in finance, hedge refers to an investment that deliberately reduces the risk of another investment. It is a way to reduce business risks while still making profits in investment. General hedging is to conduct two transactions at the same time, which are related to the market, in the opposite direction, with the same amount and break 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.

hedging is the most common in the foreign exchange market, focusing on avoiding the risk of one-way trading. The so-called single-line trading means buying short (or short position) if you are optimistic about a certain currency, and selling short (short position) if you are bearish on a certain currency. If the judgment is correct, the profits will naturally be more; But if the judgment is wrong, the loss will be very large [1]

The so-called hedging is to buy a foreign currency at the same time and make a short sale. In addition, we should also sell another currency, that is, short selling. In theory, short selling a currency and short selling a currency should be the same as the silver code, which is the real hedging, otherwise the hedging function cannot be achieved if the two sides are different in size.

the so-called hedge settlement means that after traders open positions in the futures market, they usually close their transactions through hedging instead of delivery (that is, delivery spot). After buying and opening a position, you can discharge your obligations by selling the same futures contract; After selling and opening a position, you can cancel the performance responsibility by buying the same futures contract. Hedging makes it unnecessary for investors to close futures trading through delivery, thus improving the liquidity of futures market.