Topic: Short selling - page 2. (Read 284 times)

Here's a guide for you to know about shorting (short selling) https://academy.binance.com/en/articles/what-is-shorting-in-the-financial-markets. Shorting doesn't always needs to borrow funds from the market you can even do it on spot trades like you sold your BTC at 40k to buy at a later lower price at 35k, that was still a short position. I think you're way having too many thoughts about scenario that doesn't add up, shorting even at spot trades or margin/futures trades you need to have money at all. At margin or futures trade you need collateral of a certain asset to start your short position.

You do realize you can't borrow without any collateral, right?

When things don't go as planned. Your collateral goes to the lender. Now think about the first scenario but with the collateral in mind.

Scenario 2 and 3 don't make any sense, or maybe I didn't get your point?
Also read about bankruptcy of a position, Auto Deleveraging and how Insurance Funds takes care of it

Nope. I'm starting to think I know even less than I thought I knew.
Does that mean you can trade with no money at all?

 Unlike spot trading, in futures trading you can sell a coin you do not own. This process is called shorting. Shorting is simply betting against the coin. In longing, we bet that the coin will go up, in shorting, we bet that it will go down.

Apart from the fact that we click sell instead of buy, there is no difference in the technicalities involved in selling/shorting.

NOTE:- • Closing a sell/short trade manually is the same as in buying/long.
 When already in a trade, you can adjust your leverage and also change your stop loss and take profit still in the positions tab anytime by clicking on
them.

Hope this will help.

I haven't posted on this board so far, so for those that don't know me, I'm a newbie, and as green as can be expected. I've been trying to learn as much as I can, watching videos, and reading anything I can get my hands on. As of late, I watched a video on short selling a gazillion times, but I just can't wrap my mind around it. It just doesn't make any sense to me.

So here's what I know (or I think I know):

Short selling is betting that an asset is gonna go down in price.
You have the certainty a given asset is gonna drop, so you borrow that asset, sell it high, wait for it to drop, and then buy it back low and give it back. Great. Except it doesn't make any sense.

Let's see. For example, BTC is now scraping 45K. You got tipped that's gonna go down to 30K tomorrow. So...

Scenario #1

You borrow 1 BTC. Both the lender and the exchange charge you a fee for it. You do your thing, and you get a good chunk of money in return.
But what if BTC doesn't go down? You need to have enough money in your account, so as to pay the BTC back, plus the fees, plus some extra cash in case BTC goes up. If it gets yo the point that you're not gonna be able to cover your obligation, you'll get margin called.

Scenario #2

You do have the money already in your account, so you liquidate your BTC if you have it, and wait. When BTC does go down, you buy it cheap, and get the same profit you got on scenario #1, plus the fees you don't have to pay. 

Scenario # 3

This is the only scenario that would make any sense to me:
The lender agrees to share the risk (meaning he agrees to get less money than he lent you, in case things go south). That's the only way I can see this would work (not for the lender, though), and only if the top price the borrower has to pay (including fees) is less than the value of the BTC he starts with.

So, how does it work? The way I see it, scenario #1 doesn't make any sense, scenario #2 is not short selling, and the only one that makes sense (to a point) is scenario #3. That is, if the lender is willing to share the risk with you (I personally wouldn't consider it).

Now, I'm pretty sure I'm missing something, and I'm pretty sure itś dangling right in front of my nose, and I'm gonna feel like an idiot when yoou guys tell me. But, How does it work?

Thank you all in advance.