To soften an edge, loose an edge, make an edge fade away is pretty simple in watercolor.
1. Paint your shape and continue on while the shape is still wet.
2. Using clean, clear water start wetting the paper a short distance away from the edge of the wet color.
3. Work the brush upwards, toward the edge until you're just touching the edge of the color.
4. Lift your brush away and watch the color slowly flow into the dampened area and voila a softened edge.
It is important to start in the dry area a short distance from the wet color edge. If you start in the wet edge, you may end up dragging the softened color further and further away from the shape. It may end up way bigger than you wanted it to be.
For softening edges, I like to use a slightly larger round brush than I used to paint the shape. I use a different brush than the one I used to paint the shape. This way I can get in there with clean water faster, I do not need to rinse the color out of the original brush.
Give it a try!