The so-called hedging is to make long and short positions at the same time for the same variety or related varieties to achieve the purpose of preserving value.

For example, I have 1,000 tons of steel in stock, but the market price is expected to fall, so I will short-sell 1,000 tons of steel futures.

If the price of steel rises, then I will lose money if I place a short futures order, but if the price of the spot steel in my hand rises, my profit and loss will be equal.

If the price of steel falls, then I will make money by placing a short futures order, but if the price of the spot steel in my hand falls, my profit and loss will still be the same.

Another example, I want to buy 1,000 tons of steel in a few months, but I am afraid that the price of steel will rise

(I am not afraid of falling steel prices, it would be better if they fall, but this cannot be guessed, Hedging can only be done when the current price is satisfactory).

So I will buy a long order of 1,000 tons of steel to hedge.

If the price of steel falls, I will lose money on the long order, but the price of the steel I bought also fell, achieving the price I was satisfied with in advance

If the price of steel rises, I will lose money on the long order. After making a profit, the steel I bought was also more expensive, but the profits from my multiple orders were able to balance the premium.

This is the purpose of hedging: to preserve value

Your problem is that if you want to buy the underlying asset in the future, but you are bearish, there is no need to go short. Once your prediction is wrong and the price of the underlying asset increases, your losses will double. Although you will earn double the price difference if the price drops, the risk will increase accordingly. In this case, it is better to speculate directly on futures.

This bearish or bullish trend is just the investor’s own expectation. Where does it come from? Investors guessed from their own experience