Shorting and Longing for Cryptocurrency Traders

Shorting and Longing for Cryptocurrency Traders

How to Use Binance Futures Trading: Basic Principles

Futures trading is one of the most beneficial and convenient methods of crypto trading. It is a specific form of derivative contract, which allows (or rather obligates) traders to purchase or sell tokens at a pre-established price in the future. Binance Futures is a derivative platform of Binance, which allows traders to place their orders and short their cryptocurrencies with maximal convenience.

It supports the following types of orders:

●     Limit Orders allow traders to purchase cryptocurrencies at a specific price.

●     Market Orders allow traders to purchase cryptocurrencies at spot prices.

●     Stop-Loss Orders. This is a more advanced type of order, which allows traders to take advantage of the Stop Loss and Take Profit mechanisms. These options make it possible to predetermine margin prices, which will automatically activate selling or buying triggers. Either of these options closes the deal.

How to Short Tokens on Binance: A Brief Guide

Shorting is a classic trading strategy: expecting that the value of certain assets is going to decrease, the trader borrows the said assets, sells them, and purchases them back later, making a profit. Shorting cryptocurrency represents, at its core, the same strategy, albeit with a few differences. For instance, your new favorite token is trading at $700; however, you are certain that it will fall at least $200 in several days. Therefore, you sell it and wait for a downtrend. When — or rather, if — it happens, you can purchase it back at $500. You get your crypto assets back and the difference between the initial price and the resulting one provides you with a profit.

We must not forget that this approach has a regrettably high risk/reward ratio, especially when it comes to extremely volatile cryptocurrencies with incalculable price movements. However, this very feature also makes it incredibly attractive in the eyes of risky players.

To minimize the risk one can follow the classic educational scheme: learn (and subsequently earn) by mirroring professionals with greater experience. For instance, services such as Jet-Bot, allow users to utilize this strategy and directly follow the leads of chosen traders, copying their longing and shorting approaches. Such an automated helper may be of immense use. However, while its financial productivity is obvious, its educational value is lost without further analysis. In other words, traders should take advantage of the efficiency of such tools without forgetting about their skills.

Here is a brief guide on technical details that will explain how to use Binance Futures Trading for shorting.

Phase 1 — Choosing the Futures Contract

1.  Login on Binance.

2.  Find the “Derivatives” section.

3.  Select the desired option (for instance, USD$-Margined Futures).

Phase 2 — Select the Trading Pair

Phase 3 — Deposit Funds on Your Derivatives Wallet

1.  Find the “Transfer” option.

2.  Select the sum.

3.  Confirm your transaction.

Phase 4 — Add Details

1.  You will see two available types of margin: cross and isolated ones. Select the “Cross” margin option.

2.  Enter the level of leverage: from 1x to 20x.

3.  Select the “Limit” option.

4.  Add Short Sell Price, Quantity, Take Profit, and Sell options.

5.  Confirm your order by selecting the “Sell/Short” option.

Phase 5 — Check Your Order

This strategy may lead to two options: the price changes will activate either the Stop-Loss Price, which will automatically prevent significant losses in case of an uptrend or the Take Profit Price, which will allow you to make a profit and repurchase the tokens according to your predictions.

How to Long Tokens on Binance: A Brief Guide

As for the longing, it is but a reverse of short selling, albeit with a bullish attitude. Expecting an uptrend, the investor makes a move, purchasing the assets and selling them when the price reaches its peak. For instance, you expect that the price of the token will skyrocket within weeks. You purchase it and wait until the prediction comes to fruition. The difference between the initial price and the final one makes your profit.

The advantages of this approach are many: it allows traders to limit their losses and lock in the price. Nonetheless, it also comes with a few cons, the most harmful of which are associated with the lack of control: when dealing with futures, one must remember that the long position may very well expire before the desired benefit is achieved. In addition, it is very vulnerable when it comes to rapid price changes. Therefore, it requires at the very least as much attention as the previous variant.

As for the technical details, they are very much the same, although one must select “Long” options instead of “Short” ones. Here is a brief guide.

How to Use Binance Futures in the US

Unfortunately, not all of the prominent advantages of futures trading are available for traders from the US. In 2019, the crypto market witnessed the Great Schism: Binance asked all its users from the US to leave the platform and register at Binance.US. It is a separate company, which operates under BAM Trade Services. The original company experienced a significant number of problems with the US authorities and the partnership seemed a reliable way to settle them down.

As of today, those investors who wonder how to use Binance futures in the US have to accept that the original platform still does not work with clients from the US. However, its partner is available in almost all states, except for New York, Idaho, Hawaii, Texas, and Vermont.

How to Trade Binance Futures in the US: The Parallel Platform

The platform currently deals in 80+ cryptocurrencies. It provides its clients with rewards for participating in transactions: investors may earn up to 6.5% annually by staking their tokens on the platform. Another huge advantage of this company is its low fees — the current options are the most beneficial in the US crypto market.

It also comes with an educational platform for those who make the very first steps in the Crypto-Verse — Binance Academy contains plenty of educational materials on both basic and advanced crypto trading, blockchain principles, the safety of crypto assets, etc. Those who wish to know how to trade Binance futures in the US will find there many useful tips and strategies.

In Conclusion

Futures Trading on Binance opens up a great potential for all types of investors: enthusiasts of both bullish and bearish approaches can make a profit thanks to its optimized features, and automatic prevention of losses. Nonetheless, even though the platform provides a huge selection of options, a giant number of crypto trading pairs, and extensive customer support, shorting and longing retain their highly risky nature. Hence, traders should exercise caution when utilizing either of these strategies.