📖 Financial Lexicon Term
What is Hedging?
Opening a position specifically designed to offset the risk of another active position.
Detailed Explanation
In forex, direct hedging means opening both a Buy and a Sell position on the same currency pair simultaneously. This locks in the current floating profit or loss. It protects the account from further market volatility while the trader decides how to manage the positions.
💡 Practical Trading Example
You are long 1 lot of EUR/USD. Before a major news event, you open a short 1 lot of EUR/USD to temporarily neutralize all market exposure.