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Ever heard the phrase "put your money where your mouth is"? Well, in the world of trading, that's precisely what collateral does. It's like a security deposit, ensuring that you're not just all talk and no action. So, let's dive into this crucial concept and see why it's the glue that holds the trading world together.
As a trader, you're no stranger to risk. Every time you enter a position, you're putting your hard-earned cash on the line, hoping that the market will move in your favor. But what if there was a way to mitigate that risk, to hedge your bets, so to speak? Enter hedging, the unsung hero of the trading world.