How To Guide For: Understanding What Hedging Means & How It Works

Hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. Hedging employs various techniques but, basically, involves taking equal and opposite positions in two different markets such as cash and futures markets. Hedging is used also in protecting one's capital against effects of inflation through investing in high-yield financial instruments (bonds, notes, shares), real estate, or precious metals. Investors hedge one investment by making another. Technically, to hedge you would invest in two securities with negative correlations. To get more in depth information on what hedging means and how it works click on the pictures below to read the articles.