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Forex Hedging

by hedgingforex

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Hedging Forex
All forex traders whether  professionals, newbies or part timers, are always in the process of  continuous risk. Forex trading is not possible without risk. Hedging is a  strategy of risk management employed by investors and traders to  minimize or transfer their risk. Hedging is an important tool for  traders in managing risk quite effectively.
There are many different methods of hedging forex. Traders have lost of options available to choose from. The most basic methods of hedging forex are:
Future contracts: A future contract is  an agreement to exchange a currency for another currency at a  particular and fix date in future at the price on last closing. Future  contract is a very useful hedging forex method widely used by most of  the traders.
Spot Contracts: Spot contract is the  basic method of hedging forex used by retail forex traders. Spot  contracts have only one flaw that they deliver in two days only. Due to  this short delivery date, spot contract is not considered an effective  hedging forex method.
Foreign Currency Options: Foreign  currency option is the most famous hedging method among all types of  traders. In foreign currency option the trader has all the rights to buy  or sell the currency pair when needed. There are no obligations and  limitations to buy or sell the currency on any specific date or on any  specific rate.
Hedging forex is indeed one of the  most important and critical aspect of forex trading. Without hedging,  forex traders would be in quite trouble.

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