What is long and short trading?
In this tutorial, we are going to investigate longing (buy) and shorting (sell) trades. Many people have asked me how you can sell bitcoin if you don’t own any? Well we will discuss now.
Need a trading account? Click
HERE to see our tried and tested favourites!
Trading in a nutshell
So, imagine this scenario:
You and another trader are sat at a table facing each other. There is bitcoin in the centre of the table (this is your trading platform)
So, you are both at the table. Neither of you own any Bitcoin at this point. However, you think the price is going to go up, so you decide you want to buy that Bitcoin in the middle at the price it is currently worth. Let’s say the price goes up, so you want to take your profit, so you sell your Bitcoin to the other person at the table. Cha-ching, you have now bought and sold a long position.
So, lets go back to the table and the Bitcoin is back in the middle. You have checked and you think the price is going to go down. So, by shorting you tell the person on the other side of the table they can take the Bitcoin and you will give them the current price to take it away. You also promise to buy it back off them to put it back into the middle of the table. You then wait for the price to drop. Once it does and you are in profit, you then buy than Bitcoin from the other person at a lower price. However, you also get the rest of the original price back to keep for yourself.
I know that many people think when buying an investment, they automatically think that you must buy for the value to increase before making money. With currencies, you can make money by choosing whether the price will go up or down, if you have placed the order to back this up.
REMEMBER: Whenever you place an order, always have a Stop Loss in place to cover Liquidating!