what is hedging and speculation?

This is a discussion on what is hedging and speculation? within the Economic & Fundamental Analysis forums, part of the Methods category; What is the main difference between hedging and speculation ??????????????? please describe it in detail....

Reply
 
LinkBack Thread Tools Search this Thread
Old Mar 4, 2011, 6:42pm   #1
Joined Feb 2011
what is hedging and speculation?

What is the main difference between hedging and speculation ???????????????please describe it in detail.
aj7harrison is offline   Reply With Quote
Old Mar 4, 2011, 7:03pm   #2
Joined Dec 2004
Re: what is hedging and speculation?

Speculation is attempting to benefit from a change in price. Buy low, sell high.

Hedging is looking to eliminate or reduce exposure to a particular sort of risk. For example, a multi-national corporation may hedge transactions done in foreign currencies to eliminate the risk of adverse exchange rate moves.
__________________
John Forman, PhD
Author - Trading FAQs, The Essentials of Trading
Rhody Trader is offline Training literature vendor (e.g courses / spreadbetting guides / eBooks)   Reply With Quote
Old Aug 23, 2012, 10:45am   #3
 
Parkercarr's Avatar
 
2 Posts
Joined Aug 2012
Re: what is hedging and speculation?

Speculation is the practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market value of a tradable good such as a financial instrument.
Hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities.
Parkercarr is offline   Reply With Quote
Old Aug 23, 2012, 12:04pm   #4
Joined Sep 2011
Re: what is hedging and speculation?

Go through to this link: What is the difference between hedging and speculation?
Here is described difference between hedging and speculation.
Patricia12 is offline   Reply With Quote
Old Oct 12, 2012, 10:14am   #5
 
BillyRubin's Avatar
 
2 Posts
Joined Oct 2012
Re: what is hedging and speculation?

Hedging involves in reducing risk in order to focus on another subject, while speculating involves taking on risk in order to profit from insight.
BillyRubin is offline   Reply With Quote
Old Oct 29, 2012, 9:29am   #6
 
Skynets's Avatar
 
2 Posts
Joined Oct 2012
Re: what is hedging and speculation?

Hedging offers an element of protection against price risk, whereas speculation involves deliberately taking a risk on price fluctuations, in the hope of obtaining a profit.
The hedger gives up some opportunity in exchange for reduced risk. The speculator on the other hand acquires opportunity in exchange for taking on risk.
__________________
Successful moving companies New York City
Skynets is offline   Reply With Quote
Old Oct 29, 2012, 10:59am   #7
NVP
 
NVP's Avatar
Joined Jun 2004
Re: what is hedging and speculation?

Hedging is the posh term Traders use to disguise the Speculation they are really doing
NVP is offline Coach/Trainer   Reply With Quote
Old Oct 30, 2012, 6:35am   #8
 
forever_young's Avatar
Joined Oct 2012
Re: what is hedging and speculation?

Another difference:
Both broker an trader are using hedging and speculation. But trader hedge from the risk to blow up, and broker hedge from the risk of profit by the trader.
__________________
"Experienced traders control risk, inexperienced traders chase gains." -Alan Farley
forever_young is offline   Reply With Quote
Old Nov 7, 2012, 11:26am   #9
 
2 Posts
Joined Nov 2012
Re: what is hedging and speculation?

Speculators look to make a profit from price changes. Hedgers look to protect against a price change
The main purpose of speculation, on the other hand, is to profit from betting on the direction in which an asset is going to be moving. Hedgers reduce their risk by taking an opposite position in the market to what they're trying to hedge.
__________________
Quality Meeting Venues London for your business conferences
Landmark is offline   Reply With Quote
Old Nov 30, 2012, 3:56pm   #10
Joined Nov 2012
Re: what is hedging and speculation?

I think Rhody Trader gives the best definition. Hedging reduces a form of risk. Given the natural inverse relationship between risk and reward (or at least the academic inverse relationship), one should expect lower mean returns and lower variance of returns from hedging. If your hedge adds extra PNL, then you should really think as to whether or not you're actually mitigating risk.

In the book "Boomberang" by Michael Lewis, among other things, he investigates the causes of the Icelandic financial crises, and he found that prior the the crisis, speculation had become almost a national passtime. He said that people loved to hedge, as long as the hedges made money too.
holmes16 is offline Newsletter / tip sheet / trading advice vendor   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
Gold Cartel Speculation shehanb Commodities & Money Markets 2 May 7, 2009 4:52am
E Net Speculation Theurgian Spread Betting & CFDs 20 Jan 15, 2004 10:16pm

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)