Most won’t lose this much, but traders can (and do) lose more than they invest shorting the crypto market. Some lose everything they own….
The patterns are clear that trading in the current crypto market is dangerous, which can lead to huge upside or market crashes. Our pattern analysis called the 50% crash in BTC in May as you can see in this post:
Is there more serious downside coming? If so, does it make sense to short the crypto market?
To answer the first question — we’ll share that we don’t see the same patterns as the BTC market May crash but we are on “ETH Watch”. We will be keeping subs updated daily on market conditions and hopefully be in front of big moves which patterns often are.
This post is focused on the second question, which is actually more important in the big picture than what the market is going to do today, this week or this month:
Should you consider shorting cryptocurrencies if you see big downside?
Good question — this post shares our reasons why we don’t see shorting as part of safe, high probability trading for most traders.
1) We’re working under the premise we’re in a LT Bull Market
Since cryptopatterns entire focus is SAFE high probability trading, shorting in a LT bull mkt reduces the probabilities for anything but ST and possibly IT shorts, and even then there can be significant surprises to the upside — for example BTC after it crashed from 2700 to 1500 shot up to nearly 3000–and even just a few days ago shooting up $700 when many gurus were screaming to short it.
2) Unlimited risk
Since many of our subscribers are new to trading we think the highest probability for staying with trading is staying safe and avoiding trades where you can lose more than you invest. This is why we don’t encourage margin trading on the long side either, though we know experienced traders can certainly benefit from both shorting and margin trading.
3) Shorting on most crypto exchanges is difficult and confusing.
We’ve been trading for over a decade and still can’t figure out some of the costs and procedures to short on most exchanges. and this relates to
4) What are you shorting against?
If you can only short one crypto against another it’s possible you can be very right and make no money (have had this experience personally). For example if you short ETH against BTC and both move down, you were right to short ETH but still made no money because the BTC you borrowed to short is now worth less as well. If you can short against USDT or the USD or whatever your fiat currency is, then shorting can make sense.
So to summarize — we are not against shorting, but it doesn’t fit safe trading in the current crypto market because it’s more difficult to execute, takes more discipline (which many traders don’t have), is far more risky than only trading long (in a LT bull market and without margin trading), and is not evolved on many exchanges to be easy to make money and assure liquidity too (we watched multiple traders blow out large accounts when they couldn’t get their trades to execute on Poloniex so they could cover during XRP’s massive run up for example).
Finally, and perhaps most importantly:
There is plenty of money to be made on the long side with safe trading — and much higher prob of consistently doing it for years to come. Most traders don’t stay in the game for months much less years, and shorting the market is a big reason why.
There may come a day when shorting makes more sense as platforms and shorting against fiat currencies becomes easier. Down the road, it’s also likely there will be a time when there is a clear edge to shorting the market consistently, and we believe our patterns and indicators will let us know.
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