Hedge mode is a function that allows you to enter in a long and short position simultaneously. Given the volatile nature of the cryptocurrency market, charting a low risk trading strategy is the key to beating the odds of a sideways market.
Professional traders use hedging to optimize their trading strategy. This could sound complex and a bit overwhelming for you, hence at Bitunix we have devised the perfect solution – Hedging Mode. This function will enable you to trade like seasoned traders but without complexities.
In this article, we will take you through the step-by-step process for using hedge mode for trading in crypto futures.
What is hedge mode in crypto futures trading?
Hedge mode is a feature in futures trading that allows you to close either long or short position depending on where the asset’s price is heading. In comparison to the one-way mode, hedge mode enables you to maximize the crypto asset’s price trend.
Unlike one-way trading where you will have to open and exit orders manually, hedge mode, on the other hand, minimizes the steps of changing contract positions.
Watch our detailed guide on How to use Hedge mode on Bitunix?
Hedge Mode vs. One-Way Mode
To fully grasp the significance of hedge mode, it’s important to understand how it differs from one-way mode.
| Feature | Hedge Mode | One-Way Mode |
| Positions | Allows long and short positions simultaneously. | Only one position (long or short) at a time. |
| Risk Management | Enables risk hedging by offsetting positions. | No built-in risk offset mechanism. |
| Flexibility | High flexibility in adapting to market trends. | Less flexible; requires manual adjustments. |
| Efficiency | Simplifies strategy execution. | Requires more manual intervention. |
| Complexity | Slightly more complex to set up but highly effective. | Simpler to manage but limited in scope. |
How to place a long and short position using Hedge mode?
- Usually, hedge mode is enabled by default. However, if it’s not, then simply head to the settings icon in the down right corner of the dashboard and change the position mode from one way to hedge mode.
- Now, once you have hedge mode enabled, make sure that you have enough funds in your futures account. If not, you can transfer crypto from your Bitunix spot account to futures without any internal transfer fee.
- Once done, you can choose the trading pair to place your futures order. Next, place a long and short order and set your take profit and stop-loss condition to protect your funds from forced liquidation. (This will ensure that your funds are protected from any unforeseen volatility)
- You can easily monitor the buy and sell orders on the same trading panel. Tracking both positions is easy, thanks to the colour-coded position indicators.
- Monitor the trades and close either of the positions depending on your strategy and the price performance of the asset.
Pro Tips for Trading with Hedge Mode on Bitunix
- Develop a Clear Strategy: Before opening positions, decide whether you aim to hedge against potential losses or capitalize on short-term price fluctuations.
- Use Leverage Cautiously: While leverage can amplify gains, it also increases risk. Start with lower leverage ratios and increase gradually as you gain confidence.
- Diversify Trading Pairs: Hedge mode works best when you use it across multiple trading pairs to spread risk.
- Regularly Adjust TP/SL Levels: Market conditions can change rapidly. Ensure your TP/SL settings remain aligned with current price trends.
When to Use Hedge Mode for crypto futures trading?
The effectiveness of the hedge mode depends on your goals and market conditions. Below are some scenarios where hedge mode can be particularly advantageous:
Volatile Markets: Crypto markets are notorious for their sharp and unpredictable price movements. Hedge mode allows you to protect your positions while staying in the game.
Ranging or Sideways Markets: In markets where prices move within a defined range without a clear trend, hedge mode enables you to profit from both upward and downward price movements.
Hedging Against Losses: If you hold large spot positions in a particular cryptocurrency, you can use hedge mode to protect your portfolio by shorting futures contracts on the same asset.
Leveraged Trading: Hedge mode is particularly useful for leveraged trades, where the stakes are higher. By offsetting risk, you can use leverage more confidently.
Read Also: 5 Best Strategies for Crypto Futures Trading
Common Mistakes to Avoid while using Hedge Mode
- Overcomplicating Strategies: While hedge mode offers flexibility, overly complex setups can lead to confusion and mistakes.
- Neglecting TP/SL Settings: Failing to set TP and SL levels exposes you to unnecessary risks.
- Overconfidence: Hedge mode reduces risks but doesn’t eliminate them. Always approach trading with caution.
Wrapping Up
Hedge mode is a game-changer for traders in the crypto futures market, offering an efficient, flexible, and risk-optimized approach to trading. With Bitunix’s Hedge Mode, you can take control of your trades and navigate even the most volatile markets with confidence.
By following the step-by-step guide above, you’ll be well on your way to trading like a pro.
