GLADIOGLADIOTrading
Glossary

Hedge(Hedge)

Opening a position in the opposite direction or in a correlated instrument to reduce the risk of an existing position. In retail trading, it is often an expensive alternative to a stop.

Also written as: hedging

Institutional hedging exists to manage portfolio risk (options, futures). Holding long and short at the same time in the same pair ("locking") freezes the loss but does not solve it; it accumulates spread and swap costs.

Some prop firms ban hedging. Think in terms of net risk: two opposite positions equal zero position plus cost.

Related terms

Where it appears in the guides

Guides whose text uses this term; most frequent first.