📉 Shorting in perpetual futures on cryptocurrency: how does it work? 💡
Right now, when the market is red, let's figure out what shorting really is.
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🧐 What is shorting?
Short (short) is a strategy in which a trader profits from the decline in the price of an asset. In the world of perpetual futures on cryptocurrency, shorting allows you to sell an asset that you do not own, with the aim to buy it back later at a lower price.
How it works:
1️⃣ The trader borrows the asset from the exchange.
2️⃣ Sells it at the current price.
3️⃣ Waits for the price to drop.
4️⃣ Buys the asset cheaper.
5️⃣ Returns the asset to the exchange, and takes the difference as profit.
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⚙️ Example of a short:
You open a short at $BTC for $100,000
The price drops to $95,000
You close the position and earn $5,000 minus fees.
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⚠️ Risks when shorting:
❗ Liquidation: if the asset's price rises, losses may exceed your deposit, and the exchange will close your position.
❗ Unlimited losses: when the price rises, potential losses in shorting are theoretically unlimited.
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🎯 Tips for successful shorting:
✅ Use stop-loss to limit losses.
✅ Clearly define entry and exit points.
✅ Carefully monitor news and market signals.
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Shorting is a powerful tool to earn in a falling market, but it requires experience and strict risk management. 📊💼
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