What is a Hedge?

[natsir]

with proper risk to reward ratio hedging might well be profitable in trending market. other then in ranging market you'll be able to face horrible losses located within trading. there are a few folks that hedge differently. like short in gbp/usd other then long in aud/usd and eur/jpy. i'm attempting to learn why they actually do this. as a result of still i'm not acquainted with this a sort of trading.

[sunai]

I wanna to add to this thread that hedge is simply opening two positions in opposite directions with the hope of making profits from a both as a positions. However the resources is also used by the traders to locked a bad trades such that the loss is stopped until they get to a point where they know that the prices will reversed, and then they unlock the hedges !!

[gagal]

I don't like hedging whatever, as a result of it actually puts double the number risk round the merchant. you cannot build cash over time with a defend and within the finish someone lose cash. You finish up paying rather more unfold additionally it puts rather more strain on your own margin. it is not appropriate whatever for a latest capitalist or perhaps merchant. The Hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in price. Hedging is a formes of the risky as as transfers. Hedging using a variety of the techniques, but, in essence, involves taking equal and opposite positions in two different markets. Most traders may prefer to save the hedging position or lock defeats due regards determined as the positions really !!

[QasimShop]

For Examples
Agricultural commodity price hedging
A typical hedger might be a commercial farmer. The market values of wheat and other crops fluctuate constantly as supply and demand for them vary, with occasional large moves in either direction. Based on current prices and forecast levels at harvest time, the farmer might decide that planting wheat is a good idea one season, but the price of wheat might change over time. Once the farmer plants wheat, he is committed to it for an entire growing season. If the actual price of wheat rises greatly between planting and harvest, the farmer stands to make a lot of unexpected money, but if the actual price drops by harvest time, he is going to lose the invested money.

Due to the uncertainty of future supply and demand fluctuations, and the price risk imposed on the farmer, the farmer in this example may use different financial transactions to reduce, or hedge, their risk. One such transaction is the use of forward contracts. Forward contracts are mutual agreements to deliver a certain amount of a commodity at a certain date for a specified price and each contract is unique to the buyer and seller. For this example, the farmer can sell a number of forward contracts equivalent to the amount of wheat he expects to harvest and essentially lock in the current price of wheat. Once the forward contracts expire, the farmer will harvest the wheat and deliver it to the buyer at the price agreed to in the forward contract. Therefore, the farmer has reduced his risks to fluctuations in the market of wheat because he has already guaranteed a certain number of bushels for a certain price. However, there are still many risks associated with this type of hedge. For example, if the farmer has a low yield year and he harvests less than the amount specified in the forward contracts, he must purchase the bushels elsewhere in order to fill the contract. This becomes even more of a problem when the lower yields affect the entire wheat industry and the price of wheat increases due to supply and demand pressures. Also, while the farmer hedged all of the risks of a price decrease away by locking in the price with a forward contract, he also gives up the right to the benefits of a price increase. Another risk associated with the forward contract is the risk of default or renegotiation. The forward contract locks in a certain amount and price at a certain future date. Because of that, there is always the possibility that the buyer will not pay the amount required at the end of the contract or that the buyer will try to renegotiate the contract before it expires.
Best of luck to all members of forax community.

[pinus]

Lighting is a very useful way to cope. This prevents that us of all of the recession in the United Kingdom, with more on every little benefit focus. In General, I want a backup, but I can't. The lock is not so easy. May be this is one of the following operations me personally for each source reset, corrected you? It is a decision for me personally and the decision not to use only. We know this item appears, that person not positively, foreign exchange market, and because we believe that broadband can be dangerous! Make sure that it's incredibly convenient trading technique. It puts an end to all of us come from a fairly massive loss plus clips from our small profit. In general, I would, however, to ensure complete fail. Make sure that it is not so easy and simple. Anybody in this article can give me personally all sorts of sources from all over the place, where I can get a hard skill.

[PAVVY]

Examples
Agricultural commodity price hedging
A typical hedger might be a commercial farmer. The market values of wheat and other crops fluctuate constantly as supply and demand for them vary, with occasional large moves in either direction. Based on current prices and forecast levels at harvest time, the farmer might decide that planting wheat is a good idea one season, but the price of wheat might change over time. Once the farmer plants wheat, he is committed to it for an entire growing season. If the actual price of wheat rises greatly between planting and harvest, the farmer stands to make a lot of unexpected money, but if the actual price drops by harvest time, he is going to lose the invested money.

Due to the uncertainty of future supply and demand fluctuations, and the price risk imposed on the farmer, the farmer in this example may use different financial transactions to reduce, or hedge, their risk. One such transaction is the use of forward contracts. Forward contracts are mutual agreements to deliver a certain amount of a commodity at a certain date for a specified price and each contract is unique to the buyer and seller. For this example, the farmer can sell a number of forward contracts equivalent to the amount of wheat he expects to harvest and essentially lock in the current price of wheat. Once the forward contracts expire, the farmer will harvest the wheat and deliver it to the buyer at the price agreed to in the forward contract. Therefore, the farmer has reduced his risks to fluctuations in the market of wheat because he has already guaranteed a certain number of bushels for a certain price. However, there are still many risks associated with this type of hedge. For example, if the farmer has a low yield year and he harvests less than the amount specified in the forward contracts, he must purchase the bushels elsewhere in order to fill the contract. This becomes even more of a problem when the lower yields affect the entire wheat industry and the price of wheat increases due to supply and demand pressures. Also, while the farmer hedged all of the risks of a price decrease away by locking in the price with a forward contract, he also gives up the right to the benefits of a price increase. Another risk associated with the forward contract is the risk of default or renegotiation. The forward contract locks in a certain amount and price at a certain future date. Because of that, there is always the possibility that the buyer will not pay the amount required at the end of the contract or that the buyer will try to renegotiate the contract before it expires.[4]

[PAVVY]

A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles,[1] many types of over-the-counter and derivative products, and futures contracts.

Public futures markets were established in the 19th century[2] to allow transparent, standardized, and efficient hedging of agricultural commodity prices; they have since expanded to include futures contracts for hedging the values of energy, precious metals, foreign currency, and interest rate fluctuations.

[seblak]

I can say that it also called many traders as plans a b so hedging means you take position and markets a goes negitives then you put another position with same lot sizes against firstly the one in this way your sell and but posuition are same so this is hedging ! Coverage is a way to buy and sell, it can be very helpful. The idea comes from a really big loss for you and also our very modest profits. In General, there are still serious desertification insured, non-blocking, so simple and easy to manage. Here, nearly the entire system out there, where you can see almost all of the providers that deeper knowledge of you?

[zarak]

As I said, a true hedge trading by special processing technology, often for more information about how to avoid capture, because qualified inquiry access technology provides a very dangerous includes all least depends on the number and you are free to follow the often does not control. For me I do not understand clearly hedge from the description as I am newbie on forex education. Is hedge in simples definitions,the opening trades to buy and to sell position at a times. Please clear it with simple example so that newbie can understand easily really !

[toba]

Hedging is a very practical method of investing. The idea to help keep us extremely heavy damage and to protect each of our small doses. Amount of time to complete, but it is impossible to answer. Make sure it is not serious and so quick and easy. Can a figure, we offer the following myself any kind of funds through which I am able to get a deep understanding? The Hedge is when you have Already order in any pairs And you are going Losses on this order and you want to hedge you will another order on this same and but the opposite of the Already one are actives example that if we are order in euro usd buy and now we are scenes that we have gone to loss in this order and we want to recover we put another order in same pair selling really !