Profit from market decline (SHORT positions)
SHORT (Sell) position - is the process of selling an asset (opening the position) at a high price, with the intent to re-buy the asset (close the position) at a lower price when the price of the asset decreases. Essentially, Short trading is selling high and buying low.
An Example of a SHORT (Sell) position:
Let's assume 1 BTC = $10,000. Trader opens a 1 BTC short (Sell) position at the price of BTC= $10,000. As stated previously 1:200 leverage allows trader to open this position using just 0.005 BTC of his own funds (or the equivalent value in another deposited currency).
Let’s assume that later the price of 1 BTC drops to $9,800. Trader now closes the position.
Results:
- Trader sold assets (opened the position) at $10,000 and bought them back at $9,800 (Closed the position), leaving him with $200 profit!
- The 0.005 BTC Margin that was used to open this position will now be “unlocked” and available for trader to use again.
- The $200 profit is instantly added to trader's balance and can be used for trading or withdrawn.
As seen from the example, Short positions are better in downtrend markets, when the price of an asset is decreasing. Profit or Loss made in this case is the difference between the price at which you Opened the position (sold the assets) and the price at which you Closed the position (re-bought the assets).