Forex Hedging

Know About the Hedging in Forex

According to the experts of AAG Markets, the investment world no doubt is full of risk. And it’s no surprise investors, traders and businesses are always on the lookout for ways to mitigate those risks. Forex Hedging itself is an action taking in the form of investment to offset the potential loss or reduce the risk of losses from an asset. In foreign exchange (Forex), hedging can be a useful tool to mitigate the risk that comes with transactions in foreign currencies.

Hence, AAG Markets, a global financial firm is going to discuss everything you need to know about Forex hedging, including the strategies employed in Forex hedging. Read on!

What is Forex Hedging?

According to experts of AAG Markets, Forex Hedging is the act of protecting one’s financial position against risk or severe movements in the market. This is strategically carried out by placing a hedge in the opposite direction within the same currency pair or buying Forex options.

Companies or businesses involving in international trade are most times prone to risk due to fluctuations in the value of foreign currencies. Hence, the need to offset the potential loss and safeguard positions in the foreign exchange market becomes inevitable.  However, when a company sets up a hedge and there occurs a favorable movement in the market, the company will also have to forgo the gains or profits. 

It is important to know that not all Forex brokers allow hedging and it is also considered illegal in some financial markets mainly the US. Therefore, ensure you check out the policy first before engaging in Forex Hedging.

Strategies Involve in Forex Hedging

There are different strategies that Forex traders implement to hedge against risk. However, the AAG Markets explores 3 commonest strategies that you can implement depending on your level of experience and the brokers’ hedging policies.

1. Simple Forex Hedging

A simple Forex Hedging strategy is a way in which a trader protects his position from volatility or undesirable move by opening an opposing position in the same currency pair. That is, a trader can go long (buy a position) and then go short (sell a position) on the same currency pair. Hence, all potential risks (gain included) are eliminated at the same time.  This is also known as direct hedging and it is the simplest form of Forex hedging.  

Although the gain on this strategy is zero, there are still chances of making money when you keep the original position and then make money through your short position when the market trend reverses. 

2. Multiple Currency Hedging

This is a multi-currency cross hedging strategies traders use in reducing exchange rate risk. It is more complex than simple Forex Hedging and companies operating in two or more countries with different currencies most often do employ this approach to protect their position. 

Multiple currency hedging involves buying a long position in one currency and a short position in another currency to reduce risk. This means selecting two positively correlated currencies such as EUR/USD or KWD/USD and then taking different positions on both sides. For instance, a trader might take a long position in the EUR/USD market and then hedge the risk by buying a short position in the KWD/USD. The aim is to hedge the risk of exposure of USD. However, this does not safeguard any fluctuations that might occur in both EUR and KWD. 

If this strategy works in your favor, you might make some profit, and if otherwise, you might incur losses in multiple currencies. Therefore, hedging more than one currency pair carries its own risk.

3. Forex Options Hedging

Options have been popularly used over the years as a useful tool to hedge against exposure to risks. A Forex option is an agreement to make an exchange at a specified price and at a specific time in the future.

For instance, a trader can buy a put option for a specified time after going long on a currency but expect to see currency value diminish. Whereas, a trader who has gone short on a currency pair can buy a call option to reduce the risk that might arise when the movement moves upward. However, this strategy is an imperfect hedge and only some of the risk (and likely gains) are usually eliminated.

Can I involve in a Forex Hedging?

As a business or trader, the main reason for hedging is to limit the risk of exposure when there is market volatility said by experts of AAG Markets. Businesses making transactions in different currencies can benefit from Forex hedging and if timed right, can make profits.

Cryptocurrency Adoption

AAG Markets | Cryptocurrency Adoption by Businesses

Over the past decade, the payment landscape has undergone quite remarkable changes. Consumer demand for richer experiences and greater convenience has led to an increase in online shopping and the rising expectations that the payment systems should be efficient and secure. According to Henry Powell – CEO of AAG Markets, innovative means of payment are springing up to provide a more efficient and seamless payment experience. This led to the creation of the decentralized payment system and the rise of the booming digital currencies popularly known as cryptocurrencies. A peer to a peer payment method that doesn’t require a third party. How is cryptocurrency changing the game in the business sector? Could this be the chief way consumers will be paying for goods and services in this digitalized world?

Let us examine with AAG Markets, a global CFD trading platform that understands the value of cryptocurrencies as a payment method. Let’s dig in!

Understanding Cryptocurrency

Unlike the traditional money, cryptocurrency is a digital currency that serves as a medium of exchange between peers without the need for a third party like a bank or any financial institutions. It connects consumers digitally to ensure a transparent transaction that is secured by cryptography and confirmed by blockchain through a mining process. Hence, it provides secure and transparent transactions while making counterfeit, double-spend or fraud nearly impossible. It’s no surprise businesses and consumers are turning to cryptocurrency as a fast, secure, efficient and lower-cost payment system.

The Rise of Cryptocurrency

With 36 percent of the small and mid-sized businesses accepting cryptocurrency, while 59 percent of those companies purchased digital currency for their personal use according to the HSB survey. Not to talk of many large companies accepting bitcoin as a payment system and legitimate source of fund, cryptocurrency is sure taken over the market place. Moreover the use of cryptocurrency-

1. In the Travel Sector

Many companies have integrated this technology into their businesses especially one of the largest industries in the world- the travel and tourism industry says Henry Powell – CEO of AAG Markets. From booking a flight to paying for hotel rooms to making a parking reservation, businesses are looking to make payment easier and seamless for their consumers. For instance, providers such as, Shuttlefare, Expedia, and Greitai, have embraced this payment method allowing customers to pay for a flight ticket or hotel room from their crypto wallets.

2. In E-commerce

Although the eCommerce has experienced growth and it is one of the booming industry, it cannot be denied that the industry has faced challenges with the fragile infrastructure associated with traditional financial systems where customers use their credit/debit cards to make purchases online.  Some companies such as Amazon, Newegg, KFC Canada, overstocks are few of the big players accepting cryptocurrencies. Apps, such as Circle, Square, and even Revolut, have integrated cryptocurrency buying and selling, to attract new customers to their sites. The low-cost transaction fee, faster transactions, and boost of brand image are all part of the reasons why e-commerce is turning to cryptocurrencies. There is more however to be explored in this space.

3. In the Financial Sector

Financial services are also not left out. Some forward-thinking banks are using the cryptocurrency model to ascertain how they may provide security services in a more efficient and cost-effective manner. For instance, more than 121 banks have signed up with Ripple, to promote cross-border transfers with the blockchain while reducing cost.  Global financial firms such as AAG Markets are also offering unique, transparent and efficient solutions to consumers when it comes to asset trading using cryptocurrencies.

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AAG Markets - CFD Trading

Why to Choose AAG Markets for CFD Trading?

The higher leverage coupled with minimum cost makes CFD one of the most preferred options of traders. Whether it is swing trading or day trading, the contract of difference, or CFD, in short, allows investors and traders to trade underlying assets without having to own it. It is based on a contract between the broker and the trader with an opportunity to speculate on the price movement of the financial market or asset. AAG Markets is one of the leading brokers offering varieties of trading opportunities for investors to benefit from. With the awesome benefits, CFD offers, you have made the right trading decisions when you work with the right broker.

Let’s dive into how CFD market works, the benefits and why you should work with AAG Markets?

How does CFD Work?

CFD trading works on margin. Whether it is currency, treasury, crypto or any other assets, if you predict that the price will go up, you can buy. In the contrary, if you predict the falling of the price, you can sell. As earlier stated, traders don’t buy or sell the assets but rather buy or sell some number of units depending on price speculations. However, with the margin benefits comes greater risk. Therefore, It is important to understand the instrument you are trading and keep abreast of market trends. Go through AAG trading academy to watch tutorials, read articles and learn techniques and tools to trade like an expert.

Why should you trade with AAG Markets?

1. Trade with a trusted CFD provider

The AAG Markets has gained the confidence of its clients and partners over the years. It is no surprise that the company has gained international recognition as a trusted CFD provider in no time.

2. Trade on a powerful, secure platform

AAG Markets provides intuitive trading. There are historical chart and market data that gives you the insight required in making honest investment decisions. Moreover, optimum security, functionality, and control are guaranteed with AAG cutting-edge technology.

3. High liquidity.

Here is a broker that guarantees high liquidity on assets short/sell or long/buy. They link traders up with high liquidity providers in the market space. Hence, you can take advantage of price movement in a relatively short space of time.

4. High Leverage

With AAG Markets, you get access to full opening with less capital. Remember that as much as this comes with a higher returns, the risks are also high.

5. Access to the global market on a single platform

The AAG Markets takes pride in its wide client base in more than 75 countries. This gives you access to the world’s popular global stocks

6. No price manipulation

Award winning AAG Markets does not charge commission or margin fees. The services are being compensated based on when the traders pay the spread. Hence a transparent transaction with no price manipulations.

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