A locked position also known as a hedged position happens when a trader holds both a long (buy) and a short (sell) position on the same financial instrument at the same time. Instead of closing the original trade, the trader opens an opposite one to temporarily limit risk or protect profits.
Why Use a Locked Position?
This strategy is typically used when the market becomes uncertain or volatile. By holding opposing positions, you effectively freeze your exposure any gain in one direction is offset by a loss in the other. This can buy you time to reassess the market without fully exiting your position.
However, it’s important to note that while locked positions can prevent further losses, they also halt profit growth until one side of the trade is closed.