Shorting

Ok I'm literally retarded when it comes to shorting/margin trading. Let's say I think Ether will go down 4%, so i short and sell 100 ether with, oh let's say, 20x leverage. Let's say my prediction was correct, and ether does go down 4%.

a.) What does the leverage do? If I sold 100 ether and bought back in when it was 4% cheaper I'd have 104 ether, right? But what would the 20x mean?

b.) what happens if I'm wrong and ether actually goes up? Could I hodl and turn my short into a long until ether eventually goes back down?

Having a short go wrong will make you want to shoot yourself. The risks are so much worse than going long. Stay away from this crap and just buy coins with good potential when they are at a low price, for example BitBay

SILK ROAD V5.0

FINNA MOON

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Shorting with leverage just multiplies your gains/losses. The problem with shorting is the unlimited downside compared to the unlimited upside of going long. Don't short irrational securities

So if I short ETH, predit it will go down, and it goes down by 4% and I originally sold 100 ETH would I have 104 ETH, 120 ETH or 124 ETH? I'm mathematically challenged

(assuming 20x leverage, for example)

>The problem with shorting is the unlimited downside
>don't short irrational securities
this, imagine if you were "smart" enough to short bitcoin in 2011 (or assume there was a place that would let you)

seems like a good idea at the time (bitcoin was a literal shitcoin in 2011 with little practical use at the time) but infinite potential for assrape

of course, your margin account would be closed long before you got to that level of loss, but still

I need to know as well

You don't end up with ETH. Shorting goes like this

1, sell coins (that you don't own) and receive USD (or BTC) for it
2, wait, hopefully price drops
3, buy back coins, using some of that USD (or BTC) you received when selling
4, enjoy the USD (or BTC) profit you got from the trade

Say you have $300 in your account:

Example 1:
You short sell 1 ETH at $300, price drops, you buy it back at $290. Profit: $300-290= $10 = 3.33%. This wasn't a leveraged trade.

Example 2:
You want to short sell with leverage. You short sell 20 ETH at $300 each, price drops, you buy them back at $290. Profit: 20*(300-290)= $200 = 66.7%

So with a 20x leveraged short trade you get 20x the profit.

questions?

What's the negative side of the leveraged short trade can you show the math?

nigga are you fucking stupid? whatever your fucking leverage is, if its 20x, and your shit goes up 20%, you 20x what you'd get normally

if it fucking goes down, you make 20x the losses

this isn't fucking complicated, think for yourself you useless fuck

leverage only allows you to open positions larger than your collateral.

like maybe you only own 5 eth, but with 20x leverage you can make a position on 100 eth. you still get the 4% on the 100, but put up 5 eth as collateral.

not him but

You short sell with leverage. You short 20 ETH at $300 each, price increases, you buy them back at $310. Profit: -$200.

Now, there is some more complexity here. Because you have finite money and short selling has unlimited downside, the person lending you money sets a liquidation point where your position will be closed and your collateral used to pay them back the unrealized losses, so that they don't lose money. In our example, if you had 20x leverage, that would mean you must use $300 as collateral for the trade. At our closing where our unrealized profit is -$200, we are at 200/300 = 33.3% margin level. A common liquidation margin is 20% (Poloniex), which means that in our example, once the unrealized profit hits -$240 (240/300 = 20%), your position is automatically closed. This would correspond to a ETH price of $312.

Shorting is pretty easy if you understand trends.

Current bear market still has a way to go. Lots of time to short.

In Example 2, what is the 20 in the equation (20*(300-290)= $200 = 66.7%) is that the amount of ether, or the leverage (20x)

what the fuck am I reading

ether.

in the example, with $300 in our account, we have enough for 1 ether. so by choosing to short sell 20 of them, we're making ourselves 20x leveraged.

we chose our leverage with the amount of ETH we want to short sell. the exchange just sets a limit on how high we can go. 20x leverage would be a bit much for my taste

correct me if im wrong anyone, im sick and dizzy af

looks right to me. what's unclear?

You're reading that you should not get into margin trading if you cannot grasp concepts clearly explained to you. When you margin trade you also pretty much lock up your money when you go in the red because you don't want to sell for a loss.
>t. guy stuck with a Ripple long position

one good thing about trading with leverage in the crypto world is that the exchanges seem to guarantee that your losses will be limited to account liquidation, so you don't risk ending up in debt to an exchange. (there might be exceptions, though, i haven't really looked into it. does anyone know?)

when trading with leverage in stocks or derivatives you can end up in debt if you or your broker is unable to close your position in time

This isn't what I was asking

This was. Thanks user.