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  1. Home
  2. /Glossary
  3. /Hedge
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trading

Hedge

Taking a position that offsets potential losses in another investment.

Definition

Taking a position that offsets potential losses in another investment. If you're long Bitcoin, you might buy put options or short BTC futures to protect against a downturn. Hedging reduces your maximum loss but also limits your upside. Professional traders always hedge their biggest positions.

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Related Terms

Options

Contracts giving the right, but not obligation, to buy (call) or sell (put) an asset at a set price before expiration.

Futures

Contracts to buy or sell an asset at a specific price on a future date.

Risk Management

Strategies for limiting potential losses in your investments.

Accumulation Phase

A period when smart money quietly buys up an asset before a major price move.

Annualized Return

The average yearly return on an investment, calculated to account for compounding.

Arbitrage

Profiting from price differences of the same asset across different markets.

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