As the Bitcoin (BTC) and the crypto market, in general, continues to evolve, so do the people within the ecosystem. As a result, new opportunities are being exposed to benefit from crypto price volatility in either direction. Shorting is one such opportunity gaining popularity. Even in bull markets, short-selling crypto is a great way to participate and profit. However, there are a few Bitcoin trading tips to learn first including how to protect your short, how to manage your risk which tools will help you best.
Whether you are going long or short on crypt assets, it’s important to first understand the language of that particular asset. Assets are much more independent nowadays and each one exhibits different characteristics. Bitcoin, for example, is much different than stocks or fiat. Its price is not dependent on central banks or interest rates. Instead, monitor factors like the supply of bitcoin, media and public perception of BTC, mass adoption, global regulation advancements, BTC volume on various exchanges, and more. When it comes to crypto analytics, everyone has their own style but its important ot learn the basics of BTC history and chart analytics before entering a position.
Now that we’ve covered that, why do you want to open a short position? Isn’t short positions only for people that are pessimistic about the market? That’s 100% incorrect. You can still be bullish on Bitcoin and open a short position. The main reason many people enjoy short-selling Bitcoin is that it hedges their risk in the long term. Hence, if you own Bitcoin and think it will only grow in the long term but thinks it will fall in teh short term, then you can reduce your risk by short-selling Bitcoin. That way, if the market falls, you hedge a portion of your losses with the gains from the short position.
Screenshot of the Multi HODL tool explained below
Now that you know understand the ebbs and flows of Bitcoin, and feel confident you can open a profitable short position at the right moment, it’s time to choose a platform. Bitcoin trading does not have to be an advanced and complicated process. For example, platforms like YouHodler make opening a long or short position incredibly easy with their Multi HODL tool.
Simply click the “down” button on the coin you want to short and then choose your multiplier level (x3 - x10). It’s simple as that. From there, you can closely monitor your position via their app to make sure you exit the market at the ideal time for profit.
Click here to open a short Multi HODL deal on YouHodler now
Just because Bitcoin trading is easy, doesn’t mean it’s not free of risk. When you simply buy Bitcoin, the loss is limited to the amount you bought the Bitcoin for. However, short selling Bitcoin means your loss is essentially unlimited if the market decides to move aggressively against you at any given time. Hopefully, that will never happen if you sharpen your analytical skills. Even so, there are other tools to protect your short and minimize loss.
For example, a “stop-loss” is very beneficial in certain situations when the market is not going your way. Let’s say you open a Bitcoin short position and the market starts increasing. It’s already up 3% with no sign of slowing down. One way to stop your losses is to open a long position at the same time. Therefore, your losses are immediately canceled out by the profits of the long position.
On Multi HODL, the feature we previously mentioned, it’s possible to open multiple positions at the same time, a technique is known as Lock Trading, that can better help you protect your short position from maximum loss and find more opportunities in the ups and downs of the market to benefit. Another great advantage of Multi HODL is the ability to adjust Margin Call and Take Profit levels.
This allows you to manage your risk and exit the market automatically at a precise time. For example, if you want to exit the market at a - 4% drop on your short position, you can set the Multi HODL Take Profit deal to - 4% and it will close the deal at that exact moment and deposit your funds right into your wallet. Margin call works the same way except allowing you to set the amount you want to lose in the even your short position does not go your way.
All these features efficiently help you manage your short position for optimum benefit.
Before you get going on exploring all the wonders of short positions, let’s quickly summarize.
- Borrowing Bitcoin to sell on the market and buying back at a lower price is called “shorting”
To profit, traders collect the difference between the two prices
Shorting Bitcoin is a great way to hedge losses a short pullback during a bull market or during a longer-term bear market
Shorting is not only for experts. Anyone can do this with minimal expertise (e.g. with the Multi HODL tool).
Short selling involves risk but these can be efficiently managed using Lock Trading, stop-loss, Margin Call, and Take Profit.
Always keep up to date with the latest Bitcoin news, price movements, and expert analysis to keep your trading techniques sharp.