Futures Trading: What Is Hedge? What is speculation?

Brokers in futures trading on commodity exchanges represent two types of people who carry out buying and selling activities. One category is called hedging, and the other is called speculators.

Hedge protectors are those who use the futures market as a place to transfer price risks, use futures contracts as temporary substitutes for future goods bought and sold in the spot market, assets they now own or will own, liabilities, and services (including The person or company that insures the price of goods and liabilities such as commodities and marketable securities. Hedging is generally a producer and a consumer. Processors, investors, warehousing companies, and traders use the futures market to preserve value. These people may own goods in the future to sell: or need to purchase goods in the future; or have claims for future payments; or debts in the future need to be repaid; and so on. These people are at risk of losses due to changes in commodity prices and currency prices. Therefore, they need to trade in the futures market to ensure that they can buy and sell goods at today's prices in the spot market.

The hedging of risk shifts by hedgers is mainly done by speculators. Speculators are commonly referred to as "speculators." They mean "predictors" and cannot be understood as pejorative in Chinese. Speculators in the futures market are those who are confident that they can correctly predict the future trend of commodity prices, willing to take advantage of their own funds, continue to buy and sell futures contracts, and hope to extract profits from the frequent changes in prices. Speculators have no assets, liabilities, or labor costs that require insurance. The reason why he buys futures is because he expects prices to rise: The reason why he sells futures is because he expects prices to fall. Speculators are adventurous people in the futures market. Their lubrication of the futures market is essential. Speculation is a positive and aggressive economic action. The general speculators are products whose prices tend to fluctuate, and use price fluctuations to profit from them. Some products that have stable prices and can predict prices in the future will not generate speculation.

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