Navigate to bears markets with cryptocurrencies with short positions: guide
The volatility and unpredictability of the cryptocurrency market is known, but one of the most effective strategies for the navigation of the bearish markets is to occupy short positions. In this article, we examine how to use a brief position in the cryptocurrency to minimize losses during the high market stress.
What are the short positions?
A short position is an investment strategy in which it sells security (in this case a cryptocurrency) at the current market price and later buys at a lower price, hoping to benefit from the difference. This strategy includes a low purchase and high sales, which can be useful during the bearish markets when prices fall rapidly.
Why use short positions in bears markets?
During the bearish markets, the value of cryptocurrencies is decreasing drastically due to investor confidence and greater future uncertainty. With a short position, you can benefit from this price drop, even if you do not have cryptocurrencies in itself.
Here are some benefits to use a short position in bears markets:
* Help risk : If you sell it to the current market price and buy it at a lower price later, you can minimize losses.
* Increase in potential profits : If the market falls quickly, you can sell quickly and buy cryptocurrencies at lower prices, potentially maximizing your profits.
* Improved diversification
: The use of short positions in cryptocurrency can contribute to reducing confidence in a specific asset class or market.
How to establish a short position
To establish a short position, follow these steps:
- Chip a cryptocurrency : Select the cryptocurrency sold at the current price and buy again at lower prices.
- Understand leverage : cryptocurrency markets can be a great leverage, which means that even small price reductions can generate great profits. Be sure to understand how leverage and risks work.
- Establish the stop order : Create a detention regulation to limit to limit potential losses if the market is significantly.
Popular short position strategies
Here are some popular short position strategies:
* Sale at meetings : Buy low, if prices increase rapidly, sell at the current price and buy again at lower prices.
* Buy in comments : Finish at the current price and buy at lower prices to take advantage of the subsequent increases in prices.
* Use options : Options negotiation techniques, such as selling calls or benefits of short -term movements.
Short position example
Suppose you decide to use a short position in Bitcoin (BTC). Sell 1 BTC for $ 10,000 and buy 1 BTC for $ 8500. If the market continues to decrease, it can be sold quickly and buy cryptocurrencies at $ 7,000, which can maximize profits.
Risks and considerations
Although short positions can be effective in the bearish markets, there are risks and considerations that must be taken into account:
* Leverage : cryptocurrency markets can be very volatile, and leverage can be reinforced both potential profits and losses.
* Fall time : Short positions are a limited frame to sell current prices and then purchase at a lower price, which can limit your profits if the market remains stable for too long.
* Coral risk : You are risking that the parties use other parts (such as exchanges or runners) to facilitate short positions.
Conclusion
Careful planning is required to navigate the cryptocurrencies of bears markets, understand the leverage and decrease in time, and a solid understanding of risks. The use of short position strategies can benefit from market recessions and minimize losses.
