Hedging Calculator

The Forex Hedging Calculator helps users determine the hedge position size, margin requirements, potential losses with and without hedging, risk reduction, and total margin required to manage and mitigate financial risk in forex trading.

Use Our Hedging Calculator

How to Use the Forex Hedging Calculator

This step-by-step guide will help you understand how to use the Forex Hedging Calculator to determine key metrics about your forex trades, particularly focusing on hedging strategies.

Step 1: Input Your Trade Details

  • Position Size: Enter the size of your position. This field is a number, and the minimum value you can enter is 0.01. Ensure that this entry reflects the actual size of your trade.
  • Entry Price: Input the price at which you have entered or plan to enter the trade. This field requires a positive number with a minimum value of 0.00001.
  • Stop Loss Price: Enter your stop loss price. Similar to the Entry Price, it should be a positive number of at least 0.00001.
  • Leverage: Select the leverage used for this trade from the dropdown menu. Options range from 1:1 to 1:100. Choose the appropriate leverage that applies to your trading account.
  • Hedge Percentage: Specify the percentage of your position you want to hedge. This needs to be a number between 1 and 100.
  • Account Currency: Choose your account’s currency from the available options — USD, EUR, or GBP.

Step 2: Understand the Results

  • Hedge Position Size: This result reflects the size of the position you are hedging. It is calculated by multiplying the Position Size by the Hedge Percentage divided by 100, rounding to two decimal places.
  • Margin Required: This field shows the margin required for your unhedged position. It is calculated as (Position Size * Entry Price) / Leverage, displayed in the chosen currency to two decimal points.
  • Potential Loss Without Hedge: Understand the risk you are taking without a hedge. This is calculated by Position Size multiplied by the absolute difference between the Entry Price and the Stop Loss Price. It is displayed in your account currency rounded to two decimal places.
  • Potential Loss With Hedge: This indicates the potential loss if the hedge is applied, calculated using (Position Size – Hedge Position Size) * absolute difference of Entry Price and Stop Loss Price, rounded to two decimal points in currency.
  • Risk Reduction: Shows how much your risk is reduced, as a percentage. It is determined by ((Potential Loss Without Hedge – Potential Loss With Hedge) / Potential Loss Without Hedge) * 100, formatted to two decimal places.
  • Total Margin Required (Including Hedge): This is the total margin required when hedging is involved. It is calculated using ((Position Size + Hedge Position Size) * Entry Price) / Leverage and displayed in currency format to two decimal places.

This calculator provides essential insights into the margin and potential risks of your forex trades, factoring in hedging strategies. Ensure all input values are accurate to maximize the effectiveness of the calculator.