How to short DigiFinex contracts

Shorting DigiFinex contracts involves placing an order to sell a cryptocurrency in anticipation of its price decreasing, enabling traders to profit from downward price movements.

Nov 26, 2024 at 09:24 am

How to Short DigiFinex Contracts

Shorting DigiFinex contracts allows traders to speculate on the downward price movement of cryptocurrencies. By correctly predicting and executing a short trade, traders can potentially profit from a decline in the underlying asset's value. This guide will provide a comprehensive breakdown of the steps involved in shorting DigiFinex contracts, empowering traders to navigate the process confidently and effectively.

1. Open an Account on DigiFinex

To initiate shorting contracts on DigiFinex, traders must first create an account on the platform. This registration process typically involves providing personal information, verifying identity, and setting up two-factor authentication for enhanced security. Once the account has been successfully established, traders can proceed to fund it with the necessary trading capital.

2. Determine the Target Cryptocurrency

The next step is to determine which cryptocurrency traders wish to short. DigiFinex offers a wide range of cryptocurrencies for contract trading, including Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC). Traders should carefully consider market conditions, technical analysis, and their own trading strategy to select the cryptocurrency that aligns best with their shorting objectives.

3. Fund the Account with Margin

Shorting contracts on DigiFinex requires traders to maintain sufficient margin in their account. Margin acts as collateral and enables traders to leverage their capital, allowing them to control a larger position size with a smaller initial investment. Traders should meticulously calculate their margin requirements based on the contract size and leverage they intend to employ.

4. Select a Contract Type

DigiFinex offers two main types of contracts for shorting: perpetual contracts and futures contracts. Perpetual contracts do not have a fixed expiration date and provide traders with ongoing exposure to the underlying cryptocurrency's price movements. Futures contracts, on the other hand, have a predetermined expiration date and offer traders a specific timeframe for their short positions.

5. Place a Short Order

Once the contract type has been selected, traders can place a short order on DigiFinex. This involves specifying the contract size, leverage, and limit price or market price. A limit order allows traders to set a specific price at which they want to execute the short trade, while a market order executes the trade immediately at the prevailing market price.

6. Monitor and Manage Risk

After the short order has been placed, traders should actively monitor their position and manage risk accordingly. This includes setting stop-loss or take-profit orders to limit potential losses or lock in profits. Traders should also track market movements and adjust their trading strategy as needed to optimize their risk-reward ratio.

7. Close the Position

To close a short position on DigiFinex, traders can either buy back the same number of contracts they initially sold or wait for the contract to expire. If the price of the underlying cryptocurrency has declined as anticipated, traders will profit from the difference between the initial selling price and the closing price. However, if the price has increased, traders will incur losses.

8. Withdraw Funds

Once the short position has been closed, traders can withdraw their profits or remaining funds from the DigiFinex account. The withdrawal process typically involves selecting the preferred withdrawal method, inputting the destination address, and confirming the transaction. DigiFinex supports various withdrawal methods, including direct bank transfers, third-party payment processors, and cryptocurrency wallets.