The world of digital currencies is full of technical terms. If you have been active in this space for a while, you have probably heard phrases like long and short trades. In fact, long and short trades are a strategy to achieve profit and earn money. Traders make profit through these trades. But before that, they should have a logical and wise conclusion and prediction of the cryptocurrency market.
Long and short trades are a way to invest in the cryptocurrency market. In both of these trading positions you have to risk your assets. But in the end, if you have a correct prediction of the behavior of that asset in the future, you can make a good profit. In the rest of this article, we will examine the concept of long and short positions in the cryptocurrency world.
Long deals
In general, traders of the digital currency market must have their own strategies in order to succeed in making money. Long and short trades are related to these strategies. When we talk about long and short trading, we are going to examine the opinions of different traders about the increase or decrease in the price of a digital asset. In a long position, the trader waits Increase in asset prices is desired Since many digital assets in the cryptocurrency market are volatile, the probability of this happening is relatively high.
Therefore, when a professional trader predicts an increase in the price of an asset, he will enter a long position. In this case, he buys that digital asset. This action is also called lunging. Generally, people who are interested in long-term investments use this type of transactions. Long trades give the trader a long-term perspective. In fact, it can be said that after identifying the best digital currency for long-term investment, the best choice will be long transactions. In this situation, he buys the desired asset at a relatively low price to sell to them at a certain point and after the price of that asset increases.
Short trades
Long and short trades are two trading positions that are completely opposite to each other. In short trading, the trader expects the price of the digital currency to decrease. This may seem strange at first glance. But it only takes a little thought to understand the depth of the matter. Imagine a trader predicting a decline in the price of a digital asset. In this case, he buys a certain amount of that cryptocurrency using lending platforms and then sells it. Finally, when the value of the desired asset decreases, he pays back his loan at a lower price. In this case, the price difference of the desired asset in that period of time will be equal to the profit of the trader.
Of course, don’t forget that short trades can also be beneficial for people who anticipate a decline in the value of their assets. Because in such a situation, he will try to sell the property and in this way the loss that may occur in the future will be avoided.
Long and short trades in various bullish and bearish markets
One of the tools that helps traders to profit from predicting the price of a digital currency is long and short trading. Also, all derivatives market transactions such as futures and option transactions are examples of these financial instruments. In fact, as a trader, you can do long and short transactions in the form of futures transactions in the digital currency market. For example, in the derivative trading section, you can participate in long and short transactions without owning an asset in various exchanges such as Coinx, Kocoin, etc.
If you examine the various bull and bear markets, you will notice that most of the trades are long Bullish markets occur On the other hand, when the market is in a bearish state, the number of short trades will be much more than long. Of course, don’t forget that all these cases are an intuitive conclusion and there is no fixed rule in this regard.
How traders use long and short positions
One of the most important factors that make profits in the digital currency market is for traders to recognize the right time to enter a trading position. In this regard, traders should have sufficient ability in the field of technical and fundamental analysis of cryptocurrencies to be able to provide a correct forecast of the price situation of their desired digital currency. For example, it may be determined through analysis and investigation that a certain blockchain project has planned for a strong and solid partnership or is implementing an improved version of itself. In this case, a professional trader may want to run a long trade network on the underlying digital currency.
If you find yourself in such a situation, you can buy the amount of currency you want in cash from a digital currency exchange. You also have the possibility to open a long position in the exchange of your choice through derivative contracts such as futures transactions. But in general, don’t forget that in order to have a valid prediction about the future of a digital currency, you need to be an active person on social media. Because it is only in this way that you can follow the news online and have a correct understanding of market sentiments. Also, don’t forget to use different charts, indicators and patterns in them. Because they will help your analysis a lot.
In addition to long transactions, taking short positions also requires a lot of analysis. For example, experience shows that traders usually open short positions when the market is too close to the overbought level. In such a situation, the price of a digital asset has been on an upward trend for a long time, and probably to the state Saturation it is arrived. In addition, usually when the value of a cryptocurrency fails to break the resistance level, short trading and opening a short position in the exchanges seems to be a wise thing.
How to open long and short trades in the cryptocurrency world
You have probably understood the meaning of long and short trades by now. It is entirely related to the fact that in different situations traders may profit from the increase or decrease in the price of a digital asset. But in what ways are these transactions carried out? In response to this question, it is good to know that long and short transactions can be implemented in the following ways:
- Option trading
- Futures contracts
- CFD trading
- Trade with a margin account
Option trading
The first market in which it is possible to make long and short trades is related to the option trading section of the derivatives market. Traders in this market will have the right to buy or sell a specific asset at a set price. The option market has two general modes:
- Call
- Put
Commodity transactions to traders Right to purchase property Gives. According to this contract, the trader has the right to choose to buy the asset at a certain price and on a certain date. But put trading is a method of short trading. Because traders have the right to sell assets in it. In this way, people who have predicted a bearish market can profit by selling assets.
Futures trading
One of the trading tools in the derivatives market is futures trading. These transactions help traders to agree to buy and sell a digital currency at a certain price and on a certain date. Long and short transactions in the futures market will have different profits based on the accuracy of traders’ predictions about the future of the digital currency in question. Traders in this market enter into long or short trades according to the analyzes and forecasts.
CDF market
When traders execute long and short trades in the CDF market, no buying or selling takes place. Rather, the trader can make a profit only by predicting the price difference of that digital currency. In fact, it can be said that CDF transactions, or contracts for difference, help traders enter into investment operations through contracts with an exchange or brokerage. Profits and losses of traders are also calculated in these transactions from the price difference in the desired cryptocurrency.
Margin account
When it comes to making long and short trades with a margin account, it means that the trader needs some digital currency from the exchange or brokerage to execute the desired trade. Debt Takes. In fact, people can enter the trading markets and make a profit without owning the desired asset. Just note that this feature is only available in some exchanges.
Long and short trades and making money in the cryptocurrency market
In general, it does not matter in which financial market you operate. In any case, by increasing or decreasing the price of a commodity, some may gain and some may lose. The digital currency market, as one of the most volatile financial markets, has various ways and financial tools to earn money. Long and short transactions are among these financial instruments. People who predict the future of a digital currency to be bright with a rising price enter into long trades. On the other hand, people who are sure about the downward trend of a digital currency in the future also choose short trades to earn money. Finally, as a trader in the digital currency market, you must be sensitive to the behavior of cryptocurrencies and discover ways to earn money. If you are confident about buying or selling a digital currency after conducting the analysis and reviews, you can use the reliable Iranian exchange Valex.
What is written about long and short trades? Introduction of long and short positions for the first time on the Wallex blog. appeared.
