Hedging a Position
Hedging, or securing, a position means protecting an open trade so that it can no longer end in a loss – for example through a partial sale or a stop-loss at the entry price.
Approx. 2 min read · Updated October 9, 2026
A position is considered hedged – or secured – as soon as the trader can hold it without risking a loss. The term covers a wide range of techniques, but the goal is generally the same: to stay in the market with a position that no longer puts any capital at risk.
How a position is secured
- Partial sale: the trader closes part of the position at a profit. The gain realised on this partial sale covers the remaining risk of the rest of the position down to the stop-loss.
- Stop-loss at the entry price: a position is also described as secured once the stop-loss has been moved to the entry price, often called a break-even stop.
- Offsetting position: another technique is to build an opposite position in a different market or product, for example buying a put option on shares already held.
Example: a trader buys 200 shares at $50 with a stop-loss at $45, so the initial risk is $1,000 (200 × $5). The price rises to $55 and the trader sells 100 shares, realising a profit of $500. The remaining 100 shares still carry a risk of $500 down to the stop-loss – exactly the amount already banked. If the stop is hit, the trade ends at around zero; if the price keeps rising, the remaining shares continue to gain.
Why it matters for traders
Securing a position allows traders to stay in a promising trade without having to worry about a possible loss. In practice, however, "risk-free" has its limits: price gaps and slippage can cause a stop-loss to be executed at a worse price than planned, and trading costs reduce the result. A stop-loss that is moved to the entry price too early can also be triggered by normal price fluctuations – see stop rules.
Securing a single open trade should not be confused with hedging in the broader sense, where funds, companies and traders protect entire portfolios or business risks against adverse price movements, usually with derivatives.
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More terms.
- HedgingHedging is a strategy for protecting portfolios, positions or business activities against adverse price movements with an offsetting position, usually in derivatives such as futures.
- Break-EvenBreak-even is the point at which the revenue from trading exactly covers all costs, so that there is neither a profit nor a loss.
- Profit-TakingProfit-taking means closing profitable positions to realise gains. After strong price moves, widespread profit-taking can trigger a correction.
- Stop Rules in Market TechniqueRules for placing and trailing stops purely on the basis of chart structure – beyond the last point 3 when trading the trend, or at the last candle's high or low when trading the movement.