Profit from both rising and falling markets

AAG Limited allows traders to take advantage of both growing prices, and those that are expected to decline

Long vs. Short

If you wish to buy a Bitcoin, for instance, then your account will grow in value as Bitcoin’s price increases. If Bitcoin price decreases, then your account loses value accordingly. Apart from a standard trade (purchase), AAG Limited platform allows you to open a position that will increase in value as the cryptocurrency decreases in price. This is referred to as selling or going short, as opposed to buying or going long.

Example: Going Long

Say Ethereum market price is $314.7. You think that the Ethereum price will go up, so you buy 200 of ETH’s at $314.7. This is equal to the position value of $62,940.

Because AAG Limited offers leveraged trading, you don’t need to put up the full value of this trade. Instead, you only need to cover the margin, which equals to 1% of a total position size, or $629.40.

If your prediction is correct and ETH price climbs, you may decide to fix a profit. Ethereum price is $354.2 and you close your position.

To calculate your profit, you need to multiply the difference between the closing price and the opening price of your position by its size.

354.2-314.7=39.5, which you multiply by 200 and get a profit of $7,900 because you had a “long” position.

Example: Going Short

The Bitcoin is trading around $7,400. You anticipate the upcoming negative news about cryptocurrency market, which will negatively impact the price of BTC, so you decide to sell ten Bitcoins at $7,400 for a total short position of $74,000 in value.

Bitcoin has a margin requirement of 1% (1:100 leverage) so you need to deposit $74,000×1%=$740 as margin collateral.

The announcement is a disappointing one, and the Bitcoin drops to $7,354. You’re ready to secure your profit, so you buy back 10 BTC at $7,354

Because this is a short position, you deduct the closing price ($7,354) from the opening price ($7,400) of your position to calculate profit, before multiplying by its size of 10.

7,400-7,354=46, which you multiply by 10 and get a profit of $460 because you had a “short” position.

Profit from market growth

Profit from market decline

Calculating Profits

To calculate the profit or loss earned from a long/short trade, you multiply the size of your position by the difference in points between the price when you opened it and when you closed it. With both long and short trades, profits and losses will be realised once the position is closed.

You can also use leverage to get exposure to a much larger position than with a standard trade (for both long and short), if you are confident about the direction of the market.

Questions about Bitcoin Shorting

Shorting BTC is the process of essentially betting that bitcoin will be dropping in the future based on a number of factors. Traders borrow some Bitcoin, and sell it at its current market price. Then, later on, that trader purchases the Bitcoin to pay back the person or company they borrowed them from, but now, the price they are buying is hopefully lower

Going short, or short selling, is an especially useful tool in a speculative market, such as Bitcoin which has the added benefit of big volatility. Shorting means traders are preparing or hedging against any risk of a downward movement. So, when a trader senses that the price of an asset, like Bitcoin, is going to fall for whatever reason may be brewing, these svay traders will decide to short it in the hopes of actually making money despite the drop.

The way short selling works is that it lets the trader borrow some Bitcoin, and sell it at its current market price. Then, later on, that trader purchases the Bitcoin to pay back the person or company they borrowed them from, but now, the price they are buying is hopefully lower. If the price drops enough, and by the time you need to pay back the loan, it will be cheaper to buy that Bitcoin to pay back.

For example, if you short sell 20 BTC at $5,000 per coin it means you borrow 20 BTC and sell them for $100,000. Then, the price of Bitcoin drops to $2,500. You now have to buy 20 Bitcoins back to pay the person you borrowed from, but these 20 BTC now cost you $50,000 and you make a profit of $50,000.

Therefore, if you think that Bitcoin’s price is going to drop significantly like it can with high volatility, there is good money to be made by short selling. But, it is never that easy to know when the price is about to drop, and when you should short it. However, there are more than a few ways to short Bitcoin and some of them may be better suited to different types of traders.

Because the basic model of shorting Bitcoin involves waiting for the market to go down, rather than up — which is the movement that most traders are looking for. This means that shorting can only be successful when the market is about to fall, rather than when it has finished falling.

This comes down to getting the predicting and the reading of the market right and sensing when factors are present that can lead to drops in the price. Of course, there are also very different ways in which the market can fall, in the short, medium, and long term.

You should look to short sell when you think that the market is ready to drop. But, this can be done in a few ways — traders can start to read external factors and news that are known to have a negative impact on the market. They can also utilize technical analysis which is intended to help traders read the market and predict the next move — both up and down.

The first time to start shorting the market is at the first sign of negative news brewing. Bitcoin is a speculators market and is susceptible to negative news, so it is worth shorting the market when some of the beginnings of bad news begin to surface. Bitcoin also moves fast so when things start turning, it is advisable to be quick with your short.

Another more efficient and sure fire way to get your shorting time right is to look at technical analysis which is intended to help traders predict moments and momentum, as well as breakouts and fall backs.

If the technical analysis charts point to momentum taking a turn towards a fall, it is a good time to get your shorts in even before there is a drop which allows for maximum potential for earnings from a fall.

As mentioned above, there are good times to short BTC, and there are also good strategies to implement when shorting Bitcoin at different times and in different conditions. Shorting Bitcoin is a rather basic idea, but there are more than a few ways to do it, and some ways are better used when different conditions are being met.

Indeed, some ways of shorting, just like with Bitcoin, are better utilized when looking for a better hedge, or higher profit, or even a safer option. There are also different ways to short Bitcoin in the different types of markets on offer; from futures to spot markets as well as prediction markets and binary options trading.

The advantages that come with these different markets also come into effect with the idea of shorting in the markets, and some markets are actually better suited to shorting and can offer huge profits despite a falling price.

While there are a number of different platforms offering a number of different trading options in cryptocurrency — including new institutional brokers like CME and CBOE, there is also the chance to short bitcoin using an online CFD broker such as AAG Limited.

CFDs (contracts for difference) function in the same way as futures contracts but are tailored towards retail traders. Using CFDs, traders can bet on a price increase or decrease of an underlying asset without having to own it physically.

And, because CFDs are leveraged products, traders can also go short with their Bitcoin investments and use margin which we have described above is a very profitable way to do things with high levels of leverage.

Shorting is not exclusive to Bitcoin, and is a useful tool across all traditional markets. In the cryptocurrency market, it is indeed possible to short other cryptocurrencies, but it depends if the platforms you use offer it.

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