Like the crypto industry, trading in the financial market has never come on a platter. This skill requires rigor to navigate the market, look for the best opportunity, and hone your trading skills to remain profitable.
Many traders looking to make profits from the crypto market are always looking for the best strategies to adopt as this market continues to evolve, providing so many traders and investors the opportunity to evolve with it while ensuring they make use of the opportunities to trade and make a great gain.
Traders and investors adopt different trading techniques, strategies, patterns, chart patterns, technical analysis, and psychological needs to continue trading when the market is not as favorable as it should be in a bull market.
The trading techniques employed by traders include longing and shorting of crypto assets depending on the market cycle enabling traders to profit from the rise and fall of crypto assets. Let us dive deep into learning how to trade Litecoin and shorting Litecoin to remain profitable.
What Is Leverage Trading
Leverage trading is a financial tool or technique used to trade or invest with borrowed funds aside from the main capital. This is a borrowed fund used to trade while collateral is in place to trade in the crypto to make gains after speculating the price of an asset.
When trading with leverage on a leverage trading exchange like Margex, you can open a leverage position either long or short, depending on your speculation using the free Margex tools to open a position with as little as $10 - depending on the leverage size. You can open a leverage size and a position of Ethereum (ETH) worth $1000 with $10.
Making it possible to trade large crypto assets with small funds depending on your risk appetite to open a leverage position for these assets.
With the help of margin trading, a trader can open a leverage position with a small fraction of the required funds to open this position while exploring the varieties of opportunities to open either a long or short position, depending on the current state of the market.
Because of its high returns and opportunities, leverage trading allows traders and investors to track potential returns quickly; leveraged trading has become an extremely appealing option for them. However, those with little capital and knowledge are drawn to highly leveraged markets because they believe they will become much wealthier in a shorter period than through any other trading method.
Benefits Of Leverage Trading
- Magnified profits: Trading with leverage allows traders and investors to put only a fraction of the value of their trade to trade with borrowed money and earn the same profit as in traditional trade. Profits are calculated using the leverage size selected during the margin trading call. Margin trading can increase your returns on successful trades and your losses on unsuccessful trades. It is always advised to trade with a good risk management strategy to avoid losing your crypto account.
- Opens for opportunities: Leverage can be an excellent tool for traders and investors who want to free up capital for other investments.
- Opportunity of shorting Litecoin and the market: Using leveraged crypto assets like Litecoin to speculate on market movements enables traders and investors to benefit and explore the different opportunities from a downtrend market and a prevailing winter market cycle in the crypto space.
What Is Litecoin (LTC)
Litecoin is one of the most talked about cryptocurrencies, created in 2011 as a fork of the Bitcoin blockchain to break the chain and ideas that Bitcoin was becoming centrally controlled and making it a difficult challenge for largescale miners and mining firms to gain more advantage in their mining business.
Although it has yet to achieve its purpose of preventing largescale miners from taking a bigger share in the mining of Litecoin, the cryptocurrency has restructured its focus into a mineable coin and a peer-to-peer payment system.
Litecoin was designed to carry out cheaper and faster transactions and to be more useful for everyday traders and investors. Bitcoin is more of a store of value and, as such, suffers some setbacks in terms of how the use case of Litecoin was designed. The mining process of Litecoin is quicker, making transaction speed faster and cheaper but in small sizes.
Litecoin, as a digital currency and decentralized token, utilizes blockchain technologies to transfer funds directly between individuals and organizations without an intermediary or censorship with the help of a public ledger to record transactions on the blockchain.
While mining litecoin requires more advanced technology than bitcoin, blocks are produced as much as four times faster. Litecoin also processes financial transactions much faster and can process a greater number of them in the same amount of time.
Benefits Of Shorting Litecoin (LTC)
Litecoin is one of the most traded and earliest known cryptocurrencies in the market, with huge adoption from traders and investors due to its use case of faster transactions with low gas fees. It was traded as a top 10 altcoin before now but has been de-thrown by the likes of Polygon, Ripple, and Dogecoin as these altcoins continue to exert a huge dominance in the market as traders and investors continue to monitor their growth.
Because of its early existence in the crypto market, Litecoin has built a trusted and reliable community and has been traded on well-known exchanges like Margex, where you can trade litecoin and other great crypto projects that have been vetted to be trusted and with a good reliable use case.
Margex offers shorting Litecoin with up to 100X leverage size; with the help of technical analysis tools on Margex, traders can speculate the direction of LTC price and open a short position.
Drawbacks Of Shorting Litecoin (LTC)
Shorting Litecoin comes with benefits, as stated above, but there are a few drawbacks you need to be aware of, which could be managed appropriately with the right knowledge of trading.
Shorting Litecoin (LTC) in a downtrend market magnifies losses as well as profits; this is because a trader’s or investor’s capital is comparatively smaller than conventional trades, it is easy to forget the amount of capital you’re placing at risk. You won’t be able to lose more than the balance on your account, but you should always consider your trade in terms of its full value and downside potential – and take steps to manage your risk.
When a trade goes in the wrong direction, there are high chances of the trade never coming back to a break-even or entry point there, leading to excessive loss or liquidations if there is no proper stop loss in place to manage loss or risk appetite.
When shorting Litecoin, a trader or investor is being lent money to open a full position with a little fund, thereby trading Litecoin with borrowed money. If the trade is kept beyond a stipulated time, this attracts a funding fee which is usually small to cover the cost of holding the crypto asset.
Ways Of Shorting Litecoin (LTC)
There are different ways traders and investors position themselves to benefit from a falling market like Litecoin, looking to make the best use of the opportunity. Let us discuss some ways traders and investors look to short the price of Litecoin in a falling market.
Spot margin trading
Spot margin trading is a technique used to short the price of many assets, and this type of trading is adopted in many cryptocurrency exchanges. This involves buying and selling with borrowed funds with the help of leverage size.
Spot margin trading is one of the simplest ways to short Litecoin as a trader will usually borrow the asset from an exchange to be repaid after the trade has been executed.
Options are non-binding contracts between trading parties that allow for agreement within a specified time frame and at a set price. An investor or trader can choose two types of options based on their trading strategies: call options and put options.
The futures market allows traders and investors to participate in futures contracts in which a buyer and sellers have an agreement for a crypto asset at a set date and a specific price, with the parties ensuring the agreement is settled based on the terms agreed.
A trader who wishes to short Litecoin will take the sell side of the futures contract and agree to sell LTC to the buyer at a predetermined price. If they believe that the price of Litecoin will fall below the predetermined level, they will purchase the asset at the market on the agreed date and time and sell it at a higher price.
Changes in price differences lead to traders and investors making huge profit returns, and with good trading knowledge, traders make a good return on investment with proper risk management.
How To Short Litecoin On Margex (Step-By-Step Guide With Screenshots)
Margex is a Bitcoin-based derivatives exchange that allows traders and investors to short crypto assets, including LTC, with up to 100X leverage size. Margex, with its unique trading features, allows a trader to stake and trade with the same crypto assets to earn more with up to 13% APY return on investment.
All assets on Marge have been vetted and approved for trading to avoid rug pulls and excessive manipulation of assets; with the help of Margex MP shield protection, all of these are possible.
Let us discuss how to short LTC on the Margex platform;
Step 1: Open A Margex Trading Account
Login to access the futures trading technique as discussed earlier if you are an existing Margex user, but if you are using Margex for the first time, you will need to create an account to enable you to access all Margex trading features, including the opportunity to short Litecoin
Step 2: Click On Trade Button To Access Trading Options
After successfully accessing the Margex platform, you need to deposit some funds using the wallet options to trade the techniques. You need as low as $10 to open a short position for LTC.
Step 3: Open Short LTC Futures Trade
After conducting your technical analysis on the price of LTC, and these meet with other criteria you have considered, you can proceed to open a sell position which is the same as a short position for the price of LTC. The Margex platform provides free access to all technical analysis tools to help you become a successful and better trader.
Margex allows traders to use up to 100X for a leverage position; you need to drag the leverage slider and choose either isolated or cross-margin trading, depending on your preferences as a trader.
Frequently Asked Questions (FAQ) About Shorting Litecoin
Here are the frequently asked questions about shorting Litecoin by different traders and investors.
Can Litecoin Be Shorted?
Yes, but it requires a good understanding of technical analysis or fundamental analysis.
There are different ways of shorting Litecoin or trading Litecoin, as discussed above, but what matters is developing a good strategy that works so that you can remain profitable shorting Litecoin.
What Is The Best Way To Short Litecoin?
There is no best way to short Litecoin, but the most popular way that many traders adopt is margin trading or futures trading.
Traders use borrowed assets from derivative exchanges like Margex to open a short position for Litecoin or trade Litecoin to make profits.
Trading Litecoin with the futures trading technique requires that a trader uses the risk management strategy by using stop loss to avoid exposing the trading account to losses
Should I Short LTC With Leverage?
Shorting LTC or trading Litecoin with leverage will allow you to remain profitable with the proper risk management.
Using leverage helps traders and investors practice hedging funds and make more profit returns from price differences.
What Happens If You Short A Crypto And It Goes To Zero?
Only after every exchange where it could be traded would crypto effectively go to zero. In short, while a cryptocurrency's price cannot reach zero, its trading activity can.
If the price of a crypto asset falls to zero, it means that it has been transferred to someone else without receiving any value in exchange. Margex MP shield and price manipulation protection were created to protect traders from such events and price manipulation exposure.