How Hedgers and Speculators work together to exchange risks in terms of purchasing and selling. Explain how both participants interact in reversing trade and the purpose of having daily price limits as a feature of currency futures.

Hedgers and speculators work together to exchange risks by locking in a fixed price for future transactions. Hedgers use the futures market to reduce their risk of loss associated with commodities price fluctuations, while speculators use it as a way to make money off of those same fluctuations. The hedger buys or sells futures contracts at set prices in order to protect their profit margins if the price of their underlying commodity moves against them.

The speculator on the other hand, takes advantage of these price movements by buying low and selling high. They essentially become “middlemen” between buyers and sellers, taking on higher levels of risk but also potentially earning greater rewards when done correctly. By working together, hedgers and speculators can both benefit from exchanging risks in terms of purchasing and selling commodities .

One example is known as “reversing trade” which occurs when a hedger buys one contract then immediately sells another at different prices thereby offsetting any potential losses due to fluctuating markets conditions. Additionally daily price limits are also an important feature currency futures since they provide guardrails within which market participants operate thus keeping trades fair transparent while reducing overall speculation dangers.