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Although in trading the main objective may be to speculate on the price change, regardless of the change, many traders stick to trading rising assets. Long positions are more conventional and understandable, as rising asset prices can be associated with good performance. However, selling can be an equally exciting opportunity, although it should be approached with knowledge and a good trading plan.
What is short selling?
Being "short" or opening a short position means investing with the expectation that the price of the asset will decline and expect a positive outcome of a trade in that direction. Short positions can also be referred to as "bearish" and traders who open short positions are referred to as "bearish".
Short selling is available on different assets: it can be done with CFDs on stocks, Forex, CFDs on cryptocurrencies and FX options. The basic principle is similar. Traditionally, when a trader wants to sell stocks short, for example, the idea is to borrow the stocks and sell them with the expectation that the price will continue to fall. Once the stock price has fallen further, the trader buys the same stocks at a lower price and returns them to the lender, keeping the price difference.
However, as trading on the IQ Option platform is based on CFDs, the trader does not need to own the asset to open a trade. Traders choose the amount of investment, open a trade at the current price, and receive their result based on the difference between the entry price and the exit price. This allows the trader to open as many positions as needed and limit the risk to the amount of investment (unless the trader chooses to use the balance to hold the position).
When to sell short?
The decision to buy or sell should be based on the performance of the assets and your trading method. A short position, for example, is opened when the asset is forecast to fall, and the trader's job is to establish the appropriate entry point for the trade and find the right time to exit the trade. in order to manage the losses.
In order to assess the market, the trader can choose between technical analysis and fundamental analysis or apply both. Short positions can also be traded, for example, with the martingale strategy, especially on Forex assets. When selling short, traders need to monitor the performance of assets and set a stop loss level in order to manage any losses that may arise.
How to sell short on IQ Option?
In order to open a sell position, the trader must first choose the asset from the list of assets. The following steps may include:
1. Choose the amount of investment. This is the amount of funds that will be deducted from the trader's balance and returned with a positive result in the event that the trade is made in the money. In the event of an unprofitable transaction, the amount of the investment is not reimbursed or is partially reimbursed, depending on the result.
2. Choice of multiplier. The multiplier is the amount by which the amount of the initial investment is multiplied, allowing the trader to trade with a larger position than the amount of funds available. However, using a multiplier also increases risk: the higher the multiplier, the greater the risk.
3. Setting of Stop Loss and Take Profit levels. These levels can help monitor the results of the transaction. Traders also have the option of using their balance to keep the trade open below auto-close levels or to set a trailing stop loss to manage risk.
The “trailing stop” and “use the balance” functions in the trading room
4. The last step is to click on “Sell” which will execute the trade at the current price. Then the trader can keep the trade open for as long as needed, either manually closing it or using the auto-close levels.
5. Traders can also create a pending order by choosing the "Buy at" button: it allows both buy and sell.
Short selling is another way to trade assets on the IQ Option platform. It allows traders to profit from these assets during a downturn and trade when the market is bearish. While “selling” can provide a potential for high return, it also comes with risk. The decision to buy or sell is up to the trader and must be supported by in-depth analysis as well as a successful risk management technique.
Source: IQOption blog (blog.iqoption.com) 2020-09-28 12:40:04
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