The fluctuation of exchange rate and interest rate makes holders, traders, banks and enterprises need to adopt hedging to minimize risks. The so-called foreign exchange hedging refers to futures contracts that are bought or sold in the spot market and sold or bought in the futures market at the same time. When the contract expires, the cash purchase gains and losses caused by exchange rate changes can be covered by forex futures trading gains and losses. Hedging of foreign exchange futures can be divided into buying hedging and selling hedging. Buyer's hedging refers to people who are short in the spot market buying futures contracts in the futures market to prevent the risks brought by the rise of exchange rate. Applicable to importers and short-term debtors in international trade. Selling hedging refers to people who are in a long position in the spot market, in order to prevent the risk of exchange rate decline, selling futures contracts in the futures market. It applies to exporters, money market deposits, receivables, etc.

Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.