What is hedging mode and how to use it in trading?

Perhaps you think the market is about to move sharply, but you’re not sure in which direction. Or maybe you already have a position open and want to temporarily protect your profit or limit your loss without closing it entirely.

This is where hedging mode comes in. It’s a feature that gives you more flexibility in how you manage risk and execute your trading strategy.

What is hedging mode?

Hedging mode on Capital.com is a platform feature that lets you open both a long (buy) and short (sell) position on the same market at once. Instead of committing to a single direction, you can hold two opposite positions and manage them separately.

This differs from the default trading mode, where opening an opposite position automatically closes your existing trade. With hedging mode enabled, both positions remain active, giving you more control over exposure and timing.

Why do traders use hedging mode?

Hedging mode operates on a simple principle – your buy and sell positions remain independent rather than cancelling each other out. Opening a trade in the opposite direction doesn’t close the original position; instead, you manage both separately and can close either one at any time.

Independent position management

Each position has its own entry point, profit or loss, and close. For example, if you're long 5,000 units of GBP/USD at 1.2850 and later sell 5,000 units at 1.2900, both trades remain open. They don’t offset each other. Profit and loss are calculated individually – if the price falls, the long loses while the short gains.

Margin requirements

Each position requires its own margin. You’ll need enough balance to cover both the long and short at once. Opening equal long and short positions usually needs roughly double the margin compared with holding one, unless portfolio margin reduces the requirement. Keep this in mind, especially when using leverage.

Flexibility with spreads

Hedging mode allows positions to be opened at different times or prices. You pay the bid-offer spread on both positions, and overnight funding applies to each if held beyond the trading day. Once open, you can close either position independently at any time.

Closing positions independently

You can exit one side of a hedge without affecting the other. For instance, you might close a short position after a pullback, while keeping the long open, or vice versa. This flexibility is what makes hedging mode distinct from standard mode.

How to use hedging mode in trading

Hedging a trade using hedging mode involves a few simple steps.

• Step 1: Identify your position Review your open trades. Choose a position you want to protect – for example, a long trade facing short-term volatility. Note its size and entry price to decide how much to hedge. Step 2: Decide your hedge size You can hedge fully or partially. A full hedge (1:1 ratio) opens an opposite position of the same size. For example, if you're long 10,000 units of EUR/USD, selling 10,000 units fully hedges your exposure. A partial hedge, such as selling 5,000 units, covers half the position but keeps some directional exposure. Step 3: Open the opposite position Place a trade in the opposite direction on the same instrument. In hedging mode, this new trade sits alongside your original position rather than closing it. Step 4: Monitor and manage Track how both positions move. Losses on one side may be offset by gains on the other. This approach can limit downside risk in volatile markets, though it also reduces potential upside. Step 5: Close one side when ready Once conditions change or your objective is met, close either side independently. You can also close both if you no longer wish to hold exposure.

Past performance is not a reliable indicator of future results.

Hedge trading example

Imagine you’ve bought 50 units of a gold CFD at $2,000, as you think prices might rise. A major announcement is due, and you’d like to manage risk without closing your position.

You open a short hedge of 25 units at $2,050. Now you hold:

• Long 50 units of gold at $2,000
• Short 25 units of gold at $2,050

When gold falls to $1,900, your long position loses $5,000, but your short gains $3,750. Your net loss is just $1,250 instead of $5,000.

Once volatility eases, you close the short and keep the long open. When gold later rallies to $2,100, your long gains $5,000 – plus your earlier hedge gain, your total profit is $8,750.

If the market had continued to rise instead, your hedge would have limited some gains but protected you from potential downside if conditions reversed.

With hedging mode, you can manage exposure without exiting your core position.

Past performance is not a reliable indicator of future results.

Hedge trading strategies for CFD traders

Hedging strategies can help manage risk exposure in CFD trading. Here are four common approaches used with hedging mode.

• Day trading: hedges used to manage exposure during short-term volatility. Day traders may open a short hedge if momentum weakens and close it once direction becomes clear.

• Swing trading: hedges applied when key support or resistance levels are tested. A short hedge can protect a long trade while allowing time to reassess the market.

• Position trading: hedges used to reduce exposure during temporary corrections while maintaining a long-term view. Hedge sizes can be adjusted as conditions change.

• Trend trading: hedges deployed when uncertain if a trend will continue or reverse. A hedge can protect unrealised gains until a new trend direction becomes clearer.

Learn more approaches in our CFD trading strategy guides. All trading involves risk, and it’s advisable to test strategies in a demo account before trading live.

CFDs are traded on margin, and leverage amplifies both your profits and your losses.

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