 | What is the definition of Hedge?
Hedge or “hedging” refers to a capital protection strategy used to protect against adverse movements in the price of an asset.
|  | TradersLaboratory decodes Hedge
Hedging is used if the outcome of a trade is not assured, or if a transaction becomes too costly as a result of exchange rate differentials. In such an instance, a trader may decide to take a contrary position in another market or employ another kind of trade in reverse of the original one in order to cover up any losses incurred on the first trade. Hedge trades are done in such a way that if the original trade is a winner, the payout is higher than the second trade used as the hedge, and if the first trade is a loser, the hedge trade will cover the losses. |
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