1. What Is Hedge Mode?
Hedge Mode allows you to hold both a long and a short position on the same trading pair at the same time under Cross Margin.
When the long and short positions are equal in size, the unrealized profit on one side can offset the unrealized loss on the other, helping you lock in profit or loss (subject to fees and other costs).
2. Full Hedge vs. Partial Hedge
2.1 Full Hedge
A full hedge means your long position size equals your short position size on the same pair.
Under normal market conditions, fully hedged positions are generally less likely to be liquidated, because the unrealized profit on one side can cover the unrealized loss on the other.
Benefits (conceptually):
- Price fluctuations do not significantly increase liquidation risk for that pair (compared to an unhedged position).
- Price fluctuations have limited impact on account equity from price movement alone (fees and other charges still apply).
Example
Assumptions:
- Initial balance: 10,000 USDT
- Cross margin mode
- BTC/USDT
- Leverage: 10x
- Maintenance margin rate: 0.4%
- Echobit fee rates: Maker 0.02% / Taker 0.06%
- Close fee in the risk formula uses Taker fee rate (0.06%) for illustration.
Key formulas used in this example:
Step A — Open a long position
Open 2 BTC long at 10,000, 10x.
Step B — BTC drops to 9,000 (long is losing)
Step C — Open a short position to fully hedge
Open 2 BTC short at 9,000 (now long 2 BTC + short 2 BTC).
Step D — BTC drops further to 8,000 (loss is “locked”)
Note: Risk can decrease here because a lower BTC price reduces the required maintenance margin and the estimated close fees.
2.2 Partial Hedge
A partial hedge means your long and short positions on the same pair have different sizes. Only the overlapping portion offsets; the remainder is your net exposure.
Example
Assumptions:
- Initial balance: 10,000 USDT
- Cross margin mode
- Leverage: 10x
- Maintenance margin rate: 0.4%
- Close fee uses Taker 0.06% for illustration
Open at 10,000:
If BTC drops to 9,000:
3. What Is Self-Trading?
Self-Trading is an automated risk management mechanism designed to help reduce liquidation risk for Cross Margin positions.
When your risk approaches the liquidation threshold, the system may automatically match and offset your long and short positions under the same trading pair, reducing:
- Total position size
- Total required maintenance margin
- Overall liquidation risk
Example
In cross margin mode, you hold:
- 10 BTC long at average price 60,000
- 5 BTC short at average price 59,500
If volatility pushes the account risk ratio close to liquidation, the system triggers Self-Trading and offsets:
- 5 BTC long + 5 BTC short
These offset positions are closed out, and the remaining unhedged position becomes:
- 5 BTC long (still open)
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Risk Disclaimer
Cryptocurrency investments are subject to high market risk and price volatility. You should only invest in products that you are familiar with and fully understand the associated risks.
Before making any investment decisions, please carefully assess your investment experience, financial situation, investment objectives, and risk tolerance, and consider seeking advice from an independent financial advisor.
The information provided in this document is for informational purposes only and should not be considered financial, investment, or trading advice. Past performance is not indicative of future results. The value of your investments may fluctuate, and you may lose part or all of your invested capital.
You are solely responsible for your investment decisions. Echobit shall not be liable for any losses or damages arising from your investment activities.
