A lock position in crypto (also called a lock or locked hedge) is a setup where you hold both long and short on the same coin at roughly similar notional size. On many exchanges this is done in Hedge Mode, which allows both sides on the same contract.

A lock is used as a pause when the market turns aggressive: you slow down the damage, stabilize margin behavior, and regain control. After that, the lock must be unwound by rules.

What a lock does—and what it does not do

A lock:

• reduces short-term sensitivity to price (price PnL becomes calmer),
• buys time to make decisions without rushing,
• helps survive impulse phases if margin buffer exists.

A lock does not:

• remove fees, slippage, or holding costs,
• guarantee safety against margin wicks,
• protect you from exchange-side actions such as ADL or forced reductions.

When a lock makes sense—and when it’s risky

A lock can be reasonable when:

• you have a real margin buffer and appropriate leverage,
• the market is impulsive and you want to stop deterioration,
• you have a clear unwind plan and exit triggers.

A lock is risky when:

• the coin is thin and the order book is weak,
• leverage is high and margin is tight (especially on cross),
• you ignore exchange-side risk: ADL/forced reduction, risk-limit changes.

Exchange-side risk: ADL and forced position reductions

During stress moves, an exchange may intervene via ADL (auto-deleveraging), forced reductions, or contract risk-limit changes. This is critical in a lock because:

• one leg is usually winning while the other is losing,
• the winning leg may be reduced first,
• the lock becomes unbalanced and you end up with naked exposure,
• thin margin can turn that into liquidation fast.

If you use locks, the “one leg got reduced” plan must be defined upfront.

Before unwinding: a quick checklist

1. Do you have a margin buffer, not leftovers?
2. Is leverage low enough to survive wicks?
3. Has the impulse cooled and liquidity returned?
4. Are holding conditions not toxic (including frequent funding)?
5. Is your next step clear: partial unwind or rebuild with smaller size?

Core unwind method: “profit → immediately reduce loss”

This is the practical way to unwind without guessing reversals.

Step 1: Choose the portion to partially close on the winning leg.

Step 2: Partially close the winning leg and realize profit.

Step 3: Immediately reduce the losing leg by the same realized profit amount.

Step 4: Confirm:

• both notionals are smaller,
• margin pressure is lower,
• the hedge is still controlled (not dangerously unbalanced).

The point is systematic reduction, not prediction.

Key addition: repeat cycles until losing notional is materially smaller

The main objective inside a lock is to shrink the losing notional. As long as the losing notional is large, it dominates margin and limits your options.

That’s why unwinding is iterative:

• realize part of profit on the winning leg,
• immediately reduce the losing leg,
• when needed, rebuild the protective leg (recreate the lock with smaller size),
• repeat until the losing notional becomes meaningfully smaller.

Why lock boundaries can widen

Rebuilding can push the legs farther apart in entry terms. That is an expected side effect. The priority is reducing losing notional and margin pressure. Once the losing leg is smaller, you regain flexibility and rely less on a single market move.

Option 3: averaging in—only in the right window

Averaging in can be valid only if:

• the market has cooled and liquidity is stable,
• holding conditions are not toxic,
• your balance and margin allow an add without breaking limits.

The practical reason: after you shrink the losing notional, an add can meaningfully move the average entry closer to the current price. If the losing notional is still massive, averaging often fails to change the math and only increases risk.

Common mistakes

• closing only the winning leg and leaving naked exposure;
• unwinding during a fresh impulse move;
• using high leverage with a thin margin buffer;
• ignoring ADL/forced reduction risk on thin instruments;
• having no plan for exchange intervention.

If one leg gets reduced: emergency protocol

1. Identify which leg was reduced and by how much.
2. Immediately rebalance the other leg to restore notional symmetry.
3. Reduce leverage and/or add margin to remove wick-liquidation risk.
4. If you have no buffer, close both legs and exit the regime.

The emergency goal is restoring control, not recovering PnL.

Summary

A lock is a pause and a control tool, not a final solution. The practical unwind method is to partially close the winning leg and immediately reduce the losing leg, repeating cycles until the losing notional becomes materially smaller. Boundaries may widen, but shrinking losing notional is what releases margin pressure and restores flexibility. Exchange-side risks (ADL and forced reductions) must be considered in advance, with a clear response plan.

Our trading bots and crypto screeners take a vast number of parameters into account to avoid "toxic" trades and to adhere to risk management rules. A situation where you might need a lock is highly unlikely. Nevertheless, markets are unpredictable, and it is critical to have a plan of action even for low-probability scenarios.