Brian Johnson

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What are forex hedging strategies and how do they protect traders?

Hedging involves opening positions that offset risk in case of adverse moves. Common forex hedges include direct hedges (long EUR/USD, short EUR/USD simultaneously), cross-currency hedges (using correlated pairs like EUR/GBP against EUR/USD), and options-based hedges. Institutions hedge exposures systematically to manage risk from trade flows, investments, or portfolios. Retail traders can hedge selectively—for example, holding long GBP/USD but hedging via short GBP/JPY during uncertainty. Benefits: reduced volatility, protection during black swans. Risks: hedging costs reduce profits, and improper hedges create false security. Hedging ensures survival in uncertain markets—key for both corporates and traders.