How to Short on Binance - Updated Guide 2023 - metaschool (2024)

Out of the numerous profit generation methods on Binance financial markets, shorting is one. If you are curious to know more about it, let’s take you through this quick guide on how to short on Binance.

In short (so punny), once you start shorting, you will be able to receive profits from price declines. Getting into a shorting position will help you manage risk. You will also be able to hedge all your current holdings against the risk of price drop.

But if that doesn’t make any sense to you yet, let’s talk a little more about shorting and explain it.

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So, what exactly is shorting on Binance?

In order to short, one has to borrow a cryptocurrency and sell it on an exchange at the current price. You, then buy the digital currency at a later date and repay the capital borrowed. If the price of the coin has dropped, you will be able to make a profit on the difference between the cost of buying and selling.

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Here’s a quick example on shorting

Let’s assume you believe that the price of Bitcoin is soon going to fall from its current price of $50,000. Therefore, you borrow 10 Bitcoins from an exchange and short sell at current market value.

This means you will be borrowing 10 Bitcoins and selling them for a price of $500,000

After a week, the price of one Bitcoin falls to $40,000.

This is where you re-purchase 10 Bitcoins, so that you can give them back to the exchange you borrowed from. However, you will be giving them back at just $400,000.

In this scenario, you will end up securing a total profit of $100,000, the difference between the cost buying and selling ($500,000 – $400,000) respectively.

Shorting provides the benefit of making a large amount of money as you short a volatile and risky asset like cryptocurrency. The potential is massive, but because of that massive risks are involved too. It’s business, that’s expected.

One risk is that if you’re in a short position and the stock price, of let’s say Bitcoin, can increase indefinitely. That can end up making you a loss instead of a profit. The spike up can quickly “trap” short sellers and over the years has shown to bankrupt many of those shorting.

How to short on Binance – Margin Trading

Margin trading is a way to trade assets with funds given to you by a third party. Margin accounts can provide traders the opportunity to gain access to bigger amounts of capital. Then you can leverage your position with ease. While keeping that in mind, let’s take a look at how to short on margin trading.

Step 1 – Click on Wallet and Select Margin Wallet

You should initially log into your Binance trading account. You should then click on Wallet and select Margin Wallet.

Step 2 – Search for USDT

Once you’re done with those initial steps, you will need to search for USDT. After that, you may click on the button named “Transfer”.

Step 3 – Enter the USDT amount

Next, you will need to specific number of USDT that you wish to transfer out of your spot wallet into the margin wallet. Then you can pick the option named “Confirm Transfer”. Once you do it, you will be ready to go ahead with shorting your crypto.

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Step 4 – Search for a cryptocurrency

Now you can search for any cryptocurrency on the Margin Wallet. For example, if you want to short Bitcoin, you will need to search for BTC. Then click on the button named “Trade” and pick an appropriate crypto pair. For example, it can be BTC/USDT.

Step 5 – Sell your cryptocurrency

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You should go to the section named “Sell BTC”. You can see it right under the price chart.

Step 6 – Borrow

Now you can click on the “Borrow” button. It will show the maximum BTC amount that you can borrow.

Step 7 – Place short order

In order to place the short sale order, you will need to specify the amount as well as the BTC that you plan to short. You can click on the button named “Margin Sell BTC”.

How to short on Binance – Options

You can use the Binance mobile app to short on Binance options. Mentioned below are the steps that you will need to follow to short on Binance options.

Step 1 – Download Binance app

You should first download Binance mobile app. The app is available on Google Play Store or Apple App store. After downloading the app, you need to log into it.

Step 2 – Activate futures

Next, you will need to activate Futures account on the app. This will help you proceed with starting trade options.

Step 3 – Go to Trades tab

Image Source – academy.binance.com

As the next step, you will need to get to the tab named Trades. After that, you can click on “Options” button. In case if no funds are available on the Futures wallet, you will need to transfer funds from the Exchange Wallet into the Futures Wallet.

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Step 4 – Pick the expiry time

Now you will have five different options to select from. These options have different expiry times, which range from 10 minutes, 30 minutes, 1 hour, 8 hours, and 24 hours. You can pick the best option that you wish to purchase.

Step 5 – Specify contract size

Next, you should specify the exact contract size under the field named Quantity. After that click on Buy Call button.

Step 6 – Confirm

You can now see a confirmation window as a pop up. Review the information and click on Confirm button.

Step 7 – Sell open positions

Take a look at the tab named Positions, and you can see all open positions.

Step 8 – Settle

In order to close a position, you should click on the button named “Settle” that you can see on the right hand side of tab named Positions. After that, you can click on the Confirm button and execute the option.

Final words

Now you are aware of how to short on Binance. This is one of the proven methods available to secure outstanding profits. The process of shorting any cryptocurrency on Binance is not difficult. All you have to do is to adhere to the steps I’ve shared above and get your work done.

However, it is also important to understand that crypto markets are highly volatile. This means that the price of a specific cryptocurrency can increase or decrease within a matter of few seconds. There won’t be any underlying reason for it as well. If you’re prepared to manage the risks before you short, you can expect to receive the best experience with it.

Hope you found this useful!

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