3 Tips on How to Short Bitcoin for Beginners

3 Tips on How to Short Bitcoin for Beginners

In this article, we’re going to show you how to short Bitcoin on one of the most popular CFD trading platforms that are on the market today.

How to Short Bitcoin

People sometimes aren’t sure what exactly shorting is. Essentially, imagine that you want to make a profit by selling something and buying it back later on. Let’s take the example of an iPhone. You borrow an iPhone from someone, you sell it for an amount of money. Then, you hope that the price decreases. When the price does decrease, you buy back the iPhone for a lower price. You return the iPhone to the person you borrowed it from but you were able to pocket a small profit due to the difference in prices.

People short Bitcoin because they believe that the price of Bitcoin will decrease dramatically. It can bring in a lot of profit if a currency pretty much devalues to 0. Thus, people are interested in shorting Bitcoin to make a short term profit. However, shorting Bitcoin can be pretty risky, since if the price increases instead of decreasing, you will have to return the asset and buy it back at a higher price. That’s why shorting Bitcoin is a risky but profitable game to play.

On platforms such as eToro, you can use margin trading to optimise your shorting potential so you can short a whole lot more than your deposit allows. So the profit would be all yours, minus the capital that was borrowed. Therefore, it’s pretty useful to trade on margin since you can make higher trades. Think of it like this, the bigger the loan that the broker is ready to give you, the bigger your trade size can be and thus bigger your profit. However, this is pretty risky and one should be very careful with leverage trading.

How to Short Bitcoin on eToro

Step 1: Open eToro

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When you open eToro, you will be taken to your favourite instruments page where you can monitor individual instruments in live. This is a great feature of eToro, you can monitor what is going on in your favourite coin or stock live.

 

Step 2: Search for “Bitcoin”

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In the search bar, search for “Bitcoin” and the drop down menu will give you some choices to choose from.

 

Step 3: Click on “Trade”

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On the right of the screen, click on “Trade” and a menu should open up. This menu will have around three columns for the following things: equity, stop loss and leverage.

 

Step 4: Choose Amount and Set Stop-Loss

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Here, you choose the amount of Bitcoin you want to short and then you set your stop loss. Setting your stop loss is very important since you need to protect your investment from excessive losses.

 

Step 5: Choose Leverage

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Choose your leverage but be sure that you understand that your losses can exceed your deposits. Also, trading with leverage increases the risk associated with your shorting.

 

Step 6: Confirm Trade and Monitor your trades.

The next step is to confirm the trade and the order will go through in a few seconds.

Now, click on your portfolio on the left of the screen so that you can monitor the profit and loss of all of your recent trades. You can choose to close the trade when you make a substantial profit or you can close it at a loss to prevent further losses.

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About Article Author

Martina Kelowsky
Martina Kelowsky

Currently working on her Master Degree in Economics & Computer Science she lives in Russia. She is a Bitcoin Enthusiast since 2013 and Investor in various ICO since 2014. She aims to democratize a future where money is decentralized and transaction anonymous.

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