A Guide and Strategy to Short Selling in Futures Trading

Do you know that you can still make profit even during bearish market? Short selling or shorting is the answer. However, shorting can only be done on derivative assets like futures. Luckily, Pintu Pro now has a futures market, allowing you to short crypto and potentially profit when prices drop. Learn more about how to short sell on Pintu Pro Futures in the following article.

About Short Selling

Short selling or shorting refers to a trading activity where a trader opens a position by borrowing crypto assets from an exchange to sell on the open market with the expectation that the price will fall. Later, the trader will buy back the crypto at a lower price and return it to the exchange. The price difference becomes the profit.

With short selling, traders can still profit in a bearish market. However, short selling has the potential for significant losses due to leverage. Therefore, traders must understand the potential risks before deciding to short.

Short selling can be done through derivative markets such as futures contracts, perpetual contracts, and contracts for difference (CFD). Through these derivative products, traders can speculate on crypto’s price movement without owning the asset.

However, shorting requires a more advanced trading strategy. Traders must deeply understand market trends, price movements, technical analysis, and adequate risk management.

Short Selling Strategies

The following are some chart patterns that can be used as strategies in placing short positions:

1. Double Top

A double top is a bearish reversal pattern where the price reaches a peak twice but fails to surpass the peak on the second attempt. At the same time, there is a moderate pullback between the two peaks. The double top pattern is confirmed when the price breaks below the bottom of the previous pullback (neckline).

The double-top pattern’s appearance can signal the opening of a short position as the price is expected to undergo a corrective trend. Traders can use the area below the neckline as an entry point when shorting. A break below this point confirms the double top, and the price is expected to fall. However, be aware that the price may test the neckline before it enters a downtrend.

To avoid risk, traders can place a stop-loss above the neckline or the most recent swing high. Additionally, a short position can be taken when the price no longer attempts to test the neckline and begins its bearish trend.

2. Descending Triangle

The next pattern that can be used to open a short position is the descending triangle. It is a bearish pattern formed from a series of lower highs that become smaller and smaller over time. If a trader draws a line connecting these lower high points, it will create a diagonal line.

In addition to a series of lower highs, there is also a series of lower lows that form a support level in a descending triangle. Then, if a trader draws a line connecting these lower lows, it will form a horizontal line. A downward sloping or descending triangle is formed when the diagonal and horizontal lines are connected.

The point where the two lines meet is a reference for opening a short position. If the price finally breaks below the support level at the horizontal line, then the price will be expected to be corrected further. Therefore, the area below the support level in the descending triangle can be an ideal entry point.

A descending triangle does not always signal a bearish trend. Because if the asset price experiences a breakout on the right side, then the bearish trend can reverse to a bullish one. As risk mitigation, you can set a stop-loss at the resistance point or the last lower high peak.

3. Head and Shoulder

The Head and Shoulders pattern is a bearish reversal pattern that can signal an opportunity to open a short position. It begins with a price movement that reaches an upper price point (left shoulder), drops, and rebounds to a higher second upper point. Finally, the asset price falls again, creating a last upper point (right shoulder) similar to the first upper point.

These three upper points will create three peaks, with the middle peak being taller than the others, resembling a head with a shoulder on each side. The most important part of the head and shoulders pattern is a neckline, a straight line drawn as a foundation when the price falls. The head and shoulders pattern is confirmed if the price declines after the proper shoulder breaks below this line.

Like a double top, traders can use the neckline area as an entry point. When the neckline is broken, a short position can be opened immediately.”

Short Selling Tutorial on Pintu

Are you interested in short selling but still confused about how to do it? Don’t worry; here’s a tutorial on short selling on Pintu Pro!

In this example, Risvi saw the potential that SOL’s price would experience a correction after being in a positive trend. Trying to seize the opportunity, Risvi decided to short-sell SOL. The following are the steps Risvi took:

1. Open the Pintu app and go to Pintu Pro mode to access the perpetual futures market page.

2. Click the “Futures” menu to go to the futures asset-specific market page available on Pintu Pro.

3. You will automatically be directed to the BTCUSDT asset. Press the toggle in the top left corner to change the pair to SOLUSDT.

4. Risvi looked at the SOLUSDT chart and saw indications that its price movement reflected a descending triangle pattern. From this pattern, he found that SOLUSDT’s support level was at 173.25. Risvi decided to open a short position using a limit order at the 173 level, anticipating that the support level would be broken.

5. Risvi filled in the target price of 173 and the amount of the asset purchased as 2 SOL. Then, he chose the Sell option to open a short position.

6. After verifying the correct amount and other details, Risvi confirmed the order.

7. Done! Risvi successfully opened a SOLUSDT short order with a target price of 173. When the Sol price drops past the support and confirms the descending triangle pattern, Risvi’s order will be executed automatically.

Disclaimer: The above examples are for illustrative purposes only and are not financial advice or recommendations. Make sure always to do your own research when making crypto asset transactions.

Conclusion

Isn’t it easy to short-sell on Pintu Pro Futures? In addition to opening short positions, you can also open long positions on Pintu Pro Futures! So what are you waiting for? Try Pintu Pro Futures and enjoy 5x leverage, risk management, cross-margin, and top-quality security.

You don’t need to worry about any fraud or scams on Pintu. This is because all crypto assets on Pintu diligently evaluates all its crypto assets, highlighting the significance of being cautious. Download Pintu app on Play Store and App Store! Your security is guaranteed because Pintu is regulated and supervised by Bappebti and Kominfo.

Aside from buying and trading crypto assets, you can expand your knowledge about cryptocurrencies through various Pintu Academy articles. Updated weekly, all Pintu Academy articles are made for knowledge and educational purposes, not as financial advice.

References

• James Chen, Descending Triangle: What It Is, What It Indicates, Examples, Investopedia, accessed on 30 October 2024.
• James Chen, Double Top: Definition, Patterns, and Use in Trading, Investopedia, accessed on 30 October 2024.