Hedging Strategy on Binance Futures
What is Hedging?
Maybe you've heard of the term Hedging, but it seems like many people don't know it, so I'll just explain. Hedging is a strategy used to reduce the risk of loss in trading. In transactions on Binance Futures, hedging is opening an opposing position in the same or different market to offset potential losses from the initial position. Hedging is very useful in volatile market conditions.
Hedging Objectives
Hedging aims to protect assets from unwanted price fluctuations. For example, if you have a long position in Ethereum (ETH) and are worried that the price will fall, you can open a short position in Binance Futures to offset potential losses. So, if the price of ETH really falls, losses on your long position can be offset by profits from the short position.
Example of Hedging Setup in ETH
Initial Long Position: you open a long position in ETH at $3,500 using 10x leverage.
Market Conditions Change: The price of ETH is starting to fall and you are afraid that the price will fall further.
Hedging Position: open a short position at $ETH at $3,200 with the same or different leverage.
If the price of ETH falls to $1,700:
Long Position: you lose ($3,500 - $1,700) x leverage x amount of ETH.
Short Position: you profit ($3,200 - $1,700) x leverage x amount of ETH.
Benefits and Risks of Hedging
The main advantage of hedging is that it protects the portfolio from large losses. However, it is important to remember that hedging can also reduce potential profits. In addition, additional costs such as trading fees and leverage fees must also be taken into account.
Keep DYOR
I hope you keep making money, guys
