Recently, the industry has seen the emergence of some formidable operational cases. A seasoned trader, Xiao Z, experienced a complete cycle with his ETH position—initially facing floating losses and being criticized for nearly getting liquidated, then stubbornly holding on until the floating profit peaked at over $200,000, yet he continued to hold steady. At first glance, this operation pattern resembles a gambler’s stubborn hold, but behind it actually lies a high-level trading logic commonly used by major players in the industry.

Let's analyze the first key question: why can a $200,000 unrealized profit make him so calm? There are usually two possibilities. One is that his capital size is sufficiently large, so this profit might just be a small fluctuation within his other positions, making gains and losses less significant emotionally. The other, and more noteworthy possibility, is that he has already locked in the overall downside risk of his account through risk management strategies, so he’s not afraid of profits being pulled back at certain points.

Here’s an important market concept to understand: hedging mode. Simply put, it involves establishing both long and short positions on the same trading asset simultaneously. Through precise position control, the risks on both ends offset each other, ultimately locking in volatility risk. Taking Xiao Z’s ETH position as an example, he’s likely holding real ETH assets in the spot market while opening a reverse short position on a derivatives exchange to hedge. Or he might be using a more efficient method—establishing dual positions on the same platform with perpetual contracts.

What is the result of doing this? Regardless of whether ETH’s price breaks upward or pulls back downward, the net profit and loss fluctuations of the entire account are suppressed within a very small range. From an outsider’s perspective, his ability to stay calm during the floating loss phase and hold until the floating profit peaks doesn’t come from a bullish outlook on the market, but from the confidence that overall risk has been locked in. This also explains why he can surpass the psychological fluctuations of ordinary retail investors—because he’s not playing a game of “betting on the market,” but rather “using strategy to hedge market risk.”

The core appeal of hedging trading lies here. When you can allocate positions reasonably to lock in your account’s risk, the psychological pressure of investment decisions greatly diminishes. You no longer need to frequently change strategies amid short-term market fluctuations, nor be emotionally affected by price swings. The entire trading process becomes more rational and systematic.

However, this approach presents two obvious barriers for ordinary investors. First is capital size. Hedging requires allocating funds across multiple positions, which can be costly and inefficient for retail traders with limited capital. Second is strategic design ability. How much should the hedging ratio be to effectively control risk? How should one dynamically adjust positions during different market phases? These require deep trading experience and market intuition.

More importantly, not all hedging operations can be executed smoothly. Market micro-factors such as exchange liquidity, contract fees, and price spreads between spot and derivatives can influence the actual returns of a hedging strategy. Over-reliance on hedging may also trap traders in a narrow profit range, causing them to miss the big opportunities in the market.

Therefore, what seems like a simple “hold position” strategy actually reflects multiple layers of factors: capital scale, risk management philosophy, market experience, and trading tools. Xiao Z’s case teaches us not to imitate his position but to understand his risk management mindset—this is the key factor that determines whether a long-term trading career can operate steadily.