Recently, I’ve been getting more questions about hedging strategies, so I’ll organize my thoughts again. Especially about the “no stop-loss” claim associated with hedging strategies, known as the 65 method.

The basic mechanism is simple. By holding both long and short positions on the same asset simultaneously, profits are made when the price rises (long) and when it falls (short). It’s the idea of enduring market fluctuations while eventually locking in profits in one direction. Sometimes called a “lock position.”

The reason this strategy attracts attention is that it doesn’t require setting a predetermined stop-loss point. Unlike traditional trading, it avoids short-term losses through diversified positions and dynamic adjustments. Theoretically, it claims to prevent frequent losses triggered by stop-loss activations.

However, here’s the realistic part. To execute the 65 hedging method, you need twice the margin. Capital efficiency naturally decreases. Furthermore, holding positions long-term accumulates overnight interest and transaction fees. These costs might be negligible with small positions, but become significant at larger scales.

And the biggest risk is a black swan event. If the market moves sharply in one direction, both hedged positions can incur losses simultaneously. If your margin isn’t sufficient, your account will be forcibly liquidated. This isn’t just a theoretical danger; it’s a real possibility.

Practically speaking, if you adopt a hedging strategy, you shouldn’t completely abandon stop-losses. Instead, set dynamic stop-loss rules. Also, diversify your capital across different assets and markets to reduce reliance on a single strategy. In trending markets, it’s also important to prioritize closing opposite positions and extending the main trend—flexibility is key.

Managing leverage is also crucial. Avoid excessive leverage and maintain sufficient margin to withstand market fluctuations.

Honestly, the 65 hedging method is a high-risk, high-cost strategy. It’s suitable only for experienced traders with ample capital. For most investors, I recommend strategies combining stop-loss mechanisms with trend-following to balance risk and return.

If you continue with this approach, strict position management is essential. For example, ensuring total positions don’t exceed 10% of your capital, or monitoring market movements in real-time. Proceeding with overly optimistic assumptions can lead to painful losses.