Forex education

5 Things That Happen to Your Account the Second You Close a Hedge

Why your balance goes up while equity and margin drop, the two hedge strategies I use, and the 3 rules that keep me out of trouble.

By Alan Solarsh · 6 November 2026

Close a hedge without knowing what it does to your account, and the next reversal can hit you harder than the trade that made you hedge.

Yesterday I closed my hedge.

When you close a hedge, 5 things happen to your account. Most traders only watch one of them.

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5 things that happen when you close your hedge

The floating gain on the trade now moves to your balance.
Your equity drops.
Your margin drops.
Your margin level drops.
Your DD% goes up slightly, usually 2 to 3 percent.

Why does this happen?

It's called spread. This is the fee you pay the broker when you open or close a trade.

So if you are going to remove your hedge, increasing your balance is a good strategy. Obviously. But removing the hedge without understanding the cons is putting yourself in danger, especially if the trend reverses against you.

I top up my account every month. I build my balance. That increases my chances of placing a BB trade at the right time. If the price reverses against me, I hedge, locking my trade so that no more damage can occur.

a woman aged about 40 at a kitchen table in morning light counting a small stack of banknotes into an envelope for the m

This is strategy 1.

The upside: your balance grows and the money is locked in.
The catch: the protection is gone. If the trend turns, you are exposed until you hedge again.

Strategy 2: keep the hedge and place a BB trade

Instead of removing the hedge at the MA flip, keep the hedge in place. Place a BB trade. Hopefully the trade goes blue. If there is a reversal, hedge the BB trade. After placing the BB trade, ride the price north.

What happens when you place the BB trade? 4 things happen.

Your equity drops.
Your margin drops.
Your margin level drops.
Your DD% goes up, usually 2 to 3 percent.

a man aged about 50 driving an open-top four by four on a straight dirt road heading towards distant mountains at sunris

What happens when the BB trade goes blue? 4 things happen.

Your equity increases.
Your margin increases.
Your margin level increases.
Your DD% goes down, usually 2 to 3 percent.

What happens when the BB trade goes red? 4 things happen.

Your equity drops.
Your margin drops.
Your margin level drops.
Your DD% goes up, and the drawdown gets worse until you hedge.

The upside: the hedge stays as your protection while the new trade rides the trend.
The catch: every new trade costs spread and lifts your drawdown until it goes blue.

When to hedge?

This all depends on how you read a chart. Everyone has their amazing strategy. Me included.

How to get it right: 3 rules

a man aged about 45 sitting at a wooden desk with his hands folded and eyes closed for a moment, a closed leather notebo

Rule 1. Money rules

This is your wallet management. This does not include revenge trading. This is strategic and needs to be worked out using a clever strategy. Here is the way to do it.

Rule 2. Trading rules

This is your trading strategy, stuck to diligently. Unwavering. Not watching YouTube gurus, not listening to the hype and not watching the flashy cars on YouTube, TikTok or the like. A formula you can rely on that keeps you grounded.

Rule 3. Psychology rules

This for me is the most important rule of all. It helps you, A, stick to Rule 1 and Rule 2. B, used correctly, listening to your heart and your stomach prevents losses.

a man aged about 40 standing next to his car on the side of a South African country road, reading a paper traffic fine s

Ever been caught at a speed trap, and after the pain of reading the fine you thought to yourself, "I had a feeling"? That feeling is real.

Removing emotions from trading is impossible. Knowing this simple life lesson will save you a whole lot of mental anguish. Contrary to popular belief, we are not robots. We are emotional beings. Use your emotions to empower you, save you and protect you.

You can be stubborn, of course, and call it hocus pocus. For you, I feel you, I really do. Something that is not real, tangible, repeatable and proven by science can't be trusted.

But what if it could be? What if I told you this is science? Would you become a believer? Probably not, but it will intrigue you.

The science behind the gut feeling

In 2016 researchers from the University of Cambridge tested traders on a real London trading floor. Each trader had to count their own heartbeats without touching their pulse. The traders who could feel their own heartbeat more accurately earned more and lasted longer in the job. Their gut was not guessing. It was reading their body. Read the study in Scientific Reports.

Watch: 3 short videos

So let me share a video with you. Three, actually. The study is the science. These are the food for thought.

Watch: Dr Quantum: the double slit experiment (YouTube)

Watch: Dr Quantum: everything is connected (YouTube)

Watch: Water is alive: Dr Masaru Emoto (YouTube)

Questions traders ask

What happens to my account when I close a hedge?

The floating gain on the trade moves to your balance. Your equity, margin and margin level all drop, and your drawdown goes up a little.

Why does my equity drop when I close a hedge?

It happens because of spread, which is the fee you pay the broker when you open or close a trade. That fee is why equity, margin and margin level go down.

Should I close my hedge or keep it and place a BB trade?

If you close the hedge, your balance grows, but the protection is gone and you are exposed if the trend turns. If you keep the hedge and place a BB trade, you stay protected, but the new trade costs spread and lifts your drawdown until it goes blue.