a hedging transaction is a transaction in which two markets are related, the direction is opposite, the quantity is equal, and the profit and loss are even. Market correlation refers to the identity of market supply and demand that affects the prices of two commodities. If the supply and demand relationship changes, it will affect the prices of two commodities at the same time, and the price changes in the same direction. The opposite direction means that the buying and selling directions of two transactions are opposite, so that no matter which direction the price changes, there is always a profit and a loss. Of course, in order to break even, the number of the two transactions must be determined according to the range of their respective price changes, so that the number is roughly the same.

There are many kinds of transactions that can be hedged, such as foreign exchange hedging and option hedging, but futures trading is the most suitable one. First of all, because futures trading adopts the margin system, transactions of the same size only need to invest less money, so the cost of doing two transactions at the same time does not increase much. Secondly, futures can be short-sold, and both the virtual hedging of contract liquidation and the real hedging of physical delivery can be done. The conditions for completing the transaction are flexible, so hedging transactions only developed rapidly after the birth of futures, a financial derivative.