Hedging means opening a position that offsets risk in another, so a loss on one is partly cancelled by a gain on the other. Traders use it to protect open profits or ride out uncertainty, though it also caps potential upside and can add cost.
Forex Term
Hedging
Opening an offsetting position to reduce risk.
Example
Holding a long EUR/USD and opening a smaller short EUR/USD hedges part of the downside risk.
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Trading Forex and CFDs involves a significant risk of loss.
Risk
Forex and CFD trading involves significant risk of loss and is not suitable for all investors. Leverage can work against you. This content is educational and not financial advice — always do your own research.