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3 Strategies for Hedging Risk in Crypto Trading — Autotrading Strategies

What is Hedging in Crypto Trading?

Hedging is a way of minimizing losses. It mitigates the risks. Hedging in crypto trading is not meant for earnings or gaining profits. Crypto traders go into the market with their hard-earned money. However, the market can swing in unfortunate directions. In such cases instead of making profits, a trader should rather protect their primary assets. There are three ways in which traders can protect themselves.

1. Diversifying Portfolio:

There is a famous saying, don’t put all your eggs in one basket. Essentially, this means hedging the exposure. Traders should diversify their portfolio by investing in multiple coins.

2. Short Selling Crypto:

It is another way of hedging risk in crypto trading. Short selling means that you sell borrowed coins when you see the value going down in the future. Profit is made from the price difference. Almost all popular exchanges offer the feature of margin trading. Here is how that works.

3. Utilize Derivatives:

Derivatives have become very popular among crypto communities lately. For starters, a derivative is a security that gains value from other assets. Futures, forwards, and swap, etc. are examples of derivatives.

Conclusion: Hedging Risk In Crypto Trading

The above mentioned three strategies can effectively hedge risk in crypto trading. However, you have to be extremely careful while making predictions regarding prices. Short selling and derivatives depend on market movement prophecies. You have to be sure about the price trend before you make any decision. So, our advice is to be careful with data and information sources.

AutoTrading Strategies is a consultancy company built by crypto traders and trading software developers.

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