Financial activities, and especially activities related to earnings at constantly changing exchange rates, invariably involve various risks. The risk of loss, which arose due to the adverse change in the exchange rate of one of the currencies, was called the currency risk.
Such currency risks are peculiar to foreign trade activity. At the same time, as a result of the depreciation of the payment currency, the exporter loses, and as a result of the increase, the importer loses. In the sphere of bank savings, deposits in precious metal or foreign currency are risky.
Professionals in this field have long thought about how to at least partially protect themselves from the consequences of an unsuccessful outcome of a venture. Thus, one of the methods of stabilization and guarantee of currency activity is hedging of currency risks. It is carried out in the form of the conclusion of urgent transactions, in order to avoid undesirable fluctuation of prices for currencies. Hedging currency risks is a reliable way to protect finances from damage caused by undesirable movement of exchange rates. The value of the currency at the time of conclusion of the transaction is fixed in the foreign exchange market.
Hedging is one of the ways of insurance of currency risks. Along with it, the services of specialized organizations on insurance of transactions, the choice of foreign trade contract currency and much more are also practiced. For Forex or CFD contracts, hedging gives you the opportunity to keep the money even in very strong negative situations.
As for me, I’m working with FXG Trade for half a year – and it is the first place where my analyst asked me if I use this strategy in my trading experience. So far other brokers didn’t care for paying attention to my trading style. And the advice I’ve got here was very helpful, especially on the edge of crypto volatility this autumn.
Various kinds of currency clauses in contracts for deals are actively practiced. In this case, it is necessary not only to qualify a lawyer, but also to be highly competent in the functioning of the foreign exchange market, so that the reservation in the contract serves the good, rather than detrimental to your finances.
In any case, it is necessary to remember that currency risk insurance assumes a fixed transaction value and excludes the opportunity to earn on a favorable growth in the exchange rate – that’s what I learned from trading with FXGTrade. If you want to take a risk, you need to adequately analyze the current situation, make a forecast for the possibility of favorable or unfavorable growth.
If it is more important for you to carry out the transaction guaranteed without loss, it is reasonable to insure yourself.
FXGTrade commutiny gave me a lot of new instruments, and I’m starting to share them with you. If you trade with same broker – I would like to know what you think of FXG Trade and fxgtrade.com!