Home » How To Make Money Leveraging Cryptos? Bitcoin Shorting Explained

How To Make Money Leveraging Cryptos? Bitcoin Shorting Explained

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bitcoin with a decreasing graph on the back

Margin trading or Leverage trading is basically betting on money that you have loaned. It is not your money that you are betting on and it is at most important to be really careful about the trades you take. Margin Trading is generally used by advanced traders who are aware on the concepts like Risk Management and Technical analysis. Leverage trading or Margin trading is suitable for beginners and you should have at least several months of trading experience before you attempt to margin trade. Don’t rush into it without understanding how it works.

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Shorting Bitcoin – How To Win Be Betting The Bitcoin Price Will Decrease 

In Leverage trading, you are basically swapping out contracts with others utilizing the platform. So here if you are shorting, you are swapping the contracts with someone going long and if you are going long, you are swapping with someone going short, in other words ‘Shorting’. Leverage is the amount of funds that you decide to borrow. The higher the leverage you choose, the more risky it gets.

It can range from 2x to 100x depending on the services that exchanges choose to provide. As you increase the leverage you want to trade with, the more funds you borrow and the chances of you getting liquidated increases.

The Liquidation price basically means the price at which your account balance is completely wiped out. Your liquidation price is given to you before you start the transaction and the entire time during your transaction, so that you can keep a track of it during the entire trade.

You never have to worry about calculating the Liquidation price as almost all the exchanges that allow Margin trading on Cryptos provide significant calculators that are capable of displaying real time Liquidation Price.

The fundamental principle on which Leverage trading works on is Shorting and Longing. Short position is betting that the price movement of a respective Crypto will decrease and Long position is betting that the price movement of a respective Crypto will increase.

When you are shorting, the liquidation price will be more than the market price and when you are buying the liquidation price will be lesser than the market price.

The Risks Of Shorting Bitcoin & Other Cryptocurrencies

Making money by leverage trading Cryptos is like playing around with a double edged sword. Its more rewarding but with a lot of risk involved. However, you can minimise the risk and maximise the reward by incorporating a few techniques in your daily trading activities.

Scaling in and out of your position is one of the most useful techniques to maximise profits and minimise the risk of loss. Layering your trades instead of depending on one single trade is the best way to go.

For example, you are trading with $2000 and want to take a long position at $10000 on Bitcoin. The current position is at $10500. Instead of watching the chart all day and trying to time that five minute window in order to get the closest price to that $10000, you would simply set multiple entries on the way down.

This would look something like $500 at $10400, $500 at $10300, $500 at $10200 and $500 at $10100 in case the price drops. All the entry points may not get filled as the price may only reach $10400 but you’ll be at a much better entry point with capital in the trade. It’s Vice versa for the exit positions.

Go Long, Go Short or Go Home

Buying long and selling short simultaneously is one the strategy that advanced traders use to mitigate the loss. In this case you need to have two accounts in an exchange in which you are planning to margin trade.

That shouldn’t be a problem because you can have a number of accounts without giving out your personal information in most of the exchanges these days. In one account you will set up a long entry point above the potential breakout while on the other account, you will set up a short entry point below the potential breakout. This way you’re setting yourself up a major advantage of the breakout in either direction.

Understanding the services that an exchange provides can help you monitor your leverage trades more effectively. Stop loss, using the market orders and limit orders are some of those.

For majority of your trades, you are going to want to use limit orders with the “post only” feature checked. But there are occasions where you should be using market orders. Utilizing stop losses are highly recommended when trading cryptos, especially when you’re not close to your computer or watching the market. For everything else, best practice is by sticking to the limit orders.

Where Can You Short Bitcoin 

The one credible platform for margin trading Cryptos for a long time is Bitmex. If you are a novice trader and would like to get into Leverage trading, this would be your ‘go to’ exchange.

One major advantage of Bitmex is that you can leverage your trades with as much capital as you want. 2x-10x is the leverage range you should be choosing to start with. Anything above this would be risking your liquidation.

When you choose to bet on a higher leverage without any risk management you are inviting the trouble. However, if you really want to trade over 20x leverage make sure you do it with a minimal amount that you can afford to lose.

Experienced traders who margin trade with 20x-40x are typically watching the charts with their eyes wide open because they do not afford to lose their entire portfolio if something goes wrong.

Lastly, always plan your trades ahead of time and never trade in a rush. Generally, when you try to “catch a falling knife” or “catch a moving rocket”, things don’t end up going very well for you. The extra excited you are, the more idiotic your decisions become. So keeping the cool, using logic and trading without greed can help you in taking better decisions while you leverage trade cryptos.

Don’t Get Bitmex Rekt – What is Bitmex Rekt 

Bitmex platform quickly became known in the cryptocurrency scene and it wasn’t long until the traders invented the term “Bitmex Rekt”.

Bitmex Rekt is the nightmare of any good trader. It means that your position got liquidated and your funds are lost. This usually happens a lot with traders, especially with the ones that don’t use a Stop Loss. The term got popular when OGs started using it and also when BitmexRekt bot was started.

The bot basically displays all the biggest losses from Bitmex. What makes it special is that the biggest ones are presented alongside with a funny message such as:


The irony, the jokes, the way its present and the display of how much someone lost made Twitter love it. The twitter bot have over 324k tweets and more than 40,000 followers. In fact, it got so famous that another bot appeared, especially for Big Rekt ( liquidations of 2,000,000 contracts or higher )

As a trader, its extremely important to avoid getting Bitmex Rekt. That means your contracts are liquidated and you lost all the amount placed on those. And you really don’t want this to happen. In order to prevent that, you should place a Stop Loss near your liquidation margin. You’d lost a part of your placed funds – but its better than nothing.

So remember, do not trade without a proper strategy and a stop loss. There are plenty of  Bitmex calculators made to help you.

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John Asher

John Asher

I am a crypto-enthusiast that likes to write about the blockchain industry. Mostly, I'm interested in the gaming industry and how it will revolutionize in-game asset ownership.

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