Go Short or Long in Crypto Trading and Investing – Which is Better?
The best crypto trading and investment portfolios often include a combination of long and short term strategies.
Going long in crypto trading means buying a token for the sole purpose of holding it for a minimum of one year, in the hopes that it will appreciate in value and “go to the moon”.
Going short means short term trading – could be hours, days, weeks … depends – that helps you take near instant profits whenever it’s available.
Smart traders and investors know that combining both is always a great idea, particularly when they have some time to spend on trading.
As with all trading activities, going long and short will not necessarily protect you from the occasional loss. It’s the way of trading. Sometimes you win, sometimes you lose. You just need make sure that your wins are more and bigger than your losses.
With these, you will be in a position to consistently stay in profit regardless of price movements or the market state at the time.
While this should serve as one of the fundamentals in your trading kit, you should also understand that you can’t use the same blanket approach towards investing or trading every available cryptocurrency.
You need to accurately determine the best mix for each cryptocurrency. For instance, your long/short strategy for Tronix may not be the same as Bitcoin Cash.
You can decide to use 80 percent of your budget on going long on Tronix, while investing the remaining 20 percent in short term trading strategies.
If you were to adopt this same approach for bitcoin cash, you would probably end up not profiting as much. These cryptos are very different, so their portfolio percentages/allocations should be different.
Most exchanges allow traders the opportunity to do both on their platforms. Some traders though, prefer separate platforms because of the fees associated with managing both positions on platform –some exchanges typically charge high fees for both positions.
The Concept of Going Long
This is the standard position of every crypto investor looking to make a lot of money from their crypto investments.
These entities typically buy up significant amounts of one or more cryptos and store them in their wallets or the exchange until they drastically appreciate in value. For some of these investors, they’re looking for anything between 2X and 100X ROI.
Picking the right cryptos with this potential takes skill and expertise. You need to find those undervalued cryptos, see their potential, explore how much work is being done towards making them a reality, study market sentiments and then jump in, hoping for massive returns.
Smart investors are now beginning to invest more in ICOs as those tend to check off some of the boxes we mentioned above. Many of them are usually underpriced during the ICO period, and appreciate at the end of the ICO or after the project kicks off.
Taking a long term position on cryptos usually involves the standard process of buying known cryptos like bitcoin or Ethereum with fiat currency, and then exchanging them for your token of choice.
The one thing you should be aware about going long is that it can take time before you get any significant returns on investment. Some tokens can enjoy significant appreciation in months, others might take years to do so.
The most important trait you’ll need for this is patience and fortitude. You have to believe in the project, and its viability. This is what will keep you going in the event of a downward turn in prices or unfavorable market situations.
It’s the reason you won’t sell in panic when/if the prices plummet. There’s no duration to how long a going long strategy can be. It all depends on the investor. If you’re happy with 3X ROI, you can always sell.
Others might prefer a 500X ROI. It all depends on you, your ability to withstand the pressure and your goals.
This strategy is less known among beginner traders and more popular among seasoned or professional crypto traders. This is simply the process of borrowing a significant amount of your intended cryptos against an anticipated future price drop at the going price.
When the price then drops, you can then return the amount you borrowed from the lender after selling at the price you entered the trade.
Shorting is a difficult concept for many beginner traders because of its slight complexities. But at the heart of it is accurate price predictions. This is incredibly important and can make you a lot of money when done right.
Short selling cryptocurrencies often involves some trading techniques, including margin trading, contract for difference, options trading, future trading, binary options and leverage utilization.
With leverage, you can actually open trades on much more cryptos and volume than what you have available to you at the time. Using these strategies, traders can make a lot of money even from small price fluctuations.
Shorting is best and more rewarding when you’re playing with a hefty capital base. This is probably why it’s not as popular among beginner traders and often used by professional traders.
With the profit potential also comes the loss potential. Losses due to shorting, particularly when you’re utilizing leverage can be brutal as the losses are multiplied too. If you’ll be doing a lot of shorting, stop loss and take profit orders are your best friends. These will minimize your losses and increase your odds of making money, even when the market is volatile.
Both strategies are just as effective if you’re looking to make money from trading cryptos. If you’re newbie just looking to make some passive income from crypto trading, your best bet is to go long. Just make sure to adequately research your intended cryptos and ICOs before investing.
If you’re a more aggressive trader with a lot of cash, shorting cryptos can be a great way to make decent bank and grow your portfolio. You could also just parlay the profits from your shorting activities into going long. Many traders routinely do this, and end up with huge portfolios as a result.