Example
An airline buys oil futures to lock in next year's fuel cost.
In practice
Hedgers are in the market to remove risk, not to predict price. A farmer sells futures to fix the price of a crop that is still in the ground; an exporter sells a foreign currency forward to lock in what a future payment is worth.
Their steady orders, placed whatever the price, add liquidity that speculators trade against. In commodities, reports that separate commercial hedgers from speculators are followed as a guide to how each group is positioned.
What to watch for
Hedging has a cost and caps the upside as well as the downside. For a retail trader, opening an opposite position at the same broker rarely reduces risk in a useful way: it mostly doubles the spread and the financing.