Binance Signals: Going Long & Short

Illustration of going long and going short.

Going long is the process of speculating that the price of a cryptocurrency will increase, which is in contrast to going short, wherein you are speculating that the price of a cryptocurrency will decrease.

The process of longing can be summarized as follows: buying a cryptocurrency at a specific price, the price of a cryptocurrency increases, then selling the cryptocurrency at its new increased price and making a return.

For example, say the price of Bitcoin was currently trading at $10,000 and you decide to buy 1 BTC; this makes your purchase price $10,000. Now, if the price of Bitcoin were to increase to $11,000 and you sell, this would result in a 10% return, yielding a $1,000 profit minus any trading fees. This process is known as going long on a cryptocurrency and is the primary method in which many new traders tend to invest.

This is in contrast to the process of going short on cryptocurrency which can be summarized as follows:

Borrowing a cryptocurrency from a willing lender that is then immediately sold at market price, the price of the cryptocurrency then declines, the cryptocurrency is then repurchased at a lower cost then returned to the borrower. To illustrate, Bob borrows 1 BTC from Amy which he then immediately sells at market price of $10,000. The price of 1 BTC then falls to a price of $8,000 at which point Bob buys back the 1 BTC then returns it back to Amy. The net result of this is a $2,000 profit for Bob minus any trading fees.

A tool that most advanced investors will use in order to amplify the returns that they are able to achieve with their trades is through the use of leverage. Using this tool can be incredibly lucrative but can also lead to ruin if not used carefully.

I'll give a further description of leverage in the next section below.

LeverageHow leverage can increase your trading power.

An investor can use leverage in order to trade as if he or she had larger amounts of capital than they actually do. For example, say you wanted to buy $10,000 worth of Bitcoin, but you only have $1,000. Through the use of leverage, this trade would still possible.

If you selected leverage at a ratio of 1:10, then in order to purchase $10,000 worth of Bitcoin, you would only need to put up $1,000 as margin. This margin amount is used to cover any potential losses, however, you are now able to trade as if you owned $10,000 worth of Bitcoin from just $1,000.

Binance Futures offers leverage from as little as 5x all the way up to as much as 125x. It should go without saying that the higher the leverage an investor uses, the higher the risk. This is because the liquidation price, the price at which an investor loses their entire account balance, becomes tighter. However, higher leverage also means that an investor stands to gain a significant amount of money if traded correctly. As a result, it is up to the investor to strike a balance between risk and reward.

Moving on, while we are on the topic of leverage, it's important to highlight that there are two types of leverage that a trader must be aware of, namely cross and isolated leverage.

Binance Signals: Cross & Isolated LeverageCross and Isolated Leverage

Isolated leverage is the initial capital required to open a position. One of the key advantages of isolated leverage is that you can know the exact amount you are risking. This has the distinct advantage of limiting potential losses as you can only lose the amount you have used in the trade itself. Examples of isolated leverage would simply be leverage ratios such as, 1:2, 1:10 etc. All these ratios require a specific amount of margin in order to open the position in the first place. It is isolated leverage that most new investors will find themselves using. It is the less risky of the two types of leverage, and as such, should predominantly be used by those who are still new to the concept. Conversely, cross leverage is a tool that allows a trader to use their entire account balance as margin for an open positions in order to further prevent the risk of liquidation.

To illustrate the differences between both forms of leverage, consider the following example. Alice has an account balance of 1 BTC and decides to open a long position using isolated leverage. To do this, she uses 0.1 BTC as margin for the trade, therefore leaving 0.9 BTC in her account balance and also limiting her total potential losses to 0.1 BTC. This is to say that her losses will be _isolated _to her margin.

This is in contrast to cross leverage which would require Alice's _entire _account balance of 1 BTC to act as margin in order for the trade to be opened. This therefore means that Alice's potential losses is her entire account balance of 1 BTC.

This is why cross leverage is significantly more risky that isolated leverage and should only be used if you know what you are doing. However, the real question that must then be asked is: why would anyone ever use cross leverage? The answer is liquidation price.

Using an account balance of 1 BTC to act as margin for a trade, versus using 0.1 BTC results in that trade having a much wider liquidation price. This would mean that you have more room for a trade to against you without risking liquidation.

It therefore requires a trader to be very confident of a trade for them to risk using cross leverage. However, if used correctly it also means that he or she stands to make a significant sum if they bet correctly.

Conclusion

To conclude, trading signals are a lucrative way of generating returns in what recently has been a tough investing climate for crypto. Signal providers tend to release signals relating to a specific cryptocurrency exchange such as: Binance, BitMex and Bittrex. This list has taken a look at the top 10 Binance trading signal groups on telegram. You can find out more on these providers by joining their telegram channel.

It is also important to understand the key differences between spot and leveraging trading as well as the concepts that come along with it such as: leverage, going long or short etc.

You should only join a signal group that practices correct risk management as the results can be disastrous if done incorrectly. It is up to you as an investor to strike the fine balance between risk and reward, however, it can certainly be done.

If done correctly, then the investor can stand to make attractive capital gains on a consistent basis. We hope this article has left you better informed regarding not only the best Binance signal groups in the cryptocurrency space, but also the key trading concepts that come along with trading such a volatile asset like Bitcoin.