Price goes up and down.

As such investors and traders can benefit from price fluctuations. What they need to do is to pick a direction.

Going Long

The most common choice is to buy an equity or, in this case, a cryptocurrency.

Buying is often referred to as going long.  Going long means that you buy a currency outright.  If price goes up you make money; if price moves down, you lose money.

The cool thing about trading is that if a currency or stock is moving down, you can profit from it by short selling, or simply going short.

Going Short

After researching currencies and analyzing charts we don’t always end up with bullish (uptrend) predictions. Oftentimes, the look of a chart and the technical elements within that chart point to price heading lower, not higher.

What do you do in this situation? Most traders and investors will move on and look for something else.

But if you know how to short sell, you can initiate a short position by selling the currency (instead of buying in it) and start profiting from the potential bearish (downtrend) movement.

In theory when you short sell, you reverse the long process.

You don’t have to own the currency to short sell it. All you have to do is to hit the sell button (going short) and you will be automatically betting on price moving lower. 

When you are ready to close your short sell position, press the buy button (buy to cover) and you will exit the position.

Risk of Going Short vs. Going Long

The biggest risk to going short is the unlimited downside risk. 

Investors and traders initiating a long position can lose everything if a stock goes to zero.

But for those shorting a currency, the sky is the limit.  When you short sell tthere is more at stake since price can increase exponentially and you can lose more than your original investment.

For example, if you short sell 10 coins of Ethereum at $1,100 ($11,000 investment) and the currency triples to $3,300, covering that short would require $33,000 to buy back those 10 coins.

This is the risk associated with short selling and that’s why using protective stops is especially important when short selling.

Whether you go long or short, there’s money to be made on either side of the trade. 

As long as you're comfortable with your bullish or bearish prediction, understand the dynamics of how to enter and exit the trade, and accept the risks that accompany the potential reward, you will be ready to trade everything that the market has to offer you.

Good Trading!