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Risk

Hedging — definition & meaning

Opening an offsetting position to reduce risk on another.

Hedging means taking a position designed to offset the risk of another — for example, holding a short to protect a long against a fall.

Hedging can reduce risk but is not free: it caps upside, adds costs, and can simply lock in a loss. Some jurisdictions also restrict certain hedging setups for retail accounts.

The information on Trding.io is for general information only and is not investment advice. Trading involves a real risk of losing money, and most retail traders lose. Never trade money you cannot afford to lose.

Related terms

Long
Buying an asset expecting its price to rise so you can sell higher.
Short
Selling an asset you expect to fall, aiming to buy it back cheaper.
Correlation
How closely two instruments tend to move together.
Diversification
Spreading risk across different assets so no single one can sink you.
Leverage
Borrowed exposure that lets you control a large position with a small deposit.
Margin
The deposit a broker holds to keep a leveraged position open.

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