Forex basics-Forex Hedger, FX Hedging and Speculating. Many institutional investors and corporations who import and export offset the currencies they trade in their business by hedging in the forex markets. This offsets possible losses caused by sell products or services at a fixed price where profits can be eroded by currency fluctuations. Trading in the forex markets over comes this corporate problem faced everyday by businesses.
2. Foreign exchange traders can be separated into two groups, Institutional hedgers and private or corporate speculators.
3. Hedgers: Governments, companies (exporters and importers) and some investors have foreign exchange exposure which has to be off-set. Movements between their domestic currency and the foreign trading currency affects profits
4. Business Hedging with forex for the exchange of goods and services or investing in currencies, commodities will affect the bottom line. This is the core of all foreign exchange trading; however it only makes up approximately 5% of the actual market.
5. Speculators: This group includes banks, funds, corporations and individuals Creates artificial rate exposure in order to profit from the variations or movements in the price.