🦔Hedging is the attempt to minimize financial risk in case prices suddenly drop or increase. 🛡️ Think of it as an insurance policy of sorts. Usually, it means taking an opposite position of an existing security.
Hedging does not protect you and may not even entirely compensate a loss, it is aimed at reducing the impact of a potential movement that may cause a loss. A perfect hedge would ensure that your entire loss is offset, this isn't a scenario that happens, it may help soften the fall.
Keep in mind, that hedging isn't a fail-safe and the goal of hedging is not to make more money. If your hedge is successful, it should prevent major losses.
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