Hedging, in finance, is the practice of safeguarding one’s resources (investments, income etc) from losses due to market volatility. The practice often involves investment in a product to offset the risk of adverse price movements in another investment.
In our individual walks of life, insurance can be considered to be a hedging product. However, mostly, hedging is used to denote strategies used in markets with derivatives, currencies, commodities, stocks, interest rates etc.
Both retail investors and institutional investors engage in hedging to manage risk and minimise their exposure to risk and its negative impact.