Liquidation is a trader’s worst nightmare—when your position gets forcefully closed due to insufficient margin. Many traders wonder if hedging (opening an opposing position) can save them from liquidation. The short answer? It depends.
How Hedging Works
A hedge involves opening a position in the opposite direction of your original trade. For example, if you’re long on Bitcoin, you might open a short position to offset losses.
Does Hedging Prevent Liquidation?
- Futures & Perpetual Swaps: In most cases, no. Exchanges calculate liquidation based on your net position. If your hedge is on the same exchange, it simply reduces exposure but doesn’t prevent liquidation if your margin runs out.
- Cross-Exchange Hedging: If you hedge on a different platform, it can help mitigate losses, but your original position may still liquidate if margin requirements aren’t met.
- Isolated vs. Cross Margin: In cross-margin mode, unused balance may cover losses, but hedging alone won’t stop liquidation if equity drops too low.
A Better Strategy
Instead of relying solely on hedging:
✅ Increase Margin – Add more funds to avoid liquidation.
✅ Set Stop-Losses – Automatically exit before liquidation hits.
✅ Monitor Leverage – High leverage increases liquidation risk.
Hedging will not gurantee that ur liquadation will be save bit it will help you to save your account if you trade wisely 🙂
Trade wisely!