Hedging is a practice that every investor and trader should know about. Unfortunately, I do not see any “VIP channels” or cryptocurrency courses teach it. An expensive lesson for their clients. It is like teaching someone to ride a bike without showing them a helmet. We don’t see it thought because it requires real knowledge of a broad range of financial markets, not just cryptocurrency. It requires years of geniune experience in order to teach. Hedging can save you $1000’s but is not effective using the typical HODL or 100x leverage mentality.

The best way to understand hedging is to think of it as insurance. It doesn’t prevent a negative event from happening (BTC decline 2018), but if it does happen and you’re properly hedged, the impact of the event is reduced. In simple terms hedging involves spreading out your investments to more than 1 market. If you are properly hedged, when one market is performing negatively (crypto in 2018) you can be making up them losses with your investments in a different, bullish market (NASDAQ in 2018).

I personally have hedges from crypto in the NASDAQ, S&P 500 index with its respective companies and any of the modern tech giants (Facebook, Apple). I will give you a tip for the next one I have my eye on. Above is a chart for TENCENT (700), Asia’s most valuable public company and tech giant. It is an investment holding conglomerate with many, many subsidiaries that include social networks, payment systems, media, entertainment, smartphones, e-commerce, property, advertising, artificial intelligence and more. Recently it experienced a significant dip with a cheap price now on offer. A powerful RSI divergence has given us a sign that there will be a reversal from here and that 700 has reached the bottom of this correction.

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One thought on “Hedging your Portfolio

  1. We ve been comparing hedging to insurance, but we should emphasize insurance is far more precise. With insurance, you are completely compensated for your loss (usually minus a deductible). Hedging a portfolio isn t a perfect science and things can go wrong. Although risk managers are always aiming for the perfect hedge, it is difficult to achieve in practice.

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