Recently, the rotation of altcoin markets has been too crazy. Today, this coin rises by 20%, and tomorrow, that coin falls by 30%. Some people chase high prices and get trapped, while others cut losses at low points, truly being treated like leeks. Many fans ask me if it's possible to make money using hedging methods with the high volatility of altcoins. Of course! Moreover, the high volatility of altcoins is the perfect stage for hedging 'one loss and one gain.' While others chase highs and cut losses as leeks, you can still profit from the volatility. Today, I will thoroughly explain this strategy.
First, let's talk about the pain points of altcoins: high volatility, strong manipulability, and price changes that lack logic, making it difficult for ordinary people to grasp the direction. Chasing highs and cutting losses is just giving away money. However, for hedging, high volatility is not a disadvantage but an advantage because the greater the volatility, the larger the price difference, and the more profit opportunities there are. Moreover, we don't need to worry about the fundamentals of altcoins or predict whether they will rise or fall; as long as there is volatility, we can make money.
Core content: The 'dual-target strategy' for hedging altcoins. Because a single altcoin may be manipulated and its fluctuations are irregular, we choose 'two highly correlated altcoins' for hedging. For example, two mainstream altcoins in the Ethereum ecosystem generally have consistent trends in rising and falling, but their volatility may differ. We open long and short positions on these two coins, using their differences in volatility to profit.
Specific operational steps: Step 1, choose the right targets. Find two altcoins from the same ecosystem and track, such as SOL and APT, both in the public chain track, with a high correlation. Step 2, assess relative strength. Look at the increase over the last 7 days; the coin with a larger increase is relatively stronger; the one with a smaller increase is relatively weaker. Step 3, differentiate the opening. Open a long position of 60% on the relatively strong coin and a short position of 40% on the relatively weak coin, using a leverage of 5 times (altcoin leverage should not be too high to avoid liquidation). Step 4, set profit and loss limits. Set the profit target to 10% when the price difference of the two coins reaches that level, and set the stop loss at -5% when the price difference reaches that level, ensuring both profit and risk control.
For example, last week SOL had a 7-day increase of 15%, and APT had a 7-day increase of 8%, making SOL relatively stronger. I opened a long position of 65% on SOL with 5 times leverage and a short position of 40% on APT with 5 times leverage. After 3 days, SOL increased by another 10%, while APT decreased by 5%, resulting in a profit of 600U on the long position and 400U on the short position, with a net profit of 1000U; even if it were reversed, with SOL dropping by 5% and APT increasing by 10%, the long position would incur a loss of 300U and the short position a loss of 400U, totaling a loss of 700U, but since we set a 5% stop loss, the actual loss would only be 350U, much less than chasing highs and selling lows.
Here, I want to emphasize: when hedging altcoins, definitely avoid 'illiquid small coins'. Some small coins have low trading volumes and are easily manipulated; once positions are opened, it may be impossible to close them, leading to significant losses. Therefore, always choose altcoins that rank in the top 50 in trading volume, ensuring good liquidity and smooth closing of positions, with controllable risks. Additionally, do not hedge multiple targets simultaneously; at most, select two, as too many can be hard to manage and prone to mistakes.
Many people think that altcoins can only rely on gambling, but that's not the case. By using a hedging method, you can turn wild fluctuations into stable profits. While others are anxiously chasing highs and selling lows, you can calmly profit from the price differences; this is the benefit brought by cognitive differences. This market is never short of opportunities; what is lacking is the insight to see through opportunities and the methods to earn steadily.
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