We explain what short trades are and how to short on Binance
What is short on Binance?
Short is a transaction that helps a trader earn money on a fall in the price of a traded asset. The short seller sells an asset that he formally does not have.
To implement such a deal, the exchange gives the trader a loan. For example, if we short ETH, the exchange will lend us ETH. Having received the coins, we sell them at the current price. For example, for $1,600. After some time, the price drops to $1,550 - we buy back ETH at the new price and return it to the exchange. The difference between the sale price and the buyback price is $50 per coin. This is our income from the short deal, excluding commissions.
It is important not to confuse short trading with regular coin selling.
Spot trading involves direct exchange of assets, without credit relations. Short positions in spot trading are theoretically possible - but this short will be in the "head" of the trader. A short deal for the exchange is when a trader opens a margin position and borrows cryptocurrency. On Binance, in margin mode, traders can "play for a fall" with spot market instruments.
First, top up your margin wallet with a transfer from your spot account. This can be done via the "Wallet" menu. Then go to the "Trade" menu and select the "Margin" subsection.
For example, we want to earn on the fall of ETHUSDT. Open ETHUSDT through the list of instruments, to the right of the chart. There is an order submission window under the chart. Switch to the "Cross" or "Isolated" tab, depending on what type of margin we plan to use. For example, let's focus on isolated margin. There are two blocks in the trading module - "Buy" and "Sell". We are interested in "Sell".
Select the order type, "Limit" or "Market". Below are three switches - "Normal", "Borrow" and "Redeem". "Normal" is a standard sell order, does not apply to short transactions. Select "Borrow". This is the first stage of the transaction. If we have not transferred the coins to the margin account earlier, we can do this through the trading module. To do this, click on "+" under the "Borrow" button. Specify how many coins we want to transfer and confirm the transaction.
In the "Price" field, we write the price at which we plan to sell ETH at the first stage of the short transaction. For example, at $1,500. In the "Quantity" field, we indicate how many coins we borrow from the exchange for the transaction. For example, one ETH. Below, in the "Total" column, it will be indicated how much money we need to place on the margin wallet to ensure the transaction. To keep the example simple, we trade without leverage (formally, with 1x leverage).
When the order is filled, click "Margin sale of ETH". Then the automation works - the exchange will "throw" 1 ETH into our account and sell it immediately. 1,500 USDT from the sale of ETH will appear on the margin wallet.
Let's assume the price has dropped to $1,400 and we want to lock in the profit. We return to the trading module. Select the "Buy" block and switch to "Redeem". We specify the price at which we will "buy out" the coins - 1,400 USDT. In the "Quantity" field, we specify how many coins we will buy out. In our case, one coin. Click "Buy ETH".
Binance will write off 1,400 USDT from the margin wallet, buy 1 ETH with this money and “take” it for itself, to pay off the loan. We will have 100 USDT left – the difference between the sale price and the subsequent purchase price of the coins. Without taking into account the commission, 100 USDT is our profit from the short deal.
How to Short Trade on Binance Futures Market
A short trade on the futures market is different from a margin trade on the spot market. On the futures market, a trader does not need to borrow coins and repay the loan. These transactions are "sewn" into the futures contract.
We do not buy or sell a contract, but open a position in the appropriate direction. Simply put, we "bet" on the price going up or down. If we want to make money on a price drop, we need to "play for a fall." That is, open a short position on the contract.
To trade short, display the desired futures on the screen, select the margin type and leverage size. Specify the order type - "Limit" or "Market". When the order is filled, click "Open short".
If the forecast worked and the market really goes down, we wait until the price drops to the estimated price and close the position. This can be done through the trading module (the "Close" tab) or through the "Positions" table. Find the active position and click "Market" or "Limit" to "close". We can not wait for a specific price, but close the position when we deem it necessary.
If the moment for the deal has "gone" or we have placed a limit order by mistake, the application can be cancelled. How to do this is described in the article How to cancel an order on Binance.
How to Short Trade on Binance with CScalp
Short trading on Binance is available through the CScalp terminal. If we plan to trade futures, we connect a futures account and set up working volumes.
For example, we want to "short" BTCUSDT. If there is no BTC to sell on the account, and we click on Bid orders in the order book, the terminal will automatically open a short position - if we try to sell something that is not on the account, CScalp "perceives" this as a command to open a short position.
To "short" spot assets, connect a spot account to the wallet. In the "Wallet type" line, select "Margin". Then - similarly. To open a short position, that is, to sell something that is not on the account, set the working volume and click on buyers' orders (Bid). The terminal will "understand" that we are shorting and will open a short position.
Conclusion.
Binance allows traders to short futures and spot instruments. However, such trades require preparation and preliminary calculations, so they are difficult for beginner traders. Before short trading, you can start with simpler operations, such as regular spot trading.
