How To Profit By Short Trading in A Bear Market – Bittime

Hi Bittimers,

Do you know that futures trading can be profitable both in a bull and bear market? Want to find out how you can stay profitable in a bear market? Let's find out more with Bittime!

In a bear market, the value of currency pairs will fall and that is when an opportunity to short to gain profit arises.

What Is A Futures Short?

A short is a trading strategy that profits from a decline in the price of a cryptocurrency. In futures trading, a short position is opened by selling a futures contract when the trader expects the price of the underlying asset to decrease. The trader aims to close the position later at a lower price. The profit mainly comes from the price difference between the opening and closing of the position.

For example:

Assuming 1 USDT = $1, when the BTC price reaches $20,000:

USDT-margined Futures: use 10,000 USDT with 10x leverage to short the equivalent of 1 BTC. Position size = 10,000 × 10 = 100,000 USDT notional / 20,000 = 5 BTC

Assuming a 10% drop in BTC price ($20,000 to $18,000), the gains are as follows:

USDT Margin Futures
Estimated Profit Calculation Formula	Estimated Profit = Quantity * (Opening Price - position squaring price)
Futures income	5*(20000-18000)=10000 USDT
Earnings calculation	10000/18000=0.5555 BTC
Changes in the value of margin fiat currency	No change
Total Fiat Value Revenue	10000 USDT

Through calculation, the USDT futures and the U-based futures will profit at the same time when the BTC price falls, but converted to fiat currency value gains will also profit 10,000 USDT.

From the example above, you can understand better how to profit from short futures trading.

How exactly does it work? By following these steps, you can start learning how to make short contracts on the Bittime contract platform.

1. Transfer USDT to U-based futures account as margin

2. Choose your leverage ratio (to manage risk, it is recommended to start with lower leverage).

3. Enter the number of futures you have selected and the right price.

4. Select Sell / Short direction;

These are the steps of Bittime futures shorting, you can click on the futures to start shorting now!

How to Calculate for Achieving Profit and Loss & Return

USDT-margined Futures

When using Mark Price as the reference: Unrealized Profit and Loss = Number of Positions × Opening Direction × (Mark Price − Opening Price) Rate of Return % = Unrealized Profit and Loss / Initial Margin
When using Latest Price as the reference: Unrealized Profit and Loss = Number of Positions × Opening Direction × (Latest Price − Opening Price) Rate of Return % = Unrealized Profit and Loss / Initial Margin

Opening direction: Long = 1; Short = −1 Initial Margin Rate = 1 / Leverage

Summary

Given the price instability of the cryptocurrency tokens market such as BTC, the use of futures and other tools to manage risks has become an opportunity for everyone to re-examine the derivatives market, and the substitution of leverage has given people the opportunity to offset potential losses and maximize potential benefits.

In this process, risk hedging and its related strategies have provided us with a new way of thinking and new compositions of our investment system about how to increase the complexity of the strategy in order to minimize the risk and maximize our profit. In the ever-changing investment market, this is something we need to consider, practice, and reflect on.

With the increasing correlation between traditional and decentralized financial markets, some new investment strategies are bound to arise. Bittime will continue to pay attention to the effectiveness of these strategies.

Warning: None of the articles constitutes any investment recommendation, there are always risks in carrying out investments and you should consider your personal risk tolerance. We recommend you to do your own research before making any decisions.

Customer Support

If you have any questions regarding this information, please contact our team at support@Bittime.com or through the Bittime Help Center. The Bittime team is ready to assist you in ensuring you receive clear and accurate information.

Thank you for your trust and support. Together with Bittime, enjoy a better, safer, and more comfortable trading experience.

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DISCLAIMER: This article is for informational purposes only and does not constitute advice, recommendation, offer, or solicitation to buy or sell any crypto assets. Trading crypto assets involves high risk. Crypto asset prices are volatile and can change significantly over time. Bittime is not responsible for fluctuations in exchange rates or crypto asset prices.

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