Forex hedging is the act of reducing or preventing losses that occur from unexpected events within the FX market. Hedging strategies can be applied to all financial markets, but in particular, forex is the most common, given the number of influencing factors.
The forex market is the largest and most liquid financial market in the world, and with over 330 forex pairs available on our online trading platform, there is no shortage of foreign currencies to trade. Forex traders have therefore created various forex hedging strategies in order to minimise the level of currency risk that comes with various economic indicators.
Forex brokers offer financial derivatives to hedge against currency risk, which are typically over-the-counter products. This means that they do not trade on a centralised exchange and in some cases, derivatives can be customised at a certain point throughout the duration of the contract. However, OTC trading is not regulated and is generally seen as less safe than trading via an exchange, so we recommend that our traders have an appropriate level of knowledge before opening positions.