When you buy or sell a coin in the future, you are not buying or selling the actual coin. You are entering into a futures contract (for example BTC, ETH or any listed coin) – this is an agreement to buy or sell coins at a fixed price at a certain hour. Unlike traditional coin buying, you never own the coin, so you can’t move out of your account if you haven’t closed the order. In traditional cryptocurrency market investing, you only make money when the coin price goes up. With BTC, ETH, XRP futures… you can make money even when the market goes down. That is roughly called short selling, selling what you don’t have at a high price and buying at a low price to return it to the floor and enjoy the difference.
Binance Futures exchange screen and coins you can trade | Screenshots
You can participate in margin trading using Long, Short on Binance Futures, the world’s largest crypto exchange currently by following the instructions below.
Here is how it works. There are two basic positions on crypto futures: Long and Short. A long position is to agree to buy the coin at the expiration of the contract. A short position agrees to sell the coin at the expiration of the contract. At crypto exchanges like Bitmex, Binance, Okex, all contracts are perpetual, so there is no term. You will stop the game when you liquidate your account or take profit or loss.
If you think the price of your coin will be higher in the future than at the time of placing the order, you will place a Long order. If you think the coin price will drop in the future then place a Short order.
What is a Long Position?
In a long (buy) position, investors are expecting the price to rise. An investor in a long position will profit from the price increase. A typical coin purchase is buying a crypto asset in a long position.
A long position is a position where an investor buys an order option. As a result, a long position benefits from an increase in the price of the underlying asset.
A long position involves buying an order option. The logic behind the long side of the bettor follows the same logic of a long position. A put option that increases in value when the underlying asset decreases in value.
In a long trade, the downside/potential loss is the purchase price, the lower the buy price, the higher the profit. You take profits when you reach the set goal, you shouldn’t wait too long because you will have to pay a large loan fee every hour.
What is a Short Position?
A Short (sell) position is the exact opposite of a Long position. Investors hope and benefit from a decrease in the coin’s price. Executing a short position is a bit more complicated than buying the asset.
In the case of a Short position, the investor hopes to profit from a decrease in the coin’s price. This is done by borrowing X of the exchange’s coins, and then selling the coins at the current market price. The investor then has an open position for X amount of coins with the exchange, which will have to close in the future. If the price falls, an investor can buy X amount of coins for less than the total price they sold for the same amount of coins before. The excess is the trader’s profit.
The concept of short selling is often difficult for many investors to grasp, but it is actually a relatively simple process. Let’s look at an example that will hopefully help clarify things for you.
Let’s say that you predict the price of Bitcoin (BTC) will drop in the future, possibly the next few hours or days, so you decide to sell short to profit from the expected price drop. Your short selling will work as follows:
– You deposit a deposit as collateral for the exchange to lend you 1 BTC that they already own, the higher the loan ratio, the greater the possibility of asset liquidation.
– When you get 1 BTC that your exchange lends you, you sell them at the current market price of $10,000 per coin. Now you no longer have any coins, but you have $10,000 in your account that you received from your 1 BTC buyer ($10,000 x 1 = $10,000). You have money and owe the floor 1 BTC.
– Now suppose that, as you predicted, the coin price starts to fall. A few weeks later, the price of the coin dropped to $8,000 a coin. You don’t expect it to go much, if any, lower than that, so you decide to close the short.
– Now you buy 1 BTC for $8,000 ($8,000 x 1 = $8,000). You return that 1 BTC to the exchange you borrowed before.
– You made a profit of $2,000 on your short sale. You got $10,000 when you sold 1 BTC your exchange lent, but then you were able to buy 1 BTC back to him for just $8,000. Therefore, your profit is calculated as follows: $10,000 (received) – $8,000 (paid) = $2,000 (profit). You also have to pay an additional hourly interest fee and a 2-way buy and sell order fee. The amount of fees depends on each floor, choose a low-fee and high-liquid floor to trade because the amount of money when you make margin will not be small.
There are many long and short positions that traders can take. A savvy investor will grasp the many advantages and disadvantages of each type of long and short position before attempting to incorporate them into his or her trading strategy.
Please consider only trading on the money you have, absolutely do not borrow, if that money is lost, it will not affect the well-being of you and your loved ones. There have been many heartbreaking stories about margin trading (leverage), you can win a lot but lose more. Only the floor owner is the one who doesn’t lose. There are many candles that sweep both Long and Short to death in a single note, then you can only cry out to God.
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