January 23, 2019

Short trading, big opportunity

January 23, 2019
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4 min

In the world of trading, there are thousands upon thousands of assets to trade, yet only two main actions that can be taken with them: buying and selling, or to long and to short. Every broker and exchange allows both of these actions, including the traditional marketplace where you buy a bunch of bananas, or from another perspective, sell your cash for bananas.


To long an asset is to buy it and eventually profit from its growth. Shorting or selling is the opposite - selling an asset when you believe it to be overvalued because you think its price will drop. Shorting and selling are not exactly the same, however. In order to sell an asset, you need to own it, whereas when you short, you borrow the asset from a broker to sell and then buy it later to return to the broker (in the hopes that its price will go down and you will therefore have made money). Shorting and selling can be done in both traditional and crypto markets. The genius of shorting is the ability to make gains from an asset even when its value is going down.


There are multiple ways to sell an asset - simply selling it, margin trading, and using contracts such as futures contracts in the traditional market or Perpetual Contracts in the crypto market. Simply selling it is just what it sounds like - selling the asset you possess for another which you believe will bring better gains. Margin or leveraged trading is when you borrow a currency or crypto from a broker to magnify the value you’re trading with. Futures contracts involve two parties agreeing to exchange goods and money at a fixed price and quantity at a specified future time. Perpetual Contracts are a variation on futures contracts created by BitMEX.


All of these can be performed and automated based on conditions using Capitalise. What’s Capitalise, you say? Capitalise is a platform allowing traders to create automated trading strategies using plain English. Monitoring the market while executing your trades, Capitalise allows you to follow through on your strategies without being glued to your screen.


As we were saying, simply trading your asset for another that you believe to be more stable is the traditional method because you are only trading an asset, currency, or crypto you already possess.


To open a “SELL” or “SHORT” trade using the Capitalise platform, just write the trading order you want sent, such as “Sell 100 USD worth of AAPL if...” and then your conditions. In this case, you are selling your AAPL (the amount depending on its current worth and the amount of AAPL you possess) and buying USD if your conditions are fulfilled.


Margin trading is different because you’re essentially borrowing funds from a broker or exchange in order to place your trade, so if the market is moving against you, you’re on the hook for money or crypto you don’t necessarily own. Should the market move in your favor, however, you can make big gains using this trading method.


For example, if you were to use leverage of x2 then you’d only need $5,000 to open a $10,000 trade. That would mean you could make double the profit, but you could also lose your funds twice as fast. The rest of the money in your account would effectively serve as collateral or margin for the loan the broker is giving you.


BitMEX is the main exchange for margin trading crypto. To execute a margin trade, you simply set the margin per asset on BitMEX and then order your trades normally with us on the Capitalise platform using conditional trading scenarios. For example, “Buy XBT/USD if…” and then your conditions for executing the trade.



BitMEX has also devised several types of contracts, including the Perpetual Contract. They describe the Perpetual Contract as, “a derivative product that is similar to a traditional Futures Contract, but has a few differing specifications: There is no expiry or settlement, and Perpetual Contracts mimic a margin-based spot market and hence trade close to the underlying reference Index Price. This is in contrast to a Futures Contract which may trade at significantly different prices due to basis. The primary mechanism to tether to spot price is Funding.” (source: https://www.bitmex.com/app/perpetualContractsGuide)

To perform trades using Perpetual Contracts, simply write “Sell perpetual contract if…” or “Buy XBT if…” in the Capitalise wizard and then enter in your conditions or use an example:


What if I told you all of these strategies can be executed from one central platform that monitors the market for your conditions? Believe it or not, you can with Capitalise. Capitalise empowers you to benefit from your trading plan even when you’re away from your computer. You can even set up some strategies as contingency plans just in case something particular happens and you want an action taken as a result. This way, your contingency plan isn’t put into play unless necessary.


That’s the long and the short of it, folks. So why not try it out yourself? Just go to https://app.capitalise.ai/wizard and start typing.

Alma Vilcov

Head of Customer Success

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