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The Traders Spread

Hedge

The investment process of reducing the portfolio risk via investments is called 'hedging'. The sale or purchase of an instrument as a temporary substitute for a cash market position to be made at a future date. Usually it involves opposite positions in the spot market and futures market at the same time. A hedging strategy implemented with the goal of reducing the risk of an investment position.

More terms under H

Part of the Trading glossary. Definitions are general explanations, not investment advice.