What is hedging?

What it means

A direct hedge — long and short the same symbol simultaneously — locks the current profit or loss in place while both remain open. What it does not do is improve the position, and it continues to pay spread and swap on both legs while achieving nothing.

Why it matters

Traders typically open one to avoid closing a loser, which converts a decision into a delay. The eventual unwind requires choosing which leg to close and when, which is the same directional decision that was being avoided, now made under worse conditions.

What this changes in practice

Regulatory treatment varies — US retail accounts operate under FIFO rules that prevent direct hedging entirely, while many other jurisdictions permit it. Automated systems written for hedging accounts frequently misbehave on netting accounts for this reason, which is worth checking before running any EA on an unfamiliar broker.