How to hedge your market exposure

What do we understand by the word hedge? The word hedge refers to protection against unfavorable price movements. It can involve protection against downsides if you are long on the market and protection against upsides if you are short in the market. In other words, hedging is nothing but an insurance against the volatility of your portfolio. You incur a cost to hedge but that also protects you against deep losses in a worst-case scenario. For the purpose of hedging, we shall only talk about long positions and not about short positions. There are 3 ways to hedge your exposure