How to use the "Hedge Mode" in crypto contract trading? (Tutorial)

Understanding Hedge Mode Fundamentals

1. Hedge Mode allows traders to hold both long and short positions simultaneously on the same cryptocurrency contract without them offsetting each other.

2. Unlike One-Way Mode, where opening an opposite position automatically closes the existing one, Hedge Mode preserves independent position states for directional exposure.

3. Each position maintains its own entry price, margin balance, unrealized PnL, and liquidation price—enabling precise risk segmentation.

4. This mode is especially relevant for arbitrageurs, market makers, and traders executing multi-leg strategies across correlated assets or timeframes.

5. Activation requires explicit selection during account setup or via platform settings—default behavior varies by exchange and cannot be retroactively applied to open positions.

Enabling Hedge Mode on Major Platforms

1. On Binance Futures, users navigate to “Settings” → “Trading Mode” → select “Hedge Mode” and confirm with two-factor authentication.

2. Bybit requires switching under “Contract Trading” → “Account Settings” → toggle “Hedge Mode”, followed by a mandatory 30-second cooldown before new orders execute.

3. OKX users access it via “Derivatives” → “Futures” → “Account” → “Position Mode” → choose “Hedge Mode” and accept the margin recalibration notice.

4. Gate.io enforces a full position settlement requirement: all existing One-Way positions must be closed prior to enabling Hedge Mode.

5. KuCoin applies the change instantly but resets isolated margin allocations—traders must reassign margin per position manually after activation.

Position Management Mechanics

1. Long and short positions are tracked in separate rows within the position panel, each displaying distinct leverage, margin type, and funding rate accrual.

2. Closing a long position does not affect the short position—even if both reference identical contracts and expiries.

3. Liquidation is calculated independently: margin ratio breaches trigger liquidation only for the affected position, not the entire account equity.

4. Partial closures are supported per position; reducing size of one leg leaves the counter-position fully intact and unchanged in structure.

5. Position margin can be adjusted individually—adding margin to a long position has zero impact on the short position’s maintenance requirements.

Funding Rate and Fee Implications

1. Both long and short positions accrue funding payments separately, based on their respective notional value and direction relative to the index price.

2. Funding fees do not net out—even when holding equal-sized long and short positions, both legs incur full funding obligations.

3. Taker and maker fees apply per order execution, regardless of whether the trade opens or closes a leg—no fee discounting occurs for hedged entries.

4. Insurance fund contributions are position-specific: losses from one side do not draw from the margin allocated to the opposing side during bankruptcy events.

5. Settlement proceeds from expiring quarterly contracts are credited or debited per position, with no automatic cross-position reconciliation at expiry.

Common Questions and Direct Answers

Q: Can I switch back from Hedge Mode to One-Way Mode while holding open positions?A: No. Exchanges require all positions to be fully closed before allowing mode reversion. Attempting to switch mid-position triggers an error message.

Q: Does Hedge Mode support cross-margin for both positions?A: Yes—but only if cross-margin is explicitly enabled per position. Default behavior assigns isolated margin unless manually overridden.

Q: Are stop-market orders in Hedge Mode tied to specific positions or the entire account?A: They are bound exclusively to the selected position. A stop order placed on a long will not activate based on short-side price action or liquidation thresholds.

Q: Do trailing stops function independently per position in Hedge Mode?A: Yes. Each trailing stop operates solely on its assigned position’s entry and current unrealized PnL—no interposition referencing or synchronization occurs.