Opening a corresponding order (hedging) in Futures trading is an important technique for effective risk management. This is a method of using a position opposite to the current position (for example: opening a Short while holding a Long) to protect the account from adverse fluctuations, rather than simply profiting from the new order.
Advantages of corresponding orders in Futures:
One of the most notable benefits of hedging is the ability to protect profits. When you are holding a profitable Long position, opening a Short can help you maintain that profit if the market unexpectedly turns down. In addition, hedging also limits the level of loss if the market goes against the initial order, allowing you to minimize losses without having to close the main position. Another strong point is that you do not need to close the main order to protect the account — this is especially useful if you still believe in the long-term trend. Additionally, it provides flexibility in exiting the order: you can close the corresponding order when the market shows a clear trend again without needing to act hastily.
Disadvantages to note:
However, hedging also has many limitations. First is the issue of transaction fees: opening additional orders means you will incur additional maker/taker fees and even funding fees if held overnight. Additionally, hedging locks up your capital, especially in a market with a clear trend, where you may miss profit opportunities. Without a clear plan, hedging can easily lead to strategic confusion — traders may get 'stuck' in two opposing orders, unsure of which one to close first. Another significant risk is if you use Cross margin with high leverage, volatility can negatively impact both positions at the same time.
Important principles when using corresponding orders:
First, you should only use corresponding orders when there is a clear reason — for example, the market is highly volatile, you are unsure about the trend, or there is significant news about to be released. Second, you must clearly determine the time to close the corresponding order; do not hold it too long without a subsequent strategy, especially when the main trend has become clear again. Next is the issue of position size: it is not necessary to hedge fully. You can hedge only 30–50% of the volume to reduce psychological pressure, as the main goal is to protect, not to maximize profits from both sides. Additionally, use reasonable leverage, avoiding the case of using high leverage for both sides that could lead to unintended liquidation of orders. Finally, do not abuse hedging — consider this as a backup strategy, not a regular trading tool.
When should you use corresponding orders?
You should consider using hedging when the market is highly volatile and the trend is unclear, or when you are preparing to trade during important news events that may cause significant price fluctuations. Additionally, if your Long position is profitable and is about to reach a strong resistance area, opening a Short to 'lock in profits' is a reasonable option. However, if the Long position is slightly losing but the price is at a good support level, opening a corresponding Short is unnecessary — instead, you should wait for further confirmation signals.