Crypto long and short trading- top facts you need to know

Cryptocurrency- A Complete Guide

Traditionally a stickler with the good old hedge fund market, long and short trading positions have received a warm welcome from crypto market trading as well. Interestingly, these two are two opposite trading positions as they bank on two different phases of the crypto market trading. In fact, both are equally significant if you want to make crypto trading a serious side income.

If you are new to the crypto market trading and clueless about whether to open a long or short position- this post will serve as a warm-up post.


Long and short crypto trading- the basics

If you are acquainted with the basics of the trading market – regardless of the asset type- you know the universal adage is to buy in low and sell in high. It means you will buy the assets when the prices are low and sell them when the price rises to earn high profits. Well, this basic principle forms the core of long trading.

The concept of position trading in crypto market trading has been developed in the line of long trading positions. It’s all about buying when your chosen crypto asset’s prices are low, then waiting for a long time frame for the asset price to rise- and finally selling when the price hits a huge surge.

Now, as mentioned above, a short trading position is just the polar opposite to the long trading counterpart. In short trading, first, you will lend crypto and sell them in crypto market trading at present market rate. Now, you will wait for the asset price to take a dip. Remember, in a long position, a trader waits for the price to rise but in short, the trader waits for the price to sink. So, when the price moves downward in crypto market trading, the trader buys the crypto at slashed price, thereby repaying for the lent crypto and attaining a handy profit from the difference.

Both parts of leverage/margin trading

The key similarity between long and short trading positions is that both are parts of leverage or margin crypto market trading. In leverage trading, traders are able to borrow funds from a trading platform, say a crypto exchange. The lent funds provide leverage to a trader’s initial trading capital so that a trader can open a bigger trading position in the crypto trading market- yet with limited deposit from own pocket. You can take from 1x to 2x to 10x to even up to 100x leverage, depending on the range of leverage availability at your chosen crypto exchange.

The range of leverage will depend on the margin that you will be able to deposit and the amount of leverage you need. You will need to maintain a certain amount of margin to keep your trading position open in the crypto market trading. Put simply, the “margin” quotient will serve as a collateral here. Whether you have incurred a loss or earned profit, you will have to maintain the basic margin requirement to avoid liquidation and closure of your trading position. Additionally, you will need to pay interest to the crypto exchange for the borrowed funds.

Long or short- which one to choose?

Crypto traders, especially the new ones, are often in need of guidance on whether to trade in long or opt for short in crypto market trading.

Now, two things here- the best advice would be to opt for both. However, the timing and choice of assets would be different for each.

Why to opt for both?

A trading market is always fluctuating through ups and downs. The scale of fluctuation is even more erratic when you are trading in crypto market trading. If you just focus on one single trading position, you will be able to make profit from just one single phase and might encounter losses when the market moves in another direction. But, when you open both kinds of trading positions, you will be able to make  profits in whichever direction the cryptomarket trading makes a move.

Long position trading would help you to make profits when the crypto market trading makes an upward move. But, you might have to count in losses if the market plummets and stays down for a longer time. In such situations, short position crypto market trading will support you with the needed backup as short position banks on a plummeting market. In other words, it helps to create a balanced crypto market trading and investment portfolio if you opt for both long and short trading positions.

Factors to remember for long and short trading

Now, there are two major factors to remember when it comes to opting for long and short trading positions in crypto market trading.

Choice of crypto coins

Not every crypto out there would be equally suitable for both short and long trading positions in the crypto market trading.

For a long position, you will need coins that command a sustainable future and promising growth over a period of time. Bluechip coins like ETH or BTC, are the best options for long position trading in crypto market trading. Bottom line is, choose coins that hold the potential to show a mammoth rise in the coming years.

For a short position, look for coins that might show an initial surge but hold no solid future in the long-term. Meme coins, that are especially based on hype, would be ideal for short trading positions in crypto market trading. It’s because, in short trading, you are looking for a decline in prices. So, your trump card will be the coins that are apparently popular but will soon take a dip in the coming weeks and months.

Market phase

The phase of the crypto market trading also plays a vital role in selection of your trading position.

If the crypto market trading is about to enter a bullish phase at your preferred trading time, you will opt for a long position. But, if the market shows signs of a bearish phase in the coming weeks or months, go for a short trading position.

Final words

So, this is the long and short of long and short crypto trading. Try to avoid higher leverage and keep the margin level at an affordable level so that you can maintain the trading position in the long run.

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