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 in crypto futures is a trading feature that lets you open and manage both long and short positions simultaneously on the same asset. Instead of being restricted to one directional position (as in one-way mode), traders can split exposure and use hedge mode to minimize losses, protect spot holdings, or trade market swings with more control.
For example, a trader can go long on BTC/USDT while also holding a short position in the same pair, using each leg for different strategies.
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.
Conclusion
Hedge mode in crypto futures trading gives traders the ability to manage long and short positions simultaneously, making it a practical tool for volatility, sideways markets, and hedging spot holdings. By using it correctly with leverage control, TP/SL settings, and a clear plan, traders can strengthen their risk management and gain more flexibility compared to one-way mode.
FAQs
What is hedge mode in crypto futures?
Hedge mode allows traders to open long and short positions simultaneously on the same trading pair, providing more flexibility than one-way mode.
Hedge mode vs one-way mode: what’s the difference?
Hedge mode supports long and short at the same time, while one-way mode only allows a single directional position. Hedge mode is better for risk management in volatile markets.
How to use hedge mode on Bitunix?
On Bitunix, go to futures settings, switch from one-way to hedge mode, fund your futures wallet, then place both long and short orders with TP/SL settings.
Can you hold long and short simultaneously on the same pair?
Yes. Hedge mode lets you hold both positions at once, which is not possible in one-way mode.
When should traders use hedge mode?
Hedge mode works best in volatile, sideways, or leveraged conditions, or when hedging spot holdings against losses.
What are the risks of hedge mode?
Risks include overcomplication, higher fees, and liquidation if TP/SL is not used. Hedge mode reduces risk but does not eliminate it.
Does hedge mode work with leverage and TP/SL?
Yes. Hedge mode works with leverage, take-profit, stop-loss, and even trailing stops, making it flexible for different strategies.
About Bitunix
Bitunix is one of the world’s fastest growing professional derivatives exchanges, trusted by over 3 million users across more than one hundred countries. Ranked among the top exchanges on major data aggregators, Bitunix processes billions in daily volume and offers a comprehensive suite of products including perpetual futures with high leverage, spot markets, and copy trading. Users can trade bitcoin and other major cryptocurrencies on the platform, taking advantage of advanced trading features. Known for its Ultra K line trading experience and responsive support, Bitunix provides a secure, transparent, and rewarding environment for both professional and everyday traders. Bitunix Academy adds structured lessons so you can build skills while you trade.
Bitunix Global Accounts
X | Telegram Announcements | Telegram Global | CoinMarketCap | Instagram | Facebook | LinkedIn | Reddit | Medium
Disclaimer: Trading digital assets involves risk and may result in the loss of capital. Always do your own research. Terms, conditions, and regional restrictions may apply.
