Short Strategy in Crypto Trading

Any benefit in the trading of cryptocurrencies results from a price increase or a loss. “Going short” profits from the latter, effectively betting against the currency in the hopes of a decline in the price.

Why, instead, is “going short”? For example, a trader may shorten Bitcoin (BTC) after a long climb, betting that there will be a steep fall in price before the trend stabilizes, which would allow profit to be made. Shorting usually takes place without the crypto-asset being owned directly.

Ways to Go Short

Margin Trading

It entails the dealer borrowing an asset in expectation of a drop in price, selling it at a higher price, and then buying back as soon as the price falls. The difference in price is conserved as a benefit. The crypto trader must use an exchange to borrow an asset, which either ties them to a lender, or directly loans assets, usually at interest rates. Therefore, the trader is constrained only by the borrowing limits set by the exchange in question. Because of the possibility of trading with more assets than one owns, this is the most popular method of shorting, even though it comes with its own drawbacks in the form of commissions and interest rates that subtract from the profit made on the fall in price.

Futures

Futures are contracts that allow the investor to buy an asset on a given date at a specified price. Selling asset futures bets on the price decrease, but it doesn’t require dealing directly with the digital asset, including margin trading. In addition, some futures exchanges explicitly allow to deal with benefit or loss values in fiat money. This is an approach that is growing in popularity but it is not a business proposition as advanced as others.

Contract for Difference (CFD)

CFD is the ultimate form of betting, without owning an asset. This is a straightforward bet on the currency trend, decided by the market without the investor ever having to buy, sell or borrow the commodity on which they are betting. CFDs themselves are not cryptocurrencies, and work closer to fiat money than to crypto-assets. Which means the trader needn’t think about the liquidity of the

Direct Short Selling

Unlike all of the above options, direct asset shortfalls include ownership and actual coin sales. The trader should try to sell high, buy low and deal with volatility in the market from there. While that does mean the trader is in charge of all the assets involved, it needs an asset to be acquired initially. More significantly, if the transaction doesn’t work out, it includes loss of actual assets. In automated trading, the method of direct shorting is somewhat streamlined, as it allows for the handling of higher values, but this still entails slower gains and a significant risk factor.

Trading with Smart Crypto Bot

Smart Crypto Bot is a robust market-based automated crypto-currency trading system. It is a graphical representation of the style and parameters of your trading which makes it much easier to use. If you are interested in trading Bitcoin or any other available crypto coins on the market, you are likely to be more successful by using this cryptobot.