additional costs are incurred.
More precisely, a full hedge "freezes" the outcome at the point where the second leg is opened; it does not turn losses into zero.
This term is easily confusing because in the financial industry, it is used in at least three meanings.
If you read English articles and encounter the term FX hedging, it mostly refers to the second type, which is different from locking orders.
A Stop Loss closes a position, turning the loss into a realized figure immediately, ending the matter. A hedge, however, opens an additional position, leaving the loss floating. You then need to decide again which leg to close first and when. The account thus has two positions to manage instead of zero. Automatic position closing tools on the platform can be found at How to Use MT4 / MT5 Risk Management Tools.
A common reason heard is "I don't want to realize the loss yet." Closing a position immediately moves the negative figure into the balance. Locking orders, however, keeps the figure floating, making it seem like there's still a chance to recover.
Numerically, these two approaches yield very similar results. At the moment of locking, the $50 loss in the example below is real, whether you close or lock. The difference lies in what happens afterward. The closed position is final with no additional costs. The locked position still incurs spread upon closing, overnight swaps, and the decision to unlock awaits. Reasons some practically use hedging, such as not wanting to close a long-term position during short-term news events, require weighing these costs themselves.
Looking at numerical examples makes it easiest to visualize. All figures are hypothetical examples, not actual prices from any specific day.
Suppose you open a Buy EUR/USD 0.10 lot at 1.1060. The price drops to 1.1010, resulting in a floating loss of 50 pips. For a 0.10 lot of a pair with USD as the quote currency, one pip is worth approximately $1, so the loss is around $50.
Now, you don't want to cut the loss, but also don't want it to increase, so you open a Sell 0.10 lot at 1.1010. After this, no matter which way the price moves, the total outcome remains the same.
| Price after opening second leg | Buy Leg (entry 1.1060) | Sell Leg (entry 1.1010) | Total |
|---|---|---|---|
| Continues down to 1.0950 | Loss $110 | Profit $60 | Loss $50 |
| Stays at 1.1010 | Loss $50 | 0 | Loss $50 |
| Goes back up to 1.1080 | Profit $20 | Loss $70 | Loss $50 |
This table does not yet account for spread and swap.
The observation is that no matter where the price goes, the total remains at a $50 loss. Locking orders can only halt the figure here. To "resolve" the loss, one must close one of the legs at a moment when the price moves favorably for the other leg, which means guessing the price direction again. If the guess is wrong, the loss will grow beyond $50.
In a real account, a Buy leg closes at the Bid price, and a Sell leg closes at the Ask price. If both legs are closed simultaneously, the total will equal the locked loss plus the spread difference at the time of closing.
In this example, if the spread is 1 pip at closing, the total loss is around $51. But if closed during high-impact news when the spread widens to 12 pips, the total loss would become around $62. Thus, the "locked" loss can still fluctuate, and the equity shown on the platform decreases as the spread widens.
At a size of 1 lot per leg, the same figures multiplied by ten mean an additional 11 pips of spread widening immediately consumes about $110 of equity, even if the mid-price barely moves.
Opening the second leg takes only a few seconds, but unlocking is a more difficult decision because you have to choose which leg to close first.
Continuing from the previous example, suppose the price drops to 1.0950, and you close the Sell leg to take a $60 profit. Now, the Buy leg remains with a floating loss of $110. The total outcome is still a $50 loss, but the position is now fully open again.
From this point, there are two possibilities: if the price bounces back above 1.1010, the total outcome will improve compared to when it was locked. If the price continues down to 1.0900, the Buy leg will have a $160 loss, making the total loss $100, or double what it was when you decided to lock.
Another option is to close the losing Buy leg first and hold the Sell leg. This presents the same challenge in reverse: if the price bounces up, the Sell leg will incur additional losses.
In summary, all forms of unlocking bring us back to the original question of which way the price will go. Locking orders merely postpones that question, while you continue to pay spread and swap in the interim.
The answer is: it depends on how the broker has configured it. Many believe that locking orders results in zero margin because the risks offset each other. Some think they have to pay double because there are two positions. The MetaTrader 5 manual states that neither of these is a fixed rule.
According to the MT5 manual, opposing positions in the same symbol are considered hedged or covered positions, and brokers have two margin calculation methods to choose from (MetaTrader 5 Help).
This is the default setting. The system separates the volume into two parts:
If the broker selects the "calculate using larger leg" option, the system will sum the margin for all Buy positions (including pending Buy orders) and all Sell positions, then use the larger sum as the final margin. Thus, two equally sized legs will use margin equivalent to a single leg.
Compare this to holding a Buy EUR/USD 1 lot and a Sell EUR/USD 1 lot simultaneously. If the broker sets Hedged margin equal to the contract size, the margin will be equivalent to holding 1 lot. If using the larger leg method, the result is similar because the two legs are equal. However, if there's an additional pending Buy order, the Buy side will become larger, and margin will be calculated based on that side.
The MT5 manual states that if the Hedged value is 0, no margin will be calculated for the hedged volume. In this case, locking orders genuinely reduces used margin and increases free margin.
This is a deceptive point: the seemingly abundant free margin encourages opening new positions, even though the original loss remains fully present. Once one leg is closed, the remaining part reverts to a fully open position, and the margin immediately bounces back up. If equity is thin at that moment, the margin level might drop close to the warning level faster than expected. You can read more about margin level and stop out mechanisms at What is a Margin Call? When Does it Happen? How to Prevent It?
All of this describes MT5's calculation methods according to its manual. Other platforms or account types may use different methods. The verifiable way is to open the symbol's Specification page on the platform and check the field related to hedged margin, or ask the broker in writing.
Locking orders is not free. There are two main costs:
The second leg is opened by crossing the spread once, and closing it requires crossing it again. The more times you open and close legs to "correct" your position, the more this cost accumulates. If the account also charges commission per lot, having two legs means paying two sets of commissions.
Holding overnight, both Buy and Sell legs are charged swaps separately. The long and short swap rates for the same pair are not necessarily equal in opposite directions. Some instruments may even have negative swaps on both sides, meaning that locking orders for several weeks will cause equity to drain every night, without any price movement. Actual swap rates can be found on the Specification page of the respective symbol.
When talking about Forex hedging, it usually refers to the first type, but in practice, there are two other types with distinct risks.
| Type | How it's done | Remaining risk | Effect on margin (based on MT5 manual) |
|---|---|---|---|
| Full hedge | Buy and Sell the same instrument, same size | Spread upon closing, swaps, decision to close one leg at a time | Depends on Hedged margin value or larger leg method |
| Partial hedge | Second leg is smaller, e.g., Buy 1 lot and Sell 0.5 lot | The 0.5 lot difference still moves fully with price | Unhedged part calculates full margin |
| Correlation hedge | Open two currency pairs that have historically moved in correlation | Correlation can change; both legs might incur losses simultaneously | Different instruments, does not meet single-symbol hedged conditions |
Correlation hedging is particularly risky because it appears to mitigate risk, but the historical correlation between two currency pairs does not guarantee future similarity. And because they are different symbols, each leg is calculated for margin as a separate open position.
Not all accounts allow holding positions on both sides simultaneously. The main limitations come from two sources: the platform's account system and regulatory rules in certain countries.
MT5 has two types of position accounting systems, configured at the account level, not the order level (MQL5).
Anyone who has tried to press Sell to lock a position and seen their original Buy position disappear is most likely using a netting account.
In the US, NFA Compliance Rule 2-43(b) prohibits Forex Dealer Members from carrying offsetting positions in a customer's account and requires positions to be offset on a first-in, first-out basis, except when a customer specifically requests to close an equal-sized order, in which case the broker must close the oldest position of that size (NFA Rulebook).
This is a US regulatory rule and does not apply to all countries, but it tells us that whether opening positions on both sides is allowed depends on the regulations of where the broker is registered. In addition to the account system and regulatory rules, each broker's account terms may have different restrictions on opening positions on both sides. Therefore, it is advisable to read the terms and conditions before actual use.
Important Note: Forex trading is not licensed by the Bank of Thailand. The BOT confirms it has no policy to issue Forex business licenses for retail investors (Thai PBS). The SEC states that this business is not under its supervision but is subject to currency exchange control laws (The Standard).
This content explains mechanisms for informational purposes only and is not personal investment advice. No returns are guaranteed. Readers should assess their own risks and account conditions before making any decisions.
Yes, in Thai trader's jargon, locking orders is a type of full hedge: opening an opposite position of the same size in the same instrument. The total outcome will be stable at the figure at the moment the second leg is opened, not including ongoing spread and swap costs.
Yes. Spreads widening during news events and overnight swaps can cause equity to decrease even if the mid-price doesn't move. If the margin level falls to the stop out level, the system may close one of the legs first. The remaining leg will then become an open position with nothing to offset it.
Not all. Netting accounts cannot do it by system design. Brokers under NFA rules in the US must use FIFO, and some brokers explicitly state prohibitions in their account terms. You should check before actual use.
No. Locking orders merely pauses the outcome temporarily. Ultimately, you still need to decide which leg to close first, which means predicting the price direction again, and additional spread and swap costs are incurred along the way.
It depends on the broker's settings. On MT5, the hedged portion might not require any margin, might be calculated based on a value set by the broker, or might be calculated from the larger leg. The unhedged portion always requires full margin.
Not inherently safer. A partial hedge still has an unhedged portion that moves with the price. Its advantages and disadvantages depend on the size of that difference relative to the account's capital.
The mechanism is the same. If you open Buy and Sell positions in the same symbol, the total outcome will be stable at the lock point, and the margin for the hedged portion is calculated according to the broker's settings. What differs are the contract size per lot, the value per price point, and the spread during news events, which is often wider than for major currency pairs. Therefore, the cost of unlocking might be higher than expected. You should check the Specification of the gold symbol separately from currency pairs.
Yes, in accounts that allow it, but you must account for the swap costs for the overnight hold. Also, when the market reopens, the spread might temporarily be wider than usual. If you intend to unlock immediately upon market opening, the cost from that spread will eat into the total outcome.
Forex hedging is a tool that helps temporarily halt profit and loss outcomes. In accounts that allow it, it buys time to think, but it does not eliminate losses, does not always make margin disappear, and is not free; spread upon closing and overnight swaps continue to consume equity.
Three things to know before actual use are: whether the account is netting or hedging, how the broker calculates margin for hedged positions, and what prohibitions are in the account terms. This information is found on the Specification page and in the broker's terms and conditions documents, not in general explanations on the internet.
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