If you get familiar with the bitcoin market, you must know how to buy bitcoin and earn profit from the appreciation in value. We call this action as “long”. Indeed, you can make money from bitcoin’s price movement in either direction- either buy or sell the bitcoin.
The action which sells bitcoin to make money is called “short”. It is the selling action which in the hopes it will depreciate in value. However with a great number of shorting calls for Bitcoin, how traders could get profit from a lower Bitcoin price?
As the grown of the bitcoin trading market, many trading options have shown up. Nowadays, there are plenty of methods to speculate on the price of Bitcoin. You may earn whether the direction you believe it will go. One of the methods long or short the bitcoin is called margin trading.
The margin trading is the trade of the contracts relating to the assets. It is usually along with leverage. With leverage, you only need to invest only small money to hold the large value of the contract. It expands the power of the investment which also expands the amount of profit rate. In the cryptocurrency market, the contract price is usually synchronizing with the actual asset price. By the up and down of the price, traders can earn by long and short.
In practical, traders usually do margin trading in the cryptocurrency derivatives exchanges, such as Bitmex, and Bex500 exchange. They offer not only the cryptocurrency margin trading products but also the trading education.
Although margin trading allows traders to short the market, it is full of risk. Continuously improving the trading skill to become a specialist in the margin trading market is the most significant mission.
The 3w of the shorting bitcoin
What is bitcoin shorting? The bitcoin shorting is the trade which expected the bitcoin price decline. The Bitcoin margin trading is one of the derivative products allows traders to short the bitcoin
Why is bitcoin shorting? With the improvement of the bitcoin trading market, traders are not satisfied with the profit from only the rise of the price. They are willing to take more initiative in the trade instead of the powerlessness of the declining market.
Where to act bitcoin shorting?
There are lots of crypto margin trading platform. BitMex, is one of the oldest and professional exchanges. Bex500 exchange which is the new star of the market has advanced product and safety system. They are all great exchanges to do margin trading or act bitcoin shorting.
How crypto margin trading works and how to apply the shorting bitcoin
The margin trading is usually along with leverage which allows traders to get large buying power by only investing a small amount of capital.
In the beginning, traders have to provide the premier deposit which is called “initial margin” to open the position. After that, they must hold a specific amount of funds in the account to maintain the position, referred to as the “maintenance margin”.
Different cryptocurrency exchange offers different leverage levels. For example, both BitMex and Bex500 exchange provide up to 100x leverage to all traders which allow traders to open the position 100 times the value of their initial deposit.
The trader will open a short position if they predict the decrease in the value of the crypto asset. The long position is the opposite of the short position.
Some of the exchange has an easy-to-used trading system which avoids the mistake from trading to put short position. For example, the Bex500 exchange has a great trading interface which the traders only need to put the amount of the deposit as the initial margin and click the red button with the word short. The short position can be set immediately.
Compared to regular spot trading, margin trading has more chances to get a large return but with higher risk. Traders must realize the loss when margin trading, may incur the liquidation of your position which will be closed automatically by the exchange. The liquidation occurs when the price of the cryptocurrency reach to the specific threshold which called “liquidation price”
For example, let’s assume that you open the 1 bitcoin short position with 100x leverage at the price of $10000. The liquidation rate is 30%. If the price hits around $10060, your total loss is amount 70% which will hit the liquidation level. The exchange will close your position if you do not refill the extra margin.
However, the potential profit from margin trading is also spectacular. In the same situation, only 0.6% of the price variation, you will get a 60% profit in the same position.
In conclusion, the high risk is always along with high returns. It is important to improve your trading skills for increasing the winning rate in the margin trading market.
How to improve your trading skills?
The cryptocurrency market is extremely volatile. How to reduce the risk when you trade, you may need to follow the following practices and strategies:
- Do not use up all your margin: if you are the newbie in margin trading, it is better to start your trading in a small position and never use up all your margin.
- Practice more in demo trading: the demo trading allows the newbie to practice their trade with paper money. It provides newer traders with the ability to optimize their strategies without any risk.
- Understand all order types: the mature margin trader usually use the combinations of the order types. Proficiency in the market order and limit order will help you to perfect your trading tactics.
- Divide your position: it is a good way for you to minimize the risk by spreading the position into separate parts. On the other hand, forming the ladder of the take-profit level allows you to capture the profits incrementally.
- Know the fees and interest: it has cost for the trading and leverage in exchange. You need to pay attention to the fee in case the fees go beyond your profit.
- Never stop learning: there are a great of practices and strategies in margin trading. Stay humble, Stay hungry.
How to select the best exchange
As we mentioned above, there are 6 ways for you to improve your trading skills If an exchange can help you to improve in those 6 ways. It probably the best exchange for you.
The Bex500 exchange is the crypto exchange which values all their users and provides useful tools and tutorials to help users to trade better. Let us discover what they do to help their users.
- The Cross margin mechanism: the basic trading mechanism from Bex500 is the cross margin mechanism. The cross margin mechanism effectively consolidates the control of the margin. All the orders are calculated by the total amount of the margin from your account which has a lower risk by liquidation.
- Demo trading: Bex500 provides a great demo trading version to all users. Once the users get into the Demo trading, they will receive the $5000 USDT or equivalent Bitcoin as the Demo deposit. It is good enough for them to testify the strategies or the platform.
- Easy to use limit option: Bex500 has easy to use limit option, which creates an easy trading environment for all users. In some exchange, before traders successfully set up the limit options, the exchange required users to select the 4 or 5 limit order types. This limit options setting is complex. The limit option in Bex500 is automatically. It estimates with users trading behavior and automatically decides the direction of limit order. Traders will feel easy to set up the limit option in Bex500.
- Divided order mode: In some exchange, the same direction order is accumulated which means that if you open two short position orders, they will be integrated into one order. In Bex500, the order is separate, if you open two short position orders, they are separate which gives you more power to control your orders and reduce the risk.
- Profit and Loss calculation: Bex500 provides the Profit and Loss calculation to help you to understand more about your orders. If you enter the open price, close price, trading volume, the profit and loss calculation will automatically calculate the margin you used in the order, the profit status, the fees, and interest. You can use Profit and Loss calculation to know the full scale of your order.
- Education: Bex500 provides a number of tutorials to help users to trade better. Every week, the senior trader from Bex500 will send the market analysis to all Bex500 users. Furthermore, Bex500 owns the medium channel which provides professional articles or courses about the trading technique, market trend analysis, and market news. All traders can access the Bex500 medium to learn more about the market and trading: https://medium.com/@bex500global
If you feel confident in the cryptocurrency market and can make accurate predictions of market trends, the margin trading in Bitcoin or other crypto assets can dramatically increase your profits. Especially in the bear market, you may earn a lot even though the price declines. However, if the price movement goes against your prediction, it has a great chance to damage your financial health.
Improving you trading skills continually is always the correct movement. Select the right exchange for you and you may find more funs in Crypto margin trading.