What is the difference between hedge funds and mutual funds?

Both are funds which is collected from you and me, so the hedge fund is also a type of mutual fund where the money will be engaged to take derivative positions.. Please dont think them as speculative positions . almost all positions will be well covered

Hedge funds are managed much more aggressively than their mutual fund counterparts.
They are able to take speculative positions in derivative securities such as options and have the ability to short sell stocks.
This will typically increase the leverage - and thus the risk - of the fund.
This also means that it's possible for hedge funds to make money when the market is falling.
Mutual funds, on the other hand, are not permitted to take these highly leveraged positions and are typically safer as a result.