Definition of Hedge
A strategy used to offset potential losses by opening an opposite or negatively correlated position. For example, if you are long EUR/USD, you might hedge by going long USD/CHF (which tends to move inversely to EUR/USD) to reduce net USD exposure.
At a glance
Term
Hedge
URL slug
hedge
Category
Risk & capital
Short answer
A strategy used to offset potential losses by opening an opposite or negatively correlated position.
Deep dives
Full A–Z glossary
Example
Example: $1,000 equity and 1% risk = a $10 cash cap. Size from “Hedge” and stop distance, not from a gut-feel lot size.
Common mistake
Common mistake: confusing “Hedge” with advertised max leverage — leverage alone does not set risk per trade.
Professional tip
Tip: write a cash daily loss limit independent of “Hedge”, then let the definition set size only inside that ceiling.
Practice tools:
Related terms
FAQ
A strategy used to offset potential losses by opening an opposite or negatively correlated position.
“Hedge” sits inside capital protection. Ignoring it turns leverage and margin from tools into a path to rapid loss.
Common mistake: confusing “Hedge” with advertised max leverage — leverage alone does not set risk per trade.