How To Short Sell Bitcoin When The Price Is Dropping

I know a lot of people want to know if you can short bitcoin in the UK. Until now I have shied away from short selling bitcoin until I started hearing about leading bitcoin traders maximising their earnings by trading both the bearish increases in price, and the bullish price drops that we have seen more of recently.

It makes sense to short sell bitcoin when prices are clearing falling if you understand the risks of this type of trading. The process involves borrowing contracts that track the bitcoin price, and then selling them, only to buy them back again when the price drops.

If the price doesn’t go the way you expect it will you risk losing money, but if you can get your timing just right you can sell when the price is high, then use some of that money to buy back when the price is low, the difference in price being your profits.

RSI Based Bitcoin Short Selling Strategy

short selling bitcoin
This is not trading advice!

Above is my BTC/USD Tradingview Chart with moving averages added which you can see in the coloured red, orange, green, and blue lines, and at the bottom is the Relative Strength Index oscillator, and the Stochastic RSI indicator. Normally the standard RSI is a good guide to finding the top and bottom of the market, in tandem with the moving averages.

So when the RSI gets to very high levels (above 70), and that is confirmed by the price being above the 100 day moving average (the green line on my chart) that indicates that the price has neared its peak on the daily timeframe. When that is confirmed by the price starting to move downwards you can short bitcoin.

You will know it is time to close your short position when the price goes below the 20 day moving average (the red line on my chart) and the RSI goes below 30. At that time you can then buy bitcoin, and ride the next wave until the price tops out again.

This strategy can maximise your profits during a downward price correction like we have been seeing so far in 2018. If the price trend reverses and we start to see a bull trend again I may have to revise the strategy. As there is no consensus at the moment regarding the coming breakout – whether it is going to be a bearish or bullish scenario for bitcoin at the end of 2018, I wanted to share this information so that you may benefit from a potential bear movement.

The platform that I recommend to long or short bitcoin is Plus500 in the UK. This regulated platform trades CFDs (contract for differences) enabling you to get exposure to the bitcoin price action whether you think it will go up, or go down.

Things to be aware of:

  • CFDs are leveraged products and can result in the loss of your capital.
  • 80.6% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
  • Plus500UK Ltd authorised & regulated by the FCA (#509909).

So first of all sign up for a Plus 500 account, and then this is the process of shorting the bitcoin price on their platform.

1. On the top left of the screen use the search box to find “Bitcoin” in the list:

plus500 bitcoin etf shorts
Illustrative prices only. Price correct at time of writing. This is not trading advice.

2. On the right click on Sell.

short sell bitcoin on plus500
Illustrative prices only. Price correct at time of writing. This is not trading advice.

3. Use the plus and minus buttons to select the amount of bitcoin contacts you want to trade, I recommend using only a small fraction of your account balance.

short bitcoin in the uk
Illustrative prices only. Price correct at time of writing. This is not trading advice.

4. Once you are happy with the contract amount click on Sell to place your order.

Bitcoin price movements can be slow at times and it can take several days to complete the movement, so don’t think you need to watch the screen continuously. You can use the close at profit and close at loss options to protect yourself from a possible price reversal.

Let me know if you have any questions in the comments below and I will be happy to help.

Best of luck with your trading!

James.

Disclaimer: This blog post is not trading advice and I am not a financial advisor, it is purely my personal opinion based on five years of trading bitcoin. I do not accept any responsibility for losses incurred if you decide to trade bitcoin yourself. Only invest money that you can afford to lose.

About James Winsoar 116 Articles
James Winsoar has been marketing online since 1999 when he launched what was then the world's first commercial mobile phone ringtone company. He has since created several internet marketing software programs and courses. He now teaches people how to make more money in less time by leveraging the power of the Internet.

6 Comments

  1. Hi James
    I invested money in a Company by the name of Original Crypto
    where you can track your balance on the screen as traders are working with your money: they call it ‘your personal’ trader.
    Recently i tried to contact them at various times and in various ways, but to no avail.
    Later i read on the Internet that they are a scam.
    Do you know anything about them?

    • James, you will get $10 per person you have referred into Coinbase.
      Coinbase will pay you $10 wroth of bitcoin in your account. Coinbase
      is a very very reputable company with a very high Stock market listing.
      I can only tell you that this is what happens, every customer you
      introduce gives you a piece of bitcoin. So it is like an MLM incentive
      you dont have to buy bitcoin but you earn bitcoin as a reward if you
      introduce people.

      Trading bitcoin is very volatile early last year it was trading at
      an amount over $10,000 per coin. Expectations were that it would
      go over to around $20k to $50k per coin.Sadly that hasn’t happened
      yet. That is the sad news.

      The good news is every person you refer to Coinbase earns you $10
      value in bitcoin.how many people can you introduce to give you $10
      of bitcoin. It is legitimate, but the rewards are very low and
      volatile. You were expecting $10 in cash immediately I presume.
      Hence you are asking where is it. Here is what the market was doing
      when bitcoin first came out in 2010:
      Prices and value history

      Date USD : 1 BTC Notes
      July 2010 $0.08 In five days, the price grew 900%, rising from $0.008 to $0.08 for 1 bitcoin.
      October 2010 $0.125 Price surpasses one bit
      Feb 2011 – April 2011 $1.00 Bitcoin takes parity with US dollar.
      8 July 2011 $31.00 top of first “bubble”, followed by the first price drop.

      The results shown here was an early adopters wet dream. It is way past that
      point today 1 bitcoin costs over $3000 to buy.

      There is a story I can tell you anecdotally. One of the early adopters in NYC, USA
      bought a pizza in NYC and paid it is rumored for 1000 bitcoin, the price of bit coin
      was like 1=0.00005 cents a coin, something like that. The guy in the pizza shop took
      the amount offered . Now the guy who bought the pizza thought he got a cheap pizza.
      The seller thought what the heck. The pizza shop owner is believed to have made the most expensive pizza in the world by price. He sold that early adopters pizza for
      $150 million USD. Yes you can verify the truth of this story search google. The guy
      who bought the pizza lost $150 million in retrospect.

      Check here https://www.techly.com.au/2017/12/05/first-ever-bitcoin-transaction-used-buy-two-pizzas-today-worth-150-million/

    • Thanks for your comment, I make clear that Coinbase give $10 worth of bitcoin free, and yes it is awesome that the price of bitcoin can rise.

Leave a Reply

Your email address will not be published.


*