How to use the hedge button (NON-FIFO trade)

  • Q1) What is the hedge button?

    We've introduced a Non-FIFO trade / hedge trade button option to the deal ticket within our desktop, mobile and tablet platforms (not including MT4).

    This button allows you to go both long and short in the same market on a per-trade basis. For example, if you are long the UK 100 by £5, you can also go short the UK 100 by selecting the hedge button when placing the trade. This way, you can hedge all or some of your original trade.

    The ability to hedge is already standard functionality for MT4 users, so the hedge button isn't needed in the MT4 platform.

    Q2) What is Non-FIFO?

    FIFO stands for 'first in first out'. If you have multiple trades in the same market, the first position to close is the first position placed in that market.

    Non-FIFO allows you to open and close positions in the same market in any direction you wish. It doesn't prevent you from closing the first trade you placed, it simply gives you greater flexibility to open and close multiple positions in multiple directions.

    Q3) How does the hedge button work?

    When you launch the deal ticket you’ll see a tick box option to hedge. If you tick this box, this will open a new position in the direction you've chosen, regardless of whether you currently have any open positions in the same market. If this is the first position within a particular market, the button will have no effect as, effectively, there is no original position to hedge.

    Hedge example:

    1. You have an open sell 10 position in the Wall Street market
    2. You launch a new Wall Street deal ticket
    3. You decide to buy Wall Street with a quantity of 5
    4. To place this trade independently of your original short 10 position, you need to tick the hedge button and place the trade
      1. Please note that if you don’t tick the hedge button, this will effectively close 5 of your original short position
       
    5. You now have two positions open in the Wall Street market. One buy position of 5 and one sell position of 10, meaning you are now net short 5 in total.
    6. You can also close either position independently at any time.

    You must also be aware that if you have amalgamated positions turned on, this will show the net figures for the total trades placed i.e. inclusive of all shorts or longs in a specific market. To see individual positions you need to expand the amalgamated position or switch to single positions.

    Q4) How does margin work with the hedge button?

    You're only charged margin on the larger side of the trade. Using the example above, you would only have been charged margin on the original Wall Street short 10 position, and not any hedged trade thereafter which is smaller than the initial trade.

    Trade example: 

    • You open a sell 10 Wall Street with an initial margin of £800
    • You then open a buy 5 Wall Street trade with a margin of £400 (hedged trade)

    As the margin is bigger on the Open sell 10 Wall Street trade, this will be the total margin required for all trades in this market. We do this to ensure that you have enough margin to cover the remaining position if and when the larger side is closed. The same rule applies for all step margin levels.

    Q5) How do financing charges work with hedged trades?

    Your finance charges work on a per-trade basis. Which means you’ll be charged overnight financing charges relating to the each specific trade you place, regardless of whether they are a hedged position or not.

    Q6) How do corporate actions work with hedged trades?

    Corporate actions will be applied on a per-trade basis, not as an overall value.

    Q7) Can I hedge trades through opening orders?

    You can't hedge trades via opening orders. Any new orders will cancel out any trades which exist in the opposite direction. This does not affect the stops and limits of the original position.

    N.B. Stops and limits attached to new orders won't be applied unless the order results in a larger size (i.e. a new position).

    Q8) What does the hedge button look like within the deal ticket?

    Here are some examples of where you can find the hedge button within our desktop, mobile and tablet platforms.

    Advantage Web:

    Hedging button in Advantage Web

    Mobile apps:

    Hedging button in our mobile apps

     

    Tablets:

    Hedging button in our tablet apps