Our Preferred Forex Broker
We currently trade at This Broker. After testing several Forex platforms we find this one to be the most suitable for us. What made the difference is a unique feature that allow us to watch and copy the strategies and trades of the best performing traders on the platform. You can actually see each move the "Guru" traders make. This method works nicely for us. Since we started trading at this broker we noticed an increase of our successful trades and profits when compared to our former brokers. You may want to check them out.
Please note that all trading involves risk. Only risk capital you're prepared to lose. Past performance does not guarantee future results. This post is for educational purposes and should not be considered as investment advice.
Chapter 4: How to Use Forex for Hedging
Hedging denotes safety and security. Hedging means the protection of a client's funds from unfavorable currency rate fluctuations. Account funds are fixed at their current price through conducting trades on Forex. Thus, hedging helps to ease exposure to currency rate changes risks, which helps to prevent the risk of currency rate fluctuations.
As a matter of fact, hedging presupposes using one instrument in order to lower the risk related to unfavorable market factors impact on the price of another one directly associated with it. In most cases, the notion of ‘hedging’ means insurance from currency price fluctuations, assets etc. Hedging can also be considered as a type of investment allowing to minimize price movements risks in the market. The hedging cost should be valued with regard to the possible losses in the event of not hedging.
Hedging types in Forex
One type of hedging is protecting the buyer’s money by lowering the risk of a possible increase of an instrument price. Another type is hedging the seller’s money in order to lower a price drop risk.
Here's a hedging example: a trader, who imports in a foreign currency, opens a buy trade with the currency of his trading account in advance, and when the real time of the currency purchase arrives to his bank, he closes the position. And a trader, who exports in a foreign currency, opens a sell trade with the currency on his trading account beforehand, and at a the real moment of this currency purchase in his bank, he closes it.
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