Opening a long position isn’t too much of a problem, but shorting is completely different. Traders who succeed in shorting can be easily compared to world poker series champions, because of how fluent they are in analyzing the market sentiments and evaluating the risks. This article is a brief introduction into the fascinating world of short. 📉
What is a short position?
An opposite of the long position, which means that the investor predicts the price of an asset to decrease in the short term (usually a couple days).
Why is short highly not recommended for beginners
Long positions don’t make you risk anything but your deposit. You can always shill your position and acquire a net profit. Simply convincing others to buy can be an option as well. 🤔
Short is absolutely different. You pay token borrowing costs in a war of attrition, for limited downside potential, and in doing so you take on the risk of liquidation - no matter how big your deposit is! 😨
You are dependent on time, because the borrowing costs will only increase while you wait. Any unexpected short squeeze might become a reason for losing it all. 🫤
Wait, wait, wait, why do you even short then?
Because let’s be honest - there would be no trading if people were opening long positions only. In the era when trading has become more of a side hustle, rather than a proper job, people who are willing to make the system work are rewarded respectfully. 😎
Basics
Every daredevil, who decides to take the risk and try out shorting, should understand that long traders are not going to start selling simultaneously some day. The art of short is about finding the weak spot of the whole token holder community and targeting it. This is when psychoanalytic skills come in handy. 🧠
The three main weapons
All the holders share the same weaknesses and shorters have to be capable of identifying those in time
- Greed - when the holders are trying to get as much profit from their bubble as they possibly can. 🤑
- Boredom - causes holders to make irrational decisions. 🥱
- Despair - allows the shorters to cut off their risks. 😱
Greed
The bubble can’t inflate forever and all the whales will start questioning the project’s potential after any slightest recession. Others, will forget about all the upcoming problems seeing their capital grow and the greed will take over for a period of time.
Boredom
Once the whales start exchanging their coins, people realize the asset is depreciating, so they start searching for better profit opportunities. The nature of users, who tend to inflate those bubbles is onlythat about having quick profits, thus making their boredom a major problem.
Despair
The whales, who are still holding the coins will have to sell them for as low as possible, decreasing the price even more and that is when shorters get involved. Monitoring social media like Twitter, YouTube or even TikTok allows them to analyze the current psychological state of the whales and strike, when needed. 🎯
We have seen this cycle repeat over and over again for dozens of projects and it all reminds us of a poker game, where the outsider eventually wins. Those outsiders are shorters. The main rule is always keeping track of your time, because holders aren’t the only enemy, shorters have.
Stay tuned 📻
