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Trends & Analysis
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Gold continues to shine amid geopolitical worries

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Is there an AI upside for AMD?

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GBP/USD recovers following wage report

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Buy the JPMorgan dip?

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Trends & Analysis
News

Gold continues to shine amid geopolitical worries

News

Crude oil dips for 3rd session after supply data

News

Is there an AI upside for AMD?

News

GBP/USD recovers following wage report

News

Buy the JPMorgan dip?

News

Goldman Sachs shares surge after earnings beat

Hedging definition

Hedging is a trading strategy where traders use financial instruments or strategies to reduce the risks associated with an investment position. Traders hedge to limit potential losses resulting from unexpected price movements in a particular asset. Hedging can be done in various financial markets, ranging from stocks and currencies to commodities and stock indices.

How to hedge

When a trader has an open position in an asset, they can take an offsetting position in another asset that is negatively correlated to the original position. This can be done by purchasing a derivative product, such as a stock option or a stock index future. This way, if the particular share price declines, the option or futures contract would increase in value, offsetting the losses in the original position.

 

An example of hedging

An investor who has a stock position open foresees that the stock price will experience momentary dips. They do not want to exit their position, so they decide to hedge against these potential losses by buying put options on the stocks. If the stock price does fall, the trader’s put options will increase in value. This can offset some of the losses the trader incurs in their initial position.

 

How to make the most of hedging

Traders who want to use hedging as part of their trading strategy should make sure they understand the relationship between the hedge and their existing open positions. They may also incur additional costs when hedging, such as transaction fees and margin requirements. This can take away from their potential gains from the hedge, and therefore should be considered carefully.

 

Start trading with ADSS

ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.

 

See all glossary trading terms


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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.

ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.

The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.

ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.