Hedging has long been a staple tool used by traders and investment banks to protect their investments from any unexpected market turns.
It is an absolute key part of being able to effectively 'manage risk'. Hedging in layman's terms is to be able to 'cover' your position with an equal or opposite position that will give you returns should your overall stance on the market get overturned.
For example, if you have got substantial 'long' positions on the market but you can foresee a correction coming up perhaps to do chart pattern. To hedge against your positions - you may choose to take on some 'short' positions in the same sector in order to benefit from this correction but at the same time being able to keep your 'long' positions open.
To find out more about this technique - please contact me!