shorting help on bitfinex [paying]

[prashawheresmymail]

I'm looking for someone who can explain to me thoroughly all trading methods on bitfinex (not just shorting) and clear up any questions I have.

I can pay $50 BTC.

Before we go there I'd like this cleared up:

I watched this video:

https://www.youtube.com/watch?v=K844yk2BAuI

Please excuse how stupid I may sound, this is the first day I've actually tried to understand margin trading/short positions etc.. etc..

And in summary it is basically: (can someone please confirm my understanding is correct?) :

Let's use 2 BTC as an example with the price of BTC being $700 and I predict it will be $665 in 1 day.

So I borrow 2 BTC from someone, and then I sell them at the market price, which is $700 for a total of $1400.

Now once BTC hits $665, I use that same money ($1400) to buy back the 2 BTC at a lower price ($665) leaving me with a total of:

1400/665=2.10526 BTC, which leaves me with approximately 0.10526 BTC profit minus interest fees.

The amount you can loan is obviously limited by your tradable USD balance, which is why your trading balance is decreased each time you open a short position.

In terms of the bitfinex UI, it would be:

1. Order size of 2 BTC.
2. Order Type of 'Limit' and under that I write 665 and I then click 'MARGIN SELL'.

What this would do is, IF, the market price hits 665, my short position will automatically close and it will buy the 2 BTC back at a price of 665 leaving me with a total number of 2.10526 BTC, which leaves me with approximately 0.10526 BTC profit minus interest fees, correct?

The moment BTC hits 665 OR goes below 665, my short position is automatically closed, is that correct?

If for example BTC instead goes to $725 as opposed to $665 and I decide to close my short position as I've decided it is too risky to continue and I want to minimize my losses, this means,
I would lose 2-(1400/725)=> 0.0689655 BTC, am I correct?

Thanks!

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[BitWhale]

Hey man, I'll try to help you, but I am quite confused on this last part:

This part i can verify is correct:

'Let's use 2 BTC as an example with the price of BTC being $700 and I predict it will be $665 in 1 day.

So I borrow 2 BTC from someone, and then I sell them at the market price, which is $700 for a total of $1400.

Now once BTC hits $665, I use that same money ($1400) to buy back the 2 BTC at a lower price ($665) leaving me with a total of:

1400/665=2.10526 BTC, which leaves me with approximately 0.10526 BTC profit minus interest fees.'

Side note:
With a short, instead of thinking of it as borrowing value and using that to purchase then sell, think of it as borrowing the underlying and selling it directly. For example:

If you are going to short 1000 litecoin for instance, you borrow 1000 litecoin and sell them (this way you don't have to actually buy 1000 litecoin in order to turn around and immediately sell them, which would be unprofitable in any shape or form). You now owe 1000 *litecoin* to the person you borrowed them from (regardless of their current price), to close the trade you buy 1000 litecoin and return it to them. The lender get's their 1k ltc back + interest, and you got to open your trade with leverage, everyones happy and whole by the end of the trade. This is a bit easier to understand this way I think.

The part I am confused with is, Are you trying to create a sell order for the trade you just opened?:

'1. Order size of 2 BTC.
2. Order Type of 'Limit' and under that I write 665 and I then click 'MARGIN SELL'.

What this would do is, IF, the market price hits 665, my short position will automatically close and it will buy the 2 BTC back at a price of 665 leaving me with a total number of 2.10526 BTC, which leaves me with approximately 0.10526 BTC profit minus interest fees, correct?

The moment BTC hits 665 OR goes below 665, my short position is automatically closed, is that correct?

If for example BTC instead goes to $725 as opposed to $665 and I decide to close my short position as I've decided it is too risky to continue and I want to minimize my losses, this means,
I would lose 2-(1400/725)=> 0.0689655 BTC, am I correct?'

Please correct me if I am wrong...

You are asking to close the trade correct? #2 is 'Order type of 'limit" and under that i write 665 and then click "MARGIN SELL"'.

If you are trying to close the trade above, this is incorrect my friend, you are very close but you are thinking of "Sell" as in sell my trade, when in reality, you should be buying in order to close a short trade (because you sold in the beginning). Think of it this way, If you go "long" or "Margin Buy" you are buying. If you go "short" or "Margin Sell" you are selling. In order to close a margin long, you will need to sell (since you bought in the beginning) and to close a Margin Sell, you will need to buy (since you sold in the beginning). It's always the opposite of what ever the trade started with.

Instead of putting a limit trade for $665 Margin Sell, do $665 Margin Buy for the same amount of coins you started the trade with. If you only used 1 btc and have a leverage of 2x you only need to buy back 1 btc @ 2x leverage. Don't buy 2 btc @ 2 leverage because then you will have effectively closed your short position of short 1 btc and now opened a long position of 1 btc. Make sure only to buy the same amount you started with.

example:

Start Trade: place a 1 btc short @ 2x leverage @ $700 USD ea MARGIN SELL. You have borrowed 1 btc and sold both your 1 btc & the borrowed 1 btc. You now owe 1 btc to the lender.

Closing Order: you immediately place a "limit" order to close your trade:

since you did 1 btc short @ 2 leverage, you will now need to go 1 btc long 2x leverage. Place order for 1 btc long @ 2x leverage @ $665 USD MARGIN BUY (because you are buying back the btc you sold, get me?)

IF your order fills, your short trade will be closed out in the profits.

The only way you will be unprofitable in this trade is if BTC's price goes above $700 usd and you now have to buy back 2 btc for more expensive then you sold them for.


I hope i've helped, don't worry about the $50 bucks brother, call it a New Years hook up eh. I hope I've helped. Feel free to respond/message me privately and I will do my best to explain anything I did not make sense of.

Take care!

PS: Are you familiar with the risks involved with margin trading? If you trade your whole balance on margin you are very very likely to get margin called and lose everything.  Don't ever put more than 50% of your whole margin account into a single trade, that's just asking to get margin called. This is how the brokerage can lend you money to trade with... If you don't have any money left in your account they will close your trade and take back the money you borrowed, protecting the lender.

Think of leverage as a tool to allow you to trade more and not so much as a tool to "double" or "triple" your returns. With my true brokerage account (for stocks/commodities and the like) I never put more than 3% of my account into a single trade. I can take many different trades, but I can never put more than 3% of my trading capital into a single stock or commodity. I recommend adopting some form of money management as it will go along way to keeping you afloat with margin trading.

[Darkstream]

Such a good explanation, Bitwhale. I had exactly the same doubt and want to answer you one little things more.
As you are borrowing these 2 BTC, if you don´t do this margin sell with some leverage even the price of BTC goes down, you dont win anything, is this correct..?

When you say, you borrow 2 BTC, is something you do in the "Exchange" wallet takin these 2 BTC to a lender with a rate fee that he puts or 2 BTC borrow to you the broker..?

The same question I have for buying BTC/USD. If I fund the account in USD and I don´t have any bitcoin, If I want to buy the BTC/USD, have to borrow BTC too. In this case, the return you receive if you win is in USD.

Sorry for the silly question, but In Forex markets I don´t have to borrow anything for trading different currencies and this have me so confused. Thanks in advance.

[igigme77]

This tip im going to give you is worth much more then $50.

DONT SHORT BITCOIN!

You're welcome.

[Darkstream]

Thank you for the advice, igigme77. Probably you are right. I only pretend to understand how it works trading with cryptos.

[igigme77]

Thank you for the advice, igigme77. Probably you are right. I only pretend to understand how it works trading with cryptos.

You dont short when the trend is up, you only find longs and you dont long when the trend is short. Then you only find good shorts.

[prashawheresmymail]

Thank you for the advice, igigme77. Probably you are right. I only pretend to understand how it works trading with cryptos.

You dont short when the trend is up, you only find longs and you dont long when the trend is short. Then you only find good shorts.

What were you saying, you fucking dumbass retard cuck?

[BitWhale]

Such a good explanation, Bitwhale. I had exactly the same doubt and want to answer you one little things more.
As you are borrowing these 2 BTC, if you don´t do this margin sell with some leverage even the price of BTC goes down, you dont win anything, is this correct..?

When you say, you borrow 2 BTC, is something you do in the "Exchange" wallet takin these 2 BTC to a lender with a rate fee that he puts or 2 BTC borrow to you the broker..?

The same question I have for buying BTC/USD. If I fund the account in USD and I don´t have any bitcoin, If I want to buy the BTC/USD, have to borrow BTC too. In this case, the return you receive if you win is in USD.

Sorry for the silly question, but In Forex markets I don´t have to borrow anything for trading different currencies and this have me so confused. Thanks in advance.

Hey dude I'm very sorry I'm late on this response, It completely slipped my mind to check btc forums for the last week.

Ok, sorry that might've been a bit confusing the way I explained it.

First let's dicuss a currency pair. A currency pair is two currencies traded against eachother. You will see this in forex as well, such as EUR/USD or GBP/USD. What this means is it is the first currency priced in the second "base" currency.

This idea is to trade one countries currency that you think will do better than another countries currency.

The best way I can explain this is: Back when the US put sanctions on Russia, it was much more profitable to trade BTC/RUR instead of BTC/USD. You didn't have to have Russian Rubles to make this trade though, you were merely trading one countries currency against anothers, your broker will worry about actually funding the trade properly for you.

Example 1: Bitcoin/USD

For 1 bitcoin right now, it costs *blank* united states dollars

Example 2: Bitcoin/GBP

for 1 bitcoin right now, it costs *blank* great brittish pounds

For most brokers, it doesn't matter what you funded your account with (btc, usd, gbp), you can trade any pair you want, you'd just be trading gbp/btc instead of usd/btc which might mean different rising or different returns. At the end of the day though, the trade will be settled in USD, or what ever else your account was funded with.

As for the borrowing: When you are on margin trading, it will all be automatic.

Say for instance you want to short 1 btc @ 2 leverage, you would place a trade for 2 btc margin sell. When you do this, the exchange automatically pairs you with a lender who you then pay interest to. At any point you/the lender can trade their bitcoin off, there's no time limit to it, if say your lender traded off your btc while you are still in a trade, they will just exchange your borrowed btc loan to some other lender.

Once you are ready to close the trade, you trade 2 btc "margin buy" which canceled out the 2 btc margin sell you made earlier and closes out your trade.

All you gotta do to margin trade is fund your account and always make sure to leave enough funds in there to cover any dips in price you might deal with. The best way to explain this is:

Say you have a $1000 account and you are using (for ease of math) 1/10 leverage. This means for every $1 in your account, you are allowed to trade with $10.

Now for example, say you place a trade for a coin worth $5 and put 50% of your account into a that single coin @ 10 leverage, this will leave you with 50% invested in one coin & 50% sitting in your account in cash.

50% of $1000 = $500.
$500 * 10 leverage = $5000
%5000 / $5 per coin = $1000 coins.

You bought 1000 coins for $5000 dollars and you only put up $500 up front. Now let's do some more math.

Let's say tomorrow, the stock goes down 10% to $4.50, a $0.50 decrease:

$4.50 x 1000 coins = $4500

$4500 - $5000 = -$500

So, all your coin had to do was drop $0.50 cents (10%) and you have lost 50% of your account value and now you have no money left in your account other than the $500 you put up to borrow the $5000 worth of coins for the trade.

At this point, you will be what is called "margin called", this is when your broker protects the person who lent you the coins by closing your trade and returning the borrowed coins to the lender. This forces you to close your trade at +50% loss (most the time it's much worse because it's a force sale during a market panic, possibly even a short/long squeeze). This is the only way they can lend you money to trade with, they ensure that only you lose money at the end of the day while protecting the lender bankroll at all costs (and even that doesn't work sometimes, aka flash crashes)

This is why it's very important to never trade more than 10% of your account in a single trade with leverage, it's just asking for trouble. With Forex, I trade 1:50 leverage & only risk 1.5% of my account at a time. This way as my account balance rises & falls, my trade amounts rise & fall with it, ensuring that I'm never too exposed to a single trade.

Please feel free to let me know what else I can explain, I am terribly sorry it took me so long to get back to you. Hope you are well!

[Idrisu]

Margins trading is different from conventional trading as you make profits or loses either the market is going up or going down. If you shorting on bitfinex it mean Erth/ bitcoin for example, you are selling or shorting erth and buying bitcoin simultaneously. When you are shorting on a currencies pair? You make money or profits if the price of the major currency is going down and the second pair currency is going up and you lose if the major currency is going up and the second currency is going down. Remember, trading especially margins is a very risky investment and you should not  trade with risk capital you cannot afford to loses.