When you open a second trade on a symbol you already hold, the account can handle it in one of two ways. The choice is made when the account is opened, and it changes how everything is counted.
Netting: one position per symbol
On a netting account there is a single position per symbol. A new deal is added to it:
- Same direction: the position grows and its price becomes the average of the deals.
- Opposite direction: the position shrinks. If the new deal is larger than the position, the position closes and reverses into the other direction with the remainder.
It is simple to read, and it is how most exchanges and many futures platforms work.
Hedging: every deal is its own position
On a hedging account each deal opens a separate position with its own ticket number. You can hold a buy and a sell on the same symbol at the same time, each with its own stop-loss and take-profit, and close them independently.
The same orders on each
You buy 1.00 lot of EURUSD at 1.0846, then sell 0.40 lot.
- Netting: one position, long 0.60 lot. The sell reduced it and the profit on the 0.40 lot was realised.
- Hedging: two positions, a long of 1.00 lot and a short of 0.40 lot. Nothing is realised yet; both are still open.
Both approaches can end in the same result, but hedging keeps more of it visible and open.
Margin on opposite positions
Opposite positions on one symbol do not double your risk to price movement: a move up gains on the long and loses on the short. Many brokers therefore charge margin only on the larger side. On Zexca's TradFi demo desk, a 1.00 lot long and a 0.40 lot short need the margin of 1.00 lot, not 1.40. Read your own broker's rule. For how margin is checked, see margin level, margin call and stop-out.
Close By
On a hedging account you can close a position by an opposite one on the same symbol. The overlapping volume is closed at the two open prices, so you do not pay the spread a second time, and whatever is left of the larger position stays open.
Which one to pick
- Hedging if you manage several trades on one symbol separately, scale in with different stops or want to lock in a position without closing it.
- Netting if you prefer one clear number for each symbol and want the account to behave like an exchange.
A hedge also has a cost: while you hold both sides you pay the spread twice and, overnight, swap on both. Holding opposite positions to "wait and see" is not free. See what a swap is.
Open one account of each kind on a demo, repeat the example above, and the difference becomes obvious in one minute.
Educational content, not investment advice. Trading carries risk, including the loss of capital.