Ep 1: The Godson Peer Hedged (GPH)
This is the first post in a series of articles detailing advanced trading strategies beyond clicking the red or green button; these strategies limit risk without limiting the asymmetrical upside.
this first strategy I call the Godson Peer Hedged position.
this concept is simple, certain cryptocurrencies are heavily correlated but one is more volatile, for example BTC and ETH. this means when BTC dumps ETH follows regardless of prior setup or trend. So when you long BTC, you hedge it with an ETH short.
Ok now you’re saying but Godson, ETH is usually more volatile than BTC, so an equal weighted position is not a good trade because not only is the gain from the BTC long erased from the loss on the ETH short; the losses will be catastrophic if the trade is wrong.
No problem I'll show you how to execute this strategy properly.
You’ll need two things to proceed, an account at Delta Exchange and some trend following indicator like mine or anyone else’s.
When you get a long signal for example here when the candles turn green.
if you want this script click!
you will long BTC and hedge you position with an Ethereum Put Options contract from the same exchange (DeltaExchange).
Options contracts are powerful because they allow you hold a highly leveraged position(100x) with little capital and zero risk of liquidation.
so for example in the trade above, if you’re right the put contract goes to zero but your longs will more than cover the loss because the capital requirement for options position is so low.
But incase the BUY signal was a bull trap and the market immediately reverses, the put contracts cover the loss on the Bitcoin long because if you remember, ETH is more volatile.