The market of digital assets is especially attractive for those with experience trading on the stock markets. The essence of crypto trading is the same – buy and sell cryptocurrency at different prices and generate income from it. There are many financial tools applied to this field. One of them is a popular advanced instrument – futures trading, allowing people to make money even on a falling market. Let’s see how it works.
How Does Shorting Work?
The essence of the futures trading method is to make a prediction on the future coins’ price based on the cryptocurrency prices today and price indicators from the past. It takes a lot of work to analyze all the factors and determine where the market will move next. Still, no forecast can be precise in this field – anything may happen, and the market moves in another direction, which is why futures is the riskiest instrument in crypto trading.
There are two ways for a trader to act:
- Longing
- Shorting
To go long means that the trader waits for the price growth and buys digital coins to sell them when the market reaches the next high. For instance, you estimate that the SOL rate will grow in a couple of months by 30%, and so you make a futures agreement to sell SOL coins when their rate is 30% higher on some exact day in the future. If your forecast is true, you make money.
Shorting is another popular way to trade. Actually, it is the only way to make money on the falling market. Suppose you think the SOL rate will drop soon. So you sell out your SOL coins now and enter into an agreement to buy them back at a lower value (indicate the price and the date in the contract). If that really works, you get SOL coins at a low price with having earned money by selling them before entering into a futures agreemend. That is what shorting means.
Where to Buy and Sell Crypto?
To practice all trading strategies and tools, you need to find a reliable and multifunctional platform with an intuitive interface and transparent fee policy. Try, for example, the WhiteBIT exchange – an official platform that complies with all the regulations in this field and protects clients’ funds at a high level. It offers basic and advanced trading tools and the option to practice them on a demo account.
Tips for Investing in Cryptocurrencies
Here are some essential guidelines to follow when working with crypto:
- Have a clear goal and a well-thought-out plan. This rule applies to any business venture. Setting a target enables you to develop a plan of action and reach your goal.
- Develop the ability to analyze the market and external factors that impact it. This skill will assist you in creating an appropriate trading plan.
- Understand the risks involved and take measures to hedge them.
- Avoid investing in only one type of cryptocurrency – diversify your portfolio. Consider both popular assets and lesser-known cryptocurrencies with potential.
- Do not have unrealistic expectations. Think long-term and resist the urge to sell your coins when others do.
- Avoid dwelling on missed opportunities as this can prevent you from making informed investment decisions. Focus on future prospects rather than past failures.
- Do not invest all of your savings into cryptocurrencies. Doing so can cloud your judgment and lead to emotionally-driven decisions.
- Many people have profited from crypto investments, and you can too. Follow these tips to increase your chances of success.
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