There are many ways to make money in the financial market. While some traders use technical analysis, others invest in projects and companies using fundamental analysis. You have many options when it comes to creating a profitable trading strategy as an investor or trader.
But what if there is a prolonged bear market where prices continue to fall? What can traders do to preserve their trading income?
Traders can profit from lower market prices by short selling. It is also possible to open a short position. Risk management and hedge of assets against price risk.
This article will explain what a short is and how to short Bitcoin on Binance. We also discuss the risks associated with shorting.
What is a Short Circuit?
A short sale, also known as a short sale, is the selling of an asset with the intention of purchasing it back at a lower price later. An asset trader who opens a short position anticipates that the asset’s price will fall, which is a sign that he is bullish on that asset. Instead of waiting, traders use the short selling strategy to make money from falling asset prices. Short selling can be an effective way to preserve capital when prices drop.
Short selling is a common practice in virtually all financial markets, including stock, commodity, Forex, Forex, and cryptocurrency. Short selling is a popular strategy for professional traders and retail investors alike, such as hedge funds. Both short-term and long term traders can use the same strategy of short selling stocks and cryptocurrencies.
A long position is the opposite of a short one. This is where a trader purchases an asset with the intention of later selling it at a higher price.
What is a short circuit?
The sale is usually leveraged but this can happen in some cases. A short position is when you sell a portion your spot bitcoin position and plan to redeem it later for $8,000; this is called a leveraged sale. Short selling can also be done at the expense borrowed funds. Selling short is closely linked to short selling. margin trading , f’iuchersnymi kontraktami i drugimi proizvodnymi finansovymi instrumentami . Posmotrim, kak eto rabotaet.
Let’s suppose you are bearish on a financial instrument such as a stock, or cryptocurrency. You deposit the collateral, borrow money for that asset and then sell it. Now you have a short position. If the market performs as expected and falls, you can buy back the amount borrowed and repay the lender with a percentage. Your profit is the difference in the price of the original sale and the purchase.
Let’s now look at a concrete example. Let’s say you have 1 BTC to trade and that you sell it for $8,000. You now have a short position in 1 BTC. For which you pay interest. Bitcoin’s market price drops to $6,000. One bitcoin is purchased and returned to the lender (usually an exchange). Your profit in this instance will be $2,000, minus interest payments or commissions.
Short sales carry risks
There are many risks involved in opening a short-term position. The first is the incalculable potential losses that a short position could cause. Over the years, many professional traders have been bankrupted by short stock positions. Stock price increases due to unexpected news can trap short sellers quickly.
Binance Academy will tell you that every trade must have a cancellation point. Let’s not forget about this concept, it can still be very useful.
How big are your losses if you open a long position on the spot market? That depends on the size of your position. You will lose the initial $10,000 you invested in bitcoin if you have only 1 Bitcoin.
What if you want to sell Bitcoin on a margin trading platform. Your potential flaws are endless in this scenario. Why? Because there is no limit to the price potential. If you hold a long position, however, the price can’t fall below 0.
If you decide to sell a loan asset, and its price continues to rise, then you will continue to suffer losses. This is more of an abstract risk than a real one because most platforms do not allow for it. You must eliminate your position before you reach a negative balance. It’s important to remember this because it shows why you need to be aware of margin requirements and use stop loss.
Short sales are subject to standard risk management principles. You can protect your flip side by using a stop loss and thinking about the size of your position. Also, make sure to understand the liquidation risks.
How to shorten Bitcoins and other Cryptocurrencies on Binance
Let’s say that you want to sell Bitcoin on Binance. There are many ways to do this.
How to sell Bitcoin on Binance Margin trading
You can first shorten bitcoins and other altcoins using the Binance margin trading platform.
- If you don’t have one, open one.
- Visit the Binance margin trading platform.
- You can choose your preferred market pair such as BTC/USDT and BTC/BUSD.
- Follow these instructions or the one in this video to learn more about margin trading.
How to sell Bitcoin on Binance Futures
Binance Futures allows you to also trade bitcoins and other altcoins.
- Visit Binance Futures.
- You can choose between quarterly or perpetual futures contracts.
- Our guide to Binance Futures will help you get to grips with the platform.
- Follow these instructions.
You can also try paper trading by visiting the Binance Futures Testnet. You can then test the sale without risking any real money.
How to Sell Bitcoin On Binance Options
You can also use the Binance Options platform for Android and iOS. Option contracts are a great way of opening a short position. Put options can be purchased if you anticipate bitcoin’s price falling. You have the right but not the obligation to sell bitcoins at a specific price. Here’s how:
- Get the Binance mobile application. Both Android and iOS users can access the options platform.
- If you don’t have an account with Binance Futures, create one. This is required to access Binance’s options platform.
- Follow these instructions.
This is one of the most risky and difficult ways to short Bitcoins and other cryptocurrencies. Before you start, make sure to check out our An option guide for Android and iOS.
We now know the basics of opening a short trade and why traders would want to do it. We have seen that traders who are short usually have a bearish outlook on the market. Short selling allows traders the opportunity to profit from price drops without actually owning the asset.