Binance Hedge Mode: Trade Crypto with Zero Risk
Let’s talk about future hedge mode. I know that many of you have lost your trading capital to futures trading before, some may have received liquidation calls like 50 times in the past. I know how hard it feels, it can make you have a horrible day.
Those of you that keep trying each time you get liquidated, you all are legends!
Generally, crypto trading is not for sissies (Google that word). It is for strong-minded individuals.
Those who have enough discipline to stick to their trading plans even when they make bad trades are legends. You don’t abandon your plan because of losses, rather, you re-evaluate your strategy, make a slight tweak and try again. This time, you should add Binance future hedge mode to your trading strategies, at least, try it before you trash it.
I have been liquidated on Binance Future several times, I don’t need to hide it…. See evidence right there.
Imagine that I am a clergyman, I will say something like this “This Is Your Year of Zero Liquidation.”
Come for special deliverance. Lols😄😄
That’s on a lighter note, I am going to share details of my hedge mode strategy with you and how I have been using it to dodge liquidation bullets that keep flying here and there. Even after teaching you, you are still going to have problems, as God has shown me in my dream. I heard you say something like ‘God forbid.’
Because of the simplicity of my teachings, you will;
- Take it for granted
- Think it doesn’t work because you will not try it
- You have tried it before, but did not make much profit and right now, you are reluctant to try it again.
- You find it extremely difficult to unlearn or relearn
When I said that you will have problems with the knowledge, do you see what I mean right?
Regardless, I will go ahead and show you why Binance did not allow you to use hedge mode by default. They want you to keep using the single mode:)
Right now, your account is on single mode, and I can bet with you! You need to change it to hedge mode if you want to practice this strategy.
I don’t want to waste time with the tutorial on how to switch, watch this tutorial now and do it yourself 👇🏽
I will give you some minutes so you can change to hedge mode. Go watch the video tutorial now and return back to this article.
Are You Ready to Trade Without Getting Liquidated?
Now, you are using hedge mode. It means that your account can long and short an asset at the same time. It means that if you know what you are doing, you should not be liquidated regardless of market direction.
You have activated a feature that Binance does not want you to enjoy by default. What is the use of a Ferrari that you don’t know how to drive? Let's get started with the class.
I will use Bitcoin as an example.
Usually, if you short BTC and the price begins to rise, you will be losing some money, right? If you long BTC on the same account, Binance will close your short position automatically. It means that you cannot eat your cake and still have it. Yeah!
Let’s assume that you are shorting BTC at $22k, as the US released an update on CPI, you got a -40% loss on your short position because Bitcoin pumped to $28,000.
Oh, that feels sad:(
If you are using the single mode, you have two options;
- use stop loss or
- wait till the liquidation price is reached
If you are using cross margin, this is going to push you to a tight corner. Why? The unrealized losses will be added to your balance. Imagine that you have a $100,000 wallet balance, and your unrealized loss is negative of $45,000. Because you are using cross margin, your new balance will be $100000 + (-$45000)= $55000.
At this point, it is looking more technical or advanced. No, it is not, that’s basic maths.
I will try and break it down to your level. If you have any questions, feel free to send me DM on Twitter.
Let’s Define Cross Margin
Cross margin is when you allow Binance to take on your money in a situation where your loss is more than collateral. Hmm, what is collateral? I will explain, trust me.
On the futures market, you are trading with borrowed funds. Maybe you have been seeing people who are using 20x leverage, what they are telling Binance is this.
Hey! I am a badass trader, give me a $2000 loan, and I will use $100 as collateral. If anything should go wrong, take all my $100. Is this not what you do when you take a bank loan? When things go wrong, Binance will take over your collateral and fine you extra money for stressing Cz. Haha.
For cross margin, you are using all capital on your futures account as collateral.
Definition of Isolated Margin
For isolated margin, you are using a specific amount as collateral for your loan, and your unrealized losses will not be subtracted from your wallet balance. But its disadvantage is that you are going to have a low liquidation price.
For example; if A and B use isolated and cross margin respectively, and both decided to short bitcoin with 20x leverage at $20000 entry price, and the liquidation price of Mr. A is $24,000 because he is using an isolated margin. Mr. B will enjoy a better liquidation price based on his wallet balance. The bigger his wallet balance, the larger his liquidation price, it could be as wide as $54,000. As long as Bitcoin did not rally up to $54,000, he can stay in that position.
Do you understand?
Become Futures Hedge Mode Ninja
If you are using hedge mode, all these will not really matter. Why? You will find out now. Again, you need discipline, dedication, and time.
As a matter of personal discipline, have a resolution that you don’t want to lose more than 40% in a trade.
If you are shorting BTC, after having -40% PnL, you will open long as a counter trade with similar position size. Even if BTC keeps pumping hard, what you may have lost in the short position, you will recover all with the long position plus extra profit if your position size is slightly higher on the long position
When there is a new trend and you are caught unaware, you have to hedge it. Is that clear enough?
With a single mode, this is not possible. Those who do not know how to use this feature will go to the spot market to hedge their position. Lols, you don’t need it.
Similarly, you can hedge a winning trade. It helps you lock in your profit when you are not sure of a new trend direction.
What if the price keeps moving in a channel? Something like ranging…
You can still use hedge mode with periodic dollar cost averaging.
With what I have taught you now, you have no business with liquidation. Even when your short is liquidated, the long position will help you recover your losses, and make sure that your trading capital is intact.
Try Binance Futures Demo Account
Maybe you would like to practice what I taught you, but you are not sure that you understand it yet.
Get your hands dirty with the Binance futures demo account, some of you don’t know about it:)
Open a demo account here and try it with $3000 capital 👇🏽
I hope that you have gained valuable insights into how expert traders use this tool to their advantage, it is not as difficult as you are imagining. As long as you give it a try, the potential of hedge mode will reveal itself. After a while, you will being to use it profitably. Remember the rule, if you are not winning, preserve your capital, it is the only tool you need to fight back. In my opinion, the hedge mode feature is Binance’s gift to the world. Don’t have a Binance account yet? Sign up now.
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About the Author
Ojeniyi Ayobami Abimbola has been trading cryptocurrency since 2015, and he is a blockchain content creator and a crypto coach at Cryptoniche. You can connect with him on: https://t.me/cryptoniche_hangout
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