The constant price fluctuation in the forex market makes many investors balance their exposure using forex hedging. Forex hedging deals with opening additional positions strategically to limit potential losses on a trade. There are basically three types of forex hedging strategies investors employ. These are simple forex hedging strategy, multiple currencies hedging strategy, and forex options hedging strategy. Simple Forex Hedging Strategy - With this, you open the opposing position to an existing trader. So, if you have taken a long position on a currency pair, you will then take a small position on the same currency pair. This is a direct hedge whose goal is to limit your losses and not generate profits. Multiple Currencies Hedging Strategy - Here, you need to choose two currency pairs with a positive correlation with each other. So, if you have taken a short position on EUR/USD but opted to hedge your USD exposure by selecting a long position on GBP/USD. In case the EURO falls against the USD, a long GBP/USD position would mean a loss for you. However, the profit on EUR/USD will help limit the losses. Forex Options Hedging Strategy - With this strategy, traders get the right to exchange a currency pair at a given price prior to the expiry. Options help reduce your exposure. In case you take a long position of AUD/USD at $0.90. However, you decide to hedge your risk using a put option at $0.90 with a 1-month expiry after anticipating a sharp fall. So, if upon expiry, the price falls below $0.90, your long position would incur a loss. However, the option feature will help balance your exposure. In the case of AUD/USD rising, wait for the option to expire. You can thus only pay for the premium.