There’s a lot to consider when you’re choosing which cryptocurrency to invest in. You need to understand what makes a coin value, which exchanges offer the best rates for trading, and which coins have staying power. But you also need to understand what makes one position different from another. This article will cover a long position, a short position, some tips for shorting crypto and also some of the types of trading to use that may help you decide which one is right for your portfolio.
What is a Long Position?
A long position is when you buy Bitcoin and expect its price to go up, you’re taking a long position on Bitcoin. This means that your hope (and expectation) is that the price of the coin will rise and increase in value over time. If this happens, then when it comes time for you to sell your holdings, you’ll be able to sell them at a higher price than what you paid for them, thus making money off of your investment in crypto.
You can also have multiple long positions on different cryptocurrencies at once. Let’s say Bitcoin and Ethereum both increase in value while Litecoin decreases in value over time. This would allow someone with three separate coins: BTC being valued at $20k USD; ETH valued at $3k USD; LTC valued at around $2k USD could still make money if they sold all three cryptos within this timeframe (assuming their initial purchase was made using fiat currency).
What is a Short Position?
A short position is when you sell something you don’t own. To make it clearer, let’s look at an example: imagine that on January 1st, 2019, you buy one Bitcoin for $10 USD. Then by February 1st, 2019 your friend tells you that cryptocurrencies are going up in value and so he wants to buy one Bitcoin as well but doesn’t have enough money to buy it outright so instead he borrows your coin from you (you keep a record of this transaction). Now since he has borrowed your coin he no longer owns it and only has the option to return it back later or lose his investment completely if the price falls too much during those 2 weeks. This type of transaction would be considered a short position because your friend was borrowing something from someone else without actually having possession of the asset himself.
How to Short Selling Cryptocurrencies?
You will need to borrow the asset you want to sell. This can be done by buying “futures” contracts or by finding someone who is willing to lend their crypto at an agreed-upon rate. You then sell the borrowed crypto at a high price and then buy it back when its value drops as expected. If you do this right, you can make money even if prices fall.
Long positions are different from short positions because they require more money upfront and have less risk but also potentially less reward than shorting a coin may have had in the past (since there’s no guarantee that prices will continue falling). The added benefit of long positions over simply holding onto your Bitcoin is that they allow investors more flexibility when it comes time for them to exit investments which could come sooner rather than later depending on how things go within these markets going forward and also means investors don’t have pay taxes on gains made through shorts until those profits are withdrawn from accounts instead of being reinvested again into new trades which would incur taxes regardless whether those investments were profitable or not.
Types of Trading for Crypto
There are many ways to trade cryptocurrencies, and each method has its own advantages and disadvantages. Here are the most common types:
- Buy and hold: This is a long-term strategy in which you purchase an asset, hold it for an extended period of time (usually at least several months), and then sell it when the price rises. For example, if you bought Bitcoin at $20,000 and held onto it until now (when Bitcoin reached $6500), you would have made a profit after selling at the high of $6500.
- Day trading: In this type of trading, you buy cryptocurrency with money that you intend to use only temporarily while holding onto your investment for less than 24 hours before selling again. This can be risky because while some day traders make money consistently through their quick trades, others lose much more than they win due to unexpected spikes in volatility or crashes caused by hackers or bad news related to cryptocurrencies taking place during any given quarter or year.
- Position trading: As opposed to day traders who focus on very short-term investments over days or weeks at most if not minutes. Position traders tend toward strategies involving holding onto assets from several years up until retirement age because they believe that long-term investing provides better returns overall compared with short-term strategies like day trading which come with greater risk but also allow investors opportunities for higher gains over shorter periods like months rather than years (and thus potentially decades).
As you can see, there are many different ways to trade in the cryptocurrency space and there’s no one right way to do it. If you’re just starting out in the market, then start with the basics: buying and holding some coins of your choice. This is a great way to build up a portfolio that grows over time without taking on any risk or responsibility for managing trades.
Delan Cooper is a writer with years of experience in marketing communication. He enjoys meeting new people and reading more books to get inspired for his own book. Connect with him on Twitter.