What is CFD trading? Hedging with CFDs is a risk management strategy where a trader opens a new position in the opposite direction of an existing trade. The goal is to reduce potential losses if the market moves against the original position.
While hedging can help manage risk, it does not eliminate the risk of loss entirely, especially in volatile markets. Traders should understand the costs and implications of holding multiple positions and using leverage.
If you have a buy (long) position on an underlying asset, expecting its price to go up, but you believe that the price might temporarily fall, you could open a sell (short) CFD position on the same underlying asset. This may help limit the impact of short-term losses if the market moves against your original trade.