7 min read
Though in trading, the main point may be to speculate on the price change, regardless of what that change is, many traders stick to trading on rising assets. “Long” positions are more conventional and it is understandable, as growing in price assets might be associated with good performance. However, selling may be just as good of an opportunity, though it has to be approached with knowledge and a good trading plan.
What is short selling?
Going “short” or opening a short position means investing with a prediction of the asset price going down and expecting a positive outcome from a trade in that direction. Short positions can also be referred to as “bearish” and the traders that open short positions are called “bears”.
Short selling is available on different assets: it can be done with CFDs on Stocks, Forex, CFDs on Cryptocurrencies and FX Options. The main principle is similar. Traditionally, when a trader wants to short sell stocks, for example, the idea is that the trader borrows the stocks to sell them with an expectation that the price will keep falling. Once the stock has decreased in price more, the trader buys the same stocks at a lower price and returns them to the lender, keeping the difference in price.
However, as the trading on the IQ Option platform is CFD-based, a trader does not need to own the asset to open a deal. Traders choose the investment amount, open a deal at the current price and receive their outcome in accordance with the difference between the entry and exit prices. This allows a trader to open as many positions as needed and limits the risks to the investment amount (unless the trader chooses to use the balance to maintain the position).
When to short sell?
The decision as to whether buy or sell should be based on the asset performance and your trading method. A short position, for example, is opened when the asset is predicted to decline, and the trader’s job is to establish the appropriate entry point for the deal and find the right time to exit the deal in order to manage losses.
In order to evaluate the market, a trader may choose between technical and fundamental analysis or apply both. Short positions may also be traded, for instance, with the martingale strategy, especially on Forex assets. When short selling, traders need to control the asset performance and set a stop loss level in order to manage the losses that may occur.
How to short sell on IQ Option?
In order to open a selling position, a trader needs to choose the asset from the asset list first. The following steps may include:
1. Choosing the investment amount. It is the amount of funds that will be deducted from the trader’s balance and returned with a positive outcome in case the deal is closed in the money. In case of an unprofitable deal, the investment amount does not get returned, or gets returned partially, depending on the outcome.
2. Choosing the multiplier. The multiplier is the amount by which the initial investment amount is multiplied, allowing the trader to to trade with a larger position than the amount of funds they have at their disposal. However, the usage of a multiplier also increases the risks: the higher the multiplier, the higher the risk.
3. Setting the Stop Loss and Take Profit levels. These levels may help control the outcomes of the deal. Traders also have the option of using their balance to maintain the deal open below the auto close levels or setting a trailing stop loss to manage risks.
4. The last step is to click “Sell” which will execute the deal at the current price. After that, the trader may keep the deal open for as long as needed, closing it manually or using the auto close levels.
5. Traders may also create a deferred order by choosing the “Purchase at” button: it allows both purchasing and selling.
Short selling is another way of trading the assets on the IQ Option platform. It allows traders to take advantage of those assets in the downturn and trade while the market is bearish. Though “selling” may give a possibility of a high return, it is also associated with risks. The decision of whether buying or selling is appropriate is the trader’s responsibility and it has to be backed up with extensive analysis as well as a powerful risk management technique.