Paul Zachary L409_ Gonzalez

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What is hedging in forex and when should traders apply it?

Hedging is a strategy where traders open positions to protect against potential losses. In forex, this often means opening opposite trades on the same or correlated pairs. For example, a trader long EUR/USD might short GBP/USD to reduce exposure to USD volatility. Some platforms allow direct hedging (holding long and short positions in the same pair simultaneously). Hedging is typically used during uncertain market conditions or before major news events. While it reduces downside risk, it can also limit potential profits. Effective hedging requires skillful timing and understanding of currency correlations.