Introduction
Understanding whether hedging is permitted under FTMO’s evaluation and funded account operations is important for strategy development. This article reviews hedging allowances based on confirmed FTMO documentation and platform updates.
Hedging in Trading Terms
Hedging involves holding long and short positions simultaneously on the same instrument or correlated instruments, aiming to reduce directional exposure. Use of hedging must be measured carefully, as it involves costs such as spreads, commissions, and margin.
FTMO Strategy Framework
FTMO permits a wide range of trading styles—discretionary, algorithmic, EA-based—and allows traders to use strategies consistent with real market conditions. There is no statement disallowing hedging in their strategy guidelines.
Margin Treatment of Hedged Positions
A platform update clarified that hedged positions now require separate margin for each direction. This means a long and short position in the same instrument demand margin for both, without offset. For instance, 1 lot long plus 0.5 lot short requires cumulative margin.
Effect on Risk and Equity
FTMO enforces strict maximum daily loss and overall drawdown limits measured in equity. Hedged trades accumulate floating spread costs that may lower equity and trigger limits. In volatile periods, hedging may not prevent equity declines.
Swing vs Standard Accounts
While the Swing account type allows extended holding across news and weekends, both Swing and Standard account structures permit hedging under the same margin and risk conditions. Choice between account types does not affect hedging permission.
Margin Update Impact
Following the margin calculation change, hedged positions are no longer netted. Previously, only the larger side consumed margin; now both legs do. Traders planning hedged strategies must adjust capital usage accordingly.
Cost Considerations
Hedging entails spread and commission expenses on multiple open positions. Spreads can widen during economic events, increasing floating losses. Hedging near risk thresholds may inadvertently breach limits.
Strategic Implications
- Risk analysis must include hedging costs and margin burden.
- Equity fluctuation from floating spread losses may breach daily drawdowns.
- Position sizing must consider both legs occupying margin.
- Strategy must remain replicable in actual trading conditions for FTMO evaluation.
Summary
Hedging is permitted under FTMO’s trading regime. Margin is calculated for each open hedged position independently, requiring adequate capital. Floating spreads and costs may affect equity and risk limits. Hedging strategies must respect margin requirements and maximum drawdown rules to remain viable within FTMO’s framework.
