2021-05-23 13:50:54
What is hedge? Simple strategy: you got an alt bag, market conditions changed and you experiencing losses . Some alts have margin and it makes sense to hedge short it, thus if market goes down you will be profited from your short which recovers some of your losses
In case the alt have no margin and can not be shorted, you can start partially close your position, so that you at least limit your losses.
When it makes sense to hedge? 1)
When you have a large capital and to save the capital is the first priority rather then make profit.
2)
When it's high risk investment, which is more likely there won't be a recovery on an asset.
3)
in swing trading makes sense to hedge your losses as well, as the priority is to make more profitable trades, so you simple cut your losses and going to another asset. in this strategy though it's most difficult to make up your mind.
How to make a decision?
Small tips:
- Define some losses threshold, once it's reached you starting hedging (
ex. you got -20%, it makes you act)
- If you have several assets in your portfolio and all of them going down, at least cut the high risk assets, them are weaker and will suffer the most.
Friendly advice to think about your investments from the start:
1)
try to define the risk of an asset and invest according amount to it, that fits your risk tolerance.
2)
try to define the market conditions.
3)
at least have some plan of how you get out if something goes wrong.
Those are just simple hedge strategies & tips. There is a not a one answer to all problems though, and it will always up to you how to act, which will depend on your risk tolerance and experience. I hope this small thread will help you a bit.
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