Risk Management (Hedge-Link)
The Hedge-Link is a defensive automation tool. Unlike the Standard Chain, which focuses on profit maximization after a win, the Hedge-Link focuses on capital preservation during an active event. It functions similarly to a "Stop-Loss" mechanism in traditional finance.
Overview
Prediction markets are volatile. Probabilities can shift drastically based on real-time news or game events. The Hedge-Link monitors the live price (probability) of your position and executes a defensive maneuver if the market moves against you.
Trigger Mechanisms
You define a Threshold for activation.
Price Drop Trigger: "If the price of my YES shares drops below $0.40..."
Probability Shift Trigger: "If the probability of the opposing outcome exceeds 60%..."
Execution Modes
When the trigger condition is met, the Hedge-Link can perform two types of actions:
Exit (Liquidation): The system sells your current position immediately to salvage remaining capital. This prevents the value of your shares from going to zero.
Counter-Position (The Hedge): The system purchases shares in the opposing outcome (e.g., buying "NO"). This neutralizes your exposure, ensuring that regardless of the final result, the loss is mitigated by the new position.
Strategic Application
This chain type is essential for Volatile Events.
Example: During a live election debate, if a candidate performs poorly and their odds begin to crash, the Hedge-Link detects the sentiment shift and exits the position before the price bottoms out.
Last updated