How to Short on Binance 2022

This has been around for a while now and it is present whether in Forex, cryptocurrency or even financial markets.

Due to the need to avoid losses, crypto trading platforms have made it easy for their users to minimize major losses, one of which is Shorting.

Most of the time, crypto is unstable, rises today, falls tomorrow which is why investors must develop strategies to minimize as much risk as possible.

Presently, the price of Bitcoin is fluctuating and no one knows where it’s headed, this is getting serious as some people are already of the opinion that it may still continue to fall.

Statistics confirm that about 1,500 bitcoins are lost on a daily basis, with people fearful every day that they will lose theirs as well.

In this article, I will share with you a detailed guide on how to short on Binance, margin trading and some FAQS you might want to know

Without further ado, let’s dive in.

What is shorting?

Shorting is a strategy that investors or stockholders use to make money when there is a decline in the price of stocks or financial instruments.

In crypto terms, Shorting simply involves predicting the rise or fall in price of an asset and leveraging it to make a profit.

This implies that, when you predict there is going to be a fall in price of an asset, you sell your holdings and buy later at a lower price.

And when you predict there’s going to be a rise in the price of an asset, you buy the asset and sell later when the price has risen.

Your profit lies in the difference between the purchased cost and the cost of sales.

Generally, the money used for shorting is mostly borrowed, from a broker or even from other sets of people who collect interest.

Basically, there are various ways to short crypto but in this article, we’re going to treat a very easy method that could be implemented right away on your Binance account – Margin Trading.

Are you ready? Let’s dive in.

How to short Bitcoin on Binance

Since you now know the meaning of shorting, it’s time for you to take a look at our detailed guide on how to short on Binance.

The following is a step-by-step guide on how to short crypto on Binance.

1 Open a margin account

As we’ve said earlier, short-trading has many ways to it but we’ll be treating one of them, Margin trading which requires you to open a margin account on Binance.

This account is different from the one you initially opened when you first attempted to buy assets on Binance, so you need to do this first.

Open the Binance app/website and log in.

Click on “trade” then “margin” and watch the tutorial video for more knowledge. Finally, complete the quiz as you get ready to execute your new strategy.

Binance margin account

Now, the next steps is to consider the short position you want to take.

Mainly, there are two types of margin mode namely:

Isolated mode

Cross margin mode

The “Isolated mode” is a type of account which you can open for a specific asset that you want to trade, which literally implies that you can open several isolated accounts meant for different assets.

While the “cross margin mode” is a general account whereby you can trade as many assets as possible.

NOTE: An individual can only own one cross margin account while he can own multiple isolated accounts.

2 Provide a collateral

Now, it should be noted that the idea of shorting involves borrowing money from a third-party (Binance) to trade and make profit.

So just like the normal process for collecting loan, you have to provide a collateral just in case you’re not able to pay the borrowed money back.

There are also two approaches to this, for the isolated account and for the cross margin account.

We’ll be using Bitcoin for this example.

Isolated margin mode

  1. Click  on “Transfer”
  2. Select the specific “Trading Pair” (e.g. BTC/USDT)
  3. Select the “asset” to be used for the collateral
  4. Select the “Amount”
  5. Click “Confirm”

Cross margin mode

  1. Click on  “Transfer”
  2. Select the “asset” to be used for the collateral
  3. Select the “Amount”
  4. Click “Confirm

NOTE: Basically, all you’re doing is transferring some money from “fiat and spots” (Binance wallet) to your cross margin or isolated account.

Once you confirm the transfer, the asset will be transferred to your margin account right away..

3 Borrow money

The next step is to borrow funds, having in mind that the extent to which you can borrow depends on the amount you deposited as your collateral.

To borrow money, follow the below steps with respect to the account you want to use.

Isolated margin mode

  1. Click on  “Borrow”
  2. Select the trading Pair (e.g. BTCUSDT)
  3. Review the Borrowing Terms & Conditions
  4. Select the “Amount” to Borrow
  5. Click “Confirm Borrow”

Cross margin mode

  1. Click on  “Borrow”
  2. Review the Borrowing Terms & Conditions
  3. Select the “Amount” to Borrow
  4. Click “Confirm Borrow”

NOTE: There are ten VIP levels in which each level depends on the amount of collateral you deposited. And the higher the VIP level is the lower the interest rate.

4 Trade for profits

The next step is to trade, it is now time to execute all you’ve learned.

Now, the idea is to:

  • Sell at the current high price (if there’s a tendency for the coin to fall in price.)
  • Buy later at a lower price to reap gains.

For example:: You borrow 1 BTC and sell it at $100,  now you’ve got a 1 BTC short position that you’re paying interest for.

Hopefully, the market price of Bitcoin goes down to $80. You buy 1 BTC and return that 1 BTC to the lender (usually, the exchange platform).

This is basically similar to regular “spot trading” and the only difference is that you are trading with the borrowed money and your provided collateral as a guarantee.

In this case, your profit would be $20 (minus the interest payments and fees).

Therefore go ahead and sell what you borrowed at its current high price.

For Cross and isolated margin mode

  1. Select the trading pair
  2. Set the target price
  3. Set the amount
  4. Margin Sell

And if you suspect that it’ll keep rising, then:

  •  Leave the asset there as you wait for the price to rise before selling.

5 Repay the borrowed money.

Hopefully, things go the way you predicted and the price of that asset falls. So you buy again at a lower price and repay the money to your lender (Binance).

For Cross and isolated margin mode

  1. Place a buy order (like spot trading)
  2. Once the buy order is filled, go to Repay section
  3. Repay the debt and take the remaining assets as profit

The margin level

On the right side of the screen, you’ll see your margin level which is basically a risk level according to the borrowed funds and your collateral.

The risk level changes according to the market movements, so if the prices move against your prediction, your assets can be liquidated.

Note that in case you are liquidated, you will be charged some extra fees.

That’s why, it is advisable for you to be confident to some extent, also make sure to invest what you can afford to lose.

The formula to calculate the margin level is Margin Level = Total Asset Value / (Total Borrowed + Total Accrued Interest)

Binance also has a mechanism for continuously checking your margin level to see if things go your way or not.

If your margin level drops to 1.3, you will receive a Margin Call, which is a reminder that you should either increase your collateral (by depositing more funds) or reduce your loan (by repaying what you’ve borrowed).

If your margin level drops to 1.1, your assets will be automatically liquidated, meaning that Binance will sell your funds at market price to repay the loan.


Is Cross margin mode the same as Isolated margin mode?

Generally the major difference between the two is their specialisation.

  • Cross margin mode is capable of trading different assets while isolated margin mode can only be created for a specific asset.
  • Only one Cross margin account can be created while you can create multiple isolated margin accounts.

If you intend to trade with only one type of asset e.g BTC, then you can go for the isolated margin mode.

How do I calculate margin level?

The margin level can be calculated with this formular:

Margin level = Total asset value / total borrowed money + interest) where the total asset value is the current value of that asset you are trading.

If you find this article helpful, please share so others could learn as well.

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