What is Hedging Mode?
Hedging mode allows traders to hold both long and short positions simultaneously on the same contract. This mode is useful for risk management, implementing advanced trading strategies, and protecting existing positions without closing them.
It is widely used by institutional and experienced retail traders to enhance risk control and quickly adapt to changing market conditions—all while maintaining multiple active positions within a single contract.
Why Should You Use Hedging Mode?
- Manage risk in volatile markets: Hedging mode helps traders mitigate risk by holding both long and short positions at the same time. In highly volatile markets, price movements can be unpredictable, and opposite positions can help offset potential losses. This is particularly useful for traders who want to protect their investments while still participating in market fluctuations.
- Open long and short positions on the same contract: Hedging mode enables traders to open long and short positions concurrently. This is advantageous for executing more sophisticated trading strategies, such as arbitrage or market-neutral strategies, without needing to close an existing position first.
- Ideal for traders using hedging strategies to offset potential losses: Traders focused on risk management often use hedging mode to balance their portfolios. For example, if a trader holds a long-term long position but anticipates a short-term price drop, they can open a short position to cover potential losses. This ensures profitability or minimizes downside risks while retaining long-term investments.
How to Enable Hedging Mode on OKX
On the Web
- Navigate to Trade and select Futures Trading.
- In the trading interface, select Settings (gear icon).
- Locate Position Mode and choose Hedging Mode.
- Confirm your selection by choosing Confirm or Apply.
In the App
- Go to Trade and then access the Futures Trading section.
- Select Settings.
- Scroll to Position Mode and choose Hedging Mode.
- Confirm the changes to apply them.
Important Notes
- Hedging mode is only available for derivatives trading (futures and perpetual swaps).
- When switching from one-way mode to hedging mode, ensure you have no open positions to avoid forced liquidation.
- Changes in position mode may require adjustments to your trading strategy.
Enabling hedging mode provides greater flexibility in managing your trades, allowing you to hedge risks and execute advanced trading strategies more effectively. 👉 Explore advanced trading tools
Frequently Asked Questions
What is hedging mode in trading?
Hedging mode allows traders to hold both long and short positions on the same contract simultaneously. It is commonly used for risk management and implementing strategies that require opposing positions to balance potential losses.
Can I use hedging mode for spot trading?
No, hedging mode is only available for derivatives trading, such as futures and perpetual swaps. It is not applicable to spot markets.
What happens to my existing positions when I switch to hedging mode?
If you have open positions when switching from one-way to hedging mode, you may risk forced liquidation. It is recommended to close all positions before making the switch.
Is hedging mode suitable for beginner traders?
Hedging mode is more suited for experienced traders familiar with risk management and advanced strategies. Beginners should first understand the basics of trading and risk mitigation before using this feature.
How does hedging mode help in volatile markets?
By holding both long and short positions, traders can offset potential losses during unexpected price movements. This provides a layer of protection while allowing participation in market trends.
Can I use hedging mode for arbitrage strategies?
Yes, hedging mode is ideal for arbitrage and other market-neutral strategies, as it allows traders to hold opposing positions without closing existing ones.