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December 7, 2016

Question:What's "Netting System" on MT4/MT5 trading platforms? How does it work?

Answer:

“Netting System” is a type of an account, that allows you to have only one common position for a symbol at the same time.

The opposite type of the account is “Hedging System” where there is no limitation to the number of positions you can have for a symbol at the same time.

In case your trading account adopts “Netting system”, then you account will:

  • Increase the volume of the existing position if you execute a deal in the same direction of the same symbol.
  • Decrease the volume of the existing position if you execute a deal in the opposite direction of the same symbol.
*The direction of the existing position will be reversed if the volume of the opposite deal is greater than the current position.

It does not matter what has caused the opposite deal, such as an executed market order or a triggered pending order.

The below example shows execution of two EURUSD Buy deal 0.5 lots each:

mt5-metatrader5-netting-hedging-account-type-position-calculation

It is very rare that a Forex broker adopts the “Netting System” for its clients’ accounts.

Now the standard is “Hedging System” and sometime traders can choose whether “Netting System” or “Hedging System” for their account types.

For the list of MT4 and MT5 online brokers, please visit the page below.

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