Hedge
A risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a transfer of risk without buying insurance policies.
To reduce the risk of an investment by making an offsetting investment.
There are a large
number of hedging strategies that one can use.
To
give an example, one may take a long position on a security and then sell short the same or a similar
security.
This means that one will profit (or at least avoid a loss) no matter which direction the
security's price takes.
Hedging may reduce risk, but
it is important to note that it also reduces profit potential.
below in a good example of a usdcad hedge technique
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