What is Hedge in Forex Trading?

Hedge is an investment to cut the risk of adversarial price movement in an asset. Hedge involve taking an offsetting position in associated security. Hedging practice is used to reduce the risk, but keep in mind that almost every hedging exercise have its own downside as well. Hedging is considered imperfect and not a warranty to future success and nor it confirm that any loss will be lessened.  So before hedge it is necessary that every investor should think of hedging in term of its pros and cons. Remember that effective hedge is only one that avoids losses.