Simply put, hedging is an attempt to find equilibrium in a certain market instrument. To do this, investors take the opposite position on the asset.

For example, if they bet on growth in an asset and go long, then for the sake of insurance, that is, hedging risks, they can put part of their capital short.

If the assets that an investor hedges continue to increase in value, the potential profit decreases. However, if assets lose value, hedging reduces the size of the loss.

As a result, when trading on a high-risk exchange, a transaction that may turn out to be unprofitable is covered by a potentially profitable transaction under the same conditions.

#trading #NFTCommunity #Binance