Hedging is a financial practice that involves opening multiple positions simultaneously to protect your trading or investment portfolio from fluctuations or uncertainties in the markets.

In short: it is a risk management strategy aimed at reducing potential losses.

How does it work?

* Hedging involves taking two different (opposing) positions so that the profits realized in one position offset the losses that may occur in the other position.

* The primary goal is not to achieve profit, but to reduce losses resulting from unfavorable price movements.

* For example, if you own a currency and fear a short-term price decline, you can open a short position on the same currency; if the price drops, your gains from the short position will offset your loss in the original long position.

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