NFA Bans Hedging in US Forex Accounts

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The National Futures Association has banned hedging in all forex accounts in the United States. The reason for the ban is unclear at this point.

Hedging is when you are allowed to enter offsetting positions at the same time. In other words, you can be long 1 lot of GBPUSD and short 1 lot of GBPUSD without the second position closing out the first.

I don’t think that this new rule is going to have that much of an impact on most forex traders. The reason being is that most forex traders use a hedge to ‘stop the bleeding’ on a position in the hopes that it will come back.

In my opinion, you are better off just closing the position and reversing instead of having to worry about two bad positions instead of one.

The only reason I could see to hedge is if you were entering on two different setups at the same time. For example maybe you took a breakout trade, but then a MACD divergence trade also sets up in the opposite direction while the breakout trade was on.

Anyway, this new rule doesn’t impact me at all but I’m sure there are traders who use it profitably. I’m sure they will figure out a way to get around it. Can anyone say multiple accounts?

Here it is:

http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=2273

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