Navigation of the bear markets with short cryptocurrency positions: a guide
The cryptocurrency market is known for its volatility and unpredictability, but one of the most effective strategies to navigate the bear markets is to take short positions. In this article, we will explore how to use a short position in the cryptocurrency to minimize the periods of high stress of the market.
** What are the short positions?
An uncovered position is an investment strategy where you sell a title (in this case, a cryptocurrency) at the current market price and buy it later at a lower price, in the hope of enjoying the difference. This strategy involves buying bass and selling high, which can be beneficial times of bears markets when prices decrease quickly.
** Why use short positions in the bear markets?
The duration of the markets, the value of cryptocurrencies tends to decrease considerably due to a decrease in the confidence of investors and increased uncertainty about the future. By taking a short-term position, you can potentiate powerful enjoy the thesis price reductions, even if you have no cryptocurrency yourself.
Here are some advantages of using a short position False Bear Markets:
* Reduced risk : By selling at the current market price and earning later at a lower price, you can minimize your losses.
Potential increases increased : If the market falls quickly, you may be able to sell quickly and buy cryptocurrencies at a lower price, potentially maximizing your profits.
Improvement of diversification
: The use of short positions in cryptocurrency can help reduce dependence on a special class or market market.
How to configure a short position
To configure a short position, follow the stages of the thesis:
- Choose a cryptocurrency : Select the cryptocurrency you want to sell at the current price and buy later at a lower price.
- Understanding the lever effect : Cryptocurrency markets can be highly exploited, which means that even low price reductions can cause large profits. Make sure you understand how the lever effect and the risks involved.
- Define a stop-loss command: Establish a stop-loss command to limit your potential losses if the market falls considerably.
Popular positions of exposed position
Here are some popular position strategies:
* Sell rallies : Buy low when prices increase quickly, sell at the current price and buy later at a lower price.
Buy on setbacks
: Sell at the current price and buy at a lower price to take advantage of subsequent price increases.
* Use of options : use options for trading options, such as calling calls or put, to take advantage of short -term movements.
Example of short position
Let’s say you decide to use a short position in Bitcoin (BTC). You sell 1 BTC at $ 10,000 and buy 1 BTC at $ 8,500. If the market drops further, you may be able to sell quickly and buy cryptocurrencies at $ 7,000, maximizing potential your profits.
Risks and considerations
Although short positions can be effective in the bear markets, there are risks and considerations to keep in mind:
* LEVER : The markets of cryptocurrencies can be very volatile and the lever effect can amplify both gains and potential losses.
Decree of the time : Short positions have a limited period of time for the current sale and the acquisition later at a lower price, which can limit your profits if the market is stable for too long.
Risk of counterpart : you expose yourself to a risk of counterpart using other parties (for example, exchanges or brokers) to facilitate short positions.
Conclusion
Navigation on the bear markets with short positions of cryptocurrencies requires careful planning, an understanding of the lever effect and the disintegration of time, and a solid understanding of the risks involved. By taking advantage of short position strategies, you can potentiate powerful enjoy the market reductions while minimizing your losses.