Hedge

Hedge, in the context of foreign exchange (FX) and trading, is a risk management strategy executed by taking an offsetting position in a related asset or financial instrument to protect against potential adverse price movements, primarily aiming to lock in a known future exchange rate for a commercial transaction or investment. This defensive maneuver is designed to mitigate the uncertainty of currency volatility, ensuring the preservation of profit margins or the stability of future cash flows rather than seeking speculative gains.