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Do you want to use Hedge on Detoken but still in doubt on how to use and how to earn?
I created this article to answer almost all the concerns regarding hedging. I will do my best to explain thoroughly and simplify everything about hedge positioning😁.
What is Hedge?
It is a type of position wherein we can lock-in the dollar value of our Bitcoin cash. As we all know that crypto is very volatile, on Hedging we can escape that volatility and reduces the risk of losing.
If you're new to this article and want to know more about Detoken, please visit my previous articles here:
Crypto market is so volatile or that in a matter of seconds, price can jump or dump dramatically. Advantage of volatility is we will gain faster and bigger, equally the disadvantage is we can lose too🙄
When Hodling your BCH in your wallet, the BCH amount is stable while the value of it moves.
For example I have 1 BCH in my wallet right now and i just hodl them. The current price is at $500. So it means I have 1 BCH worth $500.
Then after few minutes the price became $450, My BCH in my wallet is still 1 BCH but the value became $450.
So what is the relation of this in Hedge?
In hedge, as I said our usd value is being locked. So it is the opposite of what I have mentioned above.
Instead of the BCH itself is being stabilized, the USD value will be stabilized and the BCH amount will adjust according to what the price is.
I will now cite an example regarding this.
The current BCH price is $400.
We have $10 usd (0.025) worth of BCH in our wallet.
*We entered our hedge position using our $10 (0.025 BCH) with an entry price of $400.
After 24 hours or 144 blocks, this happened:
SCENARIO 1: BCH price drops
Our position is now closed and from $400, BCH price decreases to $300. Therefore the initial margin of $10 will still become $10, no change.
But the amount which is from 0.025 will become 0.033.
Now I guess you see the difference, your 0.025 is now 0.033 in your wallet, Both are $10 usd in value.
The good thing about it, the current price which is now $300 will, for example increased to $400, So what you think will happen to your 0.033 bch?
The answer is your $10 will become $13.2 🥳
You earned $3.2 in just approximately 24 hours! 🎉
SCENARIO 2: BCH price increased
What if the BCH price increased after 144 blocks? For example from our initial entry of $400 it became $500.
Our initial balance of $10 is still $10 after the position settlement.
But the amount differs, from 0.025 to 0.02.
You will say that your balance decreased. Well that's true, the bch amount was decreased by 0.005. Technically you loss 0.005 bch in that current price.
But in reality you did not lose because your balance is still $10, because of the value of bch is in $500. 🎉
Here is my visual representation of the example above:
In my drawing above, Red arrow is the scenario 1 and Green arrow is the scenario 2. Either increase or decreased, the $10 margin is retained while the BCH value is changed depending on which direction the BCH price goes. 😉
Another benefit of Hedge
Every position we make, we will earn an additional premium. This funding fee is added to our balance. Here's an example from my current hedge position
How to maximize your earnings?
Now to maximize our earnings with Detoken, I will suggest a simple strategy. Take note, this is just my idea and not a financial advice. You may or may not use it and please do your own research regarding basics of trading and how to manage your risk.
To make the most out of hedge, I just thought that we can place Hedge position WHEN the price of BCH is higher. And place our Long position when the price is lower.
How to know if the price is lower or higher? We need first analyse the charts and predict the price movement. Learn first the basic of support and resistance and also the chart reading to better understand the analysis.
Our main goal is to achieve the scenario 1 in my example. We want to have a price drop, why? Because in that way the BCH amount will increase.
And the good thing about it if ever it will not drop? The scenario 2 will cover your earnings, still not a loss.
So what's the purpose of long here, If you have a strong prediction that BCH really on bull run or will increase, place long and together with hedge.
Take note: Long is still riskier, you may lose your BCH here if not properly entered. Long has a leverage of 3x, not that much risk but still it cam deduct a significant amount of bch if ever the price decreases.
So that's basically my strategy here.
Either way if you're just Hedging alone, you still earn and avoids volatility. The good thing is even you skipped my suggested strategy and just place hedge position anywhere you like, you still win the trade.
Take note that scenario 1 is better than scenario 2, But both scenarios are all in our favor.
Did I explained it well? Any questions or clarifications, feel free to ask. I will answer it as best as I can. 😁
Small gain matters, it's still a gain. Little by little, our goals in life will be achieved. Patience and pereseverance are our key to success. >>p1sce5