Thread by @DoopieCash

Hedging 101

Hedging allow you to stay in position during trend changes while also playing the counter trend. Counter trends can vary quite a bit making them much more unpredictable than the main trend.

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Hedging is next tier trading (and i will only explain the basics here...) since you need to monitor and manage multiple positions so if your not yet able to CONTROL a SINGLE trade, hedging wont be a thing for you.

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To properly hedge you need to FULLY understand trend (and the underlying market structure), especially trend in trend because that's the movement we're looking for. Work down the time-frames W→ D → 4h → 1h → 15m

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In this 101 we will be hedging with counter trades (leveraged future contracts as trading vehicle) i know you can make use of options but I will lose to many ppl this way.

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When hedging you have 2 options:
-Cover
-Snowballing

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Cover:
Eliminate counter party risk. If you're expecting heavy PA/volatility due to a black swan or something else you have the possibility to protect lock-in your funds. This will result in a net neutral position:
-10 BTC hodl
-10 BTC shorthedge (leverage, no 10 BTC needed!)

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Snowballing:
I like to use my hedges to actually fuel my main trades (& still benefit from the risk covering). This way the profit I make on the counter trades will flow into my main position making it bigger and bigger over time.

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If you have large uptrends (like $BTC often does) this will result in REALLY HUGE positions & PNL at the end while maintain a low risk profile.

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Each trade and therefor each hedge comes with its OWN trade SETUP.

So when trading our main trade (trend) we have a plan consisting of a:
-Entry
-TPs
-and our SL

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When a TP get hit we're not only able to actually take profit but also to open a hedge and since every TP is placed against a resistance, every TP is a possible location to open a hedge.

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When we open a hedge we will use the same setup:
So entry, Tps & SL no exceptions!

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If a hedge gets stopped without hitting a TP well tough luck move on to the next! Only ~50% of the hedge trades will hand out significant profit. But if you maintain the proper risk management this will result in exponential growth and a free insurance as extra perk

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To summarize:

Enter trade, take profit, open hedge, take profit on hedge, fuel main trade, repeat

Remember buy protection (hedge) when you can, not when you have to...then you're already to late!

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Dont mind the typos cba to check atm...only the message matters 😘