Hedge
a.k.a. Hedging
A position taken to offset the risk of another, like insurance against a price move.
In plain English
A position taken to offset the risk of another, like insurance against a price move.
To hedge is to protect yourself. If you hold a position that could lose if the euro falls, you might add a trade that gains if the euro falls. Losses on one are cushioned by gains on the other.
Hedging reduces risk and usually reduces potential profit too. In retail forex, 'hedging' sometimes means holding a buy and sell on the same pair at once, which often just doubles costs and is banned for US accounts under FIFO rules.
Keep this word for good
Your free Private Swap Lounge saves the terms you’ve learned and quizzes you on them. Portal under construction. Expected delivery date is December 01, 2026.