Currency short selling tutorial

Short selling in the currency circle refers to borrowing assets and selling them, then repurchasing and returning the borrowed assets in anticipation of a fall in price to make a profit. The steps include: borrow assets, sell borrowed assets, wait for asset prices to fall, repurchase assets, return borrowed assets, calculate profits

What is short selling in the currency circle?

Short selling in the currency circle refers to borrowing an asset and selling it immediately in the expectation that the price of the asset will fall. Once the price of an asset does fall, short sellers can make a profit by repurchasing the asset at a lower price and returning the borrowed asset.

How to short-sell in the currency circle?

1. Borrow assets

Borrow the assets you want to short from the exchange or lending platform, such as Bitcoin, Ethereum, etc. You need to pay certain handling fees and interest when borrowing.

2. Sell borrowed assets

Sell borrowed assets immediately to create a short position in the market. You now have a commitment to sell the borrowed asset.

3. Wait for the asset price to fall

Over time, if you correctly predict that the asset price will fall, the price will fall accordingly.

4. Repurchase Assets

When the asset price drops to your target level, repurchase the previously sold assets and buy them at a lower price.

5. Return borrowed assets

Use the repurchased assets to return the previously borrowed assets, along with any accumulated interest or fees.

6. Calculate Profit

Your profit will be equal to the product of the decline in the asset price and the amount of the borrowed asset, minus the interest and fees paid.

Notes:

• High Risk: Shorting is a high-risk strategy that can result in significant losses if the asset price increases.
• Margin Required: Borrowing assets usually requires providing some form of collateral or margin to reduce the risk of the lending platform.
• Transaction Fees: In addition to interest and handling fees, exchanges often charge transaction fees.
• Liquidity: Some assets may be less liquid, which may make it difficult to repurchase the asset, thereby increasing risk.

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