Unlike some other forms of trading, when it comes to CFDs traders using the ETX MT4 platform have the ability to hedge their trades, which can be beneficial when it comes to limiting potential losses.
For example, let’s say that I currently have an open position on Dollar/Yen – I ‘went long’ buying the Dollar in the expectation that USD would strengthen against the Japanese currency. However, I’m now having second thoughts – not enough to make me want to close my trade, but sufficient doubt to make me slightly uncertain that my hoped-for currency strengthening will occur.
In other forms of trading, I would have two choices; close the trade now or keep the trade open and cope with the uncertainty. However, with a CFD I can simultaneously open another Dollar/Yen position in which I short the Dollar – going the opposite way to my original trade, which is still open. Traders should keep in mind that CFDs can only be hedged using the ETX MT4 platform.
If the currency pair subsequently moves the other way to my original trade – with the Dollar falling against the Yen – I’ll still be able to salvage something from the situation, because my hedge will then take effect.