When you anticipate a decline in an asset’s market price, you can profit by taking a short position through margin trading.

The concept of a short position in margin trading involves borrowing assets: selling them at a high price, and repurchasing them at a lower price after the market drops, repaying the loan and pocketing the price difference.

 

Example of a Short Position in Margin Trading

Suppose the current market price of BTC is 10,000 USDT and you expect BTC to fall further. At this point, you can use margin to sell BTC, then wait for the price to drop before buying back to repay the loan.

Steps:

Web

1. Transfer Funds As Margin

  • Log in to your LBank account. Tap [Wallet] and select [Margin Account].

  • Click [Transfer] and transfer 10,000 USDT from your spot wallet to your margin account as margin.

2. Use Margin to Sell BTC

  • After logging into the account, click [Trade] - [Spot] - [Spot Leverage]，and choose the trading pair.

  • Navigate to the Trading Page, click [Margin]-[Sell], select [Cross], [Limit] and switch to [Auto Borrow].

  • Enter order details: [Price] [Amount]

  • Click [Sell BTC] to place the order.

Conditions:

Margin

10,000 USDT

Margin Ratio

3x

BTC Current Price

10,000 USDT

Borrowed Amount

20,000 USDT

Position

30,000 USDT

 

💡The system automatically borrows 2 BTC and sells them at 10,000 USDT each, for a total value of 20,000 USDT. Combined with your original 10,000 USDT margin, your total position is now 30,000 USDT,establishing your short margin position.

3. Close the Position and Secure Profit

Assume BTC drops to 7,000 USDT two weeks later, as predicted. You can buy back the BTC at this price to repay the loan.

  • Go to the [Buy] Page, select [Limit], and switch to [Auto Repay].

  • Enter the order details: buy 2 BTC at 7,000 USDT each.

  • Submit the order.

Once filled, the system automatically uses the purchased BTC to repay the previously borrowed 2 BTC.

Calculation

Excluding fees and interest for simplicity：

 

Cost

7,000 × 2 = 14,000 USDT

Income

10,000 × 2 = 20,000 USDT

Net Asset After Repayment

20,000 - 14,000 = 6,000 USDT

Margin Account Balance

10,000 + 6,000 = 16,000 USDT

Return on Investment

60%

💡Ignoring fees and interest, your net profit would be 6,000 USDT, resulting in a 60% ROI.

 

How to Manage Risk when Going Short with Margin?

In a short margin trade, if the market drops as expected, you can profit by selling high and buying low. However, if the market rises, your margin level (ML) may drop, potentially triggering liquidation.

To mitigate this, you can use an OCO order (One-Cancels-the-Other) to set simultaneous take-profit and stop-loss orders for effective risk management.

 

Example of Risk Management

Assume you go short on BTC, but the price rises instead of falling. While you remain optimistic about an eventual decline, you're worried about further increases leading to liquidation. In this case, an OCO order can help by setting both stop-loss and take-profit:

1. Set a Potential Take-profit Price

If you assume BTC dropping to 9,000 USDT is an ideal exit point, set the [Price] to 9,000 USDT to lock in profit if the market drops.

2. Set an Acceptable Stop-loss Price

If BTC rises and you’re willing to accept a loss at 10,900 USDT, with a maximum acceptable closing price of 10,905 USDT:

  • [Trigger Price] 10,900 USDT

  • [Limit Price] 10,905 USDT

  • [Amount] 2 BTC

  • Click [Buy BTC] to place the order

3. System Automatically Determines and Executes

Once the order is placed, the system monitors market trends and automatically executes either the take-profit or stop-loss order, canceling the other. This ensures timely exits during price fluctuations, securing profits or limiting losses.

 

By leveraging LBank’s margin trading for short positions during a downward market trend, you can maximize profits. Using an OCO order (One-Cancels-the-Other) for risk management enables automatic execution of take-profit or stop-loss actions, helping you optimize gains while minimizing risks.

 

Risk Disclosure

Margin trading involves significant risks and may result in partial or complete loss of funds, making it unsuitable for all investors. Market fluctuations, strategy failures, or technical issues may adversely affect trading results. Past performance is not indicative of future outcomes. Please carefully evaluate your risk tolerance and consider seeking advice from a professional financial advisor. LBank bears no liability for losses incurred from margin trading.

 

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