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What are speculation and hedging?
Speculation is generally just a profit-oriented investment behavior, and hedging is a combination of futures and cash, with the purpose of hedging risks.

Speculation and hedging: the purpose of hedging is to stabilize prices and avoid risks, while the purpose of speculation is to obtain risk returns and benefits from price fluctuations. The greater the price fluctuation, the better for speculation. The difference between them is as follows: 1. Hedging for different trading purposes is a way to avoid or transfer the risks caused by the rise and fall of spot prices, with the aim of locking in profits and controlling risks; On the other hand, speculators hope to make high-risk profits. 2. Hedgers who bear different risks only bear the risk brought by the change of basis, and the relative risk is relatively small; Speculators, on the other hand, need to bear the risks brought by price changes, and the relative risks are relatively large. 3. The positions of hedgers with different operating methods need to be determined according to the spot positions, and the hedging positions and spot positions operate in opposite directions, with the same or similar types and quantities; Speculators, on the other hand, trade according to their own amount of funds, occupancy rate of funds, psychological endurance and judgment of trends.

From the origin, the futures market mainly meets the needs of hedgers to transfer risks and stabilize returns, which is also one of the main economic functions of the futures market. However, if there are only hedgers in the futures market, but there are no speculators, and the risks that the hedgers want to transfer are not borne, hedging cannot be realized. It can be said that the emergence of speculation is a necessary condition for the existence of hedging business and an inevitable result of the development of hedging business. Speculators provide the venture capital that hedgers need. Speculators use their own funds to participate in futures trading and bear the price risk that hedgers hope to pass on.

The participation of speculators increases the market transaction volume, thus increasing the market liquidity, which is convenient for hedgers to hedge contracts and freely enter and leave the market. With the participation of speculators, the pace of price changes in related markets or commodities tends to be consistent, thus forming a market situation conducive to hedgers. Therefore, futures speculation and hedging are two basic elements of the futures market. * * * and the maintenance of the existence and development of the futures market complement each other and are indispensable.