Hedging is a way for spot traders (buyers and sellers of spot) to avoid the risk of spot price, that is, the spot buyer should prevent the price from rising and the spot seller should prevent the price from falling and do the selling hedging. Its purpose is to obtain the best price, maximize profits and avoid spot price risks.

Hedging is a mutual protection transaction to avoid extreme markets. For example, chemicals and metals have high financial properties. In order to prevent the spread of the European debt crisis, investors look at more copper while bearish on crude oil, so that when extreme markets appear, one party will always gain and the other will lose, thus hedging unilateral risks.

Swaps-very similar to hedging, but swaps can only be used in one way, that is, to look at how many recent contracts short long-term contracts at the same time, or to look at how many long-term contracts short-term contracts do at the same time.

The essential difference is that

Hedging-Futures contracts hedge spot risks.

Hedging-using different varieties with high correlation to hedge risks with each other.

Swap-Use the same futures products in different months to hedge future and near-term risks.