Ripple has recently experienced a meteoric rise. If you managed to buy and hold Ripple at the right time, you would have made a handy profit. But it is possible to profit from the inevitable pullback as well. If you’re looking to short Ripple here are some options on how to make money when the price of Ripple drops.
What is Shorting
When you short a cryptocurrency, you profit when the price of that cryptocurrency falls in value. Here is the mechanics behind shorting:
- Borrow someones Ripple, and sell it.
- Wait for the price of Ripple to drop.
- Buy back the same amount of Ripple and give it back to the person you borrowed it from.
- Because you’ve bought the same amount of ripple at a cheaper price, you’ve made a profit!
Obviously shorting like this doesn’t happen like this in the real world. You can short through a broker – we’re the same process happens, it’s just all automatic.
Shorting Ripple on eToro
On eToro you can trade stocks, forex, commodities and cryptocurrencies. They currently offer 12 of the most popular cryptos including Bitcoin, Ethereum and of course Ripple. As well as buying cryptocurrencies, you can also open “short” or “sell” positions on eToro.
What I like about eToro is that you can trade cryptocurrencies alongside traditional markets like stocks. I also like that I don’t need to deposit using Bitcoin. I can trade using my credit card or Paypal. This makes starting trading much much easier.
The Risks of Shorting
I always feel that short positions are inherently more risky than long positions. Look at Bitcoin – I can’t see it dropping back to $30. Imagine if you had opened a short position at $30! Where as I can see a scenario in which Bitcoin hits it’s all time high again. It might take a while, but it will eventually get there.
Shorting anything is a risky tactic. Obviously it can be extremely profitable. But you should have a strong understanding of how trading works before you attempt it.
Because shorting cryptocurrency is so risky, I suggest you try practice trading first. This way you can trade under real market conditions but using virtual money. If you can’t make a profit from practice trading, you won’t make a profit in real life.
If you’re completely new to trading, then you could also try copy trading. This is where you copy the trades made by more experienced traders. It’s a great way to learn about trading while still making a little money on the side.