Crypto exchanges such as KuCoin allow retail and institutional investors to execute a crypto shorting trading strategy, which involves earning profits by selling an asset before its price drops. This guide explores the ins and outs of how to short on KuCoin using margin and futures products.
Quick Guide - How to Short on KuCoin
Below is a quick step-by-step guide to the entire shorting process on KuCoin using margin.
- Open a KuCoin account. Log in using an existing account or visit the website to create a new account.
- Deposit funds. Transfer funds to the KuCoin wallet using any payment method, including fiat or crypto.
- Move funds to the margin wallet. Transfer funds or collateral from the spot wallet to the margin wallet.
- Select a crypto pair to short. Search for available crypto pairs from KuCoin’s margin trading home screen and select a pair to short-sell on the margin market.
- Borrow funds. Decide on the amount to borrow and deposit collateral from the margin wallet.
- Open a short position. Enter the amount of margin to use and execute a short-sell trade using a market or limit order at the desired price.
- Repay the borrowed funds. Once the trade is completed, repay the amount borrowed and accrued interest.
Can You Short on KuCoin?
Yes, KuCoin allows investors to short Bitcoin and other digital assets. The platform offers up to 5X leverage for cross-margin and up to 10x for isolated margin. The process of shorting crypto on KuCoin is similar to many other platforms. If a trader anticipates that a certain coin's value will drop in the future, they can sell the coin before the price dumps and then repurchase it at the lower price point utilizing borrowed funds from KuCoin or using derivatives contracts.
How Does Short Selling on KuCoin Work?
Shorting crypto on KuCoin entails selling it at a high price and then buying it back at a low price in the future. This contrasts the standard strategy used by seasoned crypto traders when trying to profit from price increases, that is, going long on KuCoin. Short-selling on KuCoin is offered through four different methods.
KuCoin Margin Trading
With this trading model, investors can make trading bets on the crypto market using funds borrowed from a third party. This strategy allows the trader to enter into trades beyond their initial investment. If used correctly, they can generate huge rewards for the investor. But, they come with big risks. The investor's initial capital is known as collateral, while the borrowed funds from the exchange are known as leverage. Margins on KuCoin are divided into cross margin (up to 5x leverage) and isolated margin mode (10x maximum leverage).
Learn more: What are the best crypto margin platforms?
KuCoin Futures Trading
KuCoin's futures trading product is a derivatives market where experienced traders can use leverage to maximize their crypto trading volume and profit. With this strategy, investors can enter various leveraged futures contracts and trade with Bitcoin and other cryptocurrencies.
KuCoin futures trading combines USDT-margined and Coin-margined pairs. For example, investors can pair BTC Perpetual/USDT, ETH Perpetual/USDT, and other available margins, including DOT and XRP. But profits and losses from the trades are indicated using the underlying asset selected (BTC, USDT, XRP, and others).
Another KuCoin product that is essentially spot trading with leverage. They have no expiry dates or negative prices. As a result, investors can take a leverage position on a crypto pair without depositing any collateral, maintaining a margin, or losing assets to liquidation.
Futures Grid Trading Bot
KuCoin features crypto trading bots that can be preconfigured to execute orders and short cryptos when it reaches the top of the range. The bot can also function using automatic parameters, including investment margin, automatic contract selection, when to sell short, and more.
How to Short-Sell on KuCoin With Margin
Step 1 - Open a KuCoin account
The first step is to sign up and create an account on KuCoin via the website or mobile application. This can be done by clicking the “Sign Up” button at the top-right corner of the home screen and entering the required basic information, such as email, password, and referral code (if any).
Step 2 - Deposit funds
KuCoin does not require an immediate Know Your Customer (KYC) process to deposit funds, so investors can add either crypto or fiat to their wallets by clicking the “Deposit” button on the user dashboard. KuCoin charges no deposit fees and the deposited funds will be credited to the user’s spot wallet.
Step 3 - Move funds to margin wallet
Transfer the deposited funds from the spot wallet to the margin wallet to short-sell on KuCoin. Do this by clicking the “Transfer” button under the asset overview.
Enter the KuCoin margin market by clicking the “Trade” button at the top of the dashboard. Select “Margin Trading” from the dropdown menu to access the market.
Search for available crypto pairs from KuCoin’s trading home page and select a pair to short-sell in the margin market.
Step 5 - Borrow funds
To short the selected crypto pair, the trader must borrow funds from KuCoin. Click “Borrow” at the base of the screen, choose the coin to be borrowed (for example, BTC), enter the amount, and confirm the loan.
Step 6 - Enter a short position
Return to the margin market and go short using the specific coin pair. You will need to enter the account 'Trading Password' to unlock the fields. Enter the leverage amount. KuCoin offers up to 5x leverage for cross-margin and 10x for isolated-margin. Set the price to enter a short trade and the portion of funds to be used, then execute the trade. Note that trading fees apply to all the trades executed.
Step 7 - Repay the borrowed funds
Once the trade is completed and all orders are completely closed, the investor must pay back the loan and its accumulated interest. To do this, click the “Repay” button at the base of the screen. Enter the amount to be repaid and complete the transaction.
How to Short-Sell on KuCoin With Futures
Step 1 - Log in to account
Navigate the KuCoin website or mobile app and sign in to the created account on KuCoin with the login credentials used during the Account registration process. Then click “Log In.”
Step 2 - Deposit funds to KuCoin
Click “Deposit” to find the spot wallet balance with either crypto and fiat currencies.
Step 3 - Transfer Funds to Futures Account
Move the deposited funds from the main account to futures using the “Transfer” button at the base of the asset overview. Users must ensure their KuCoin Futures trading account is enabled before this step.
Enter the KuCoin Futures market by clicking the “Derivatives” button at the top of the screen and selecting any of the futures market options, including Futures Classic, Futures Lite, and Futures Brawl.
Step 5 - Enter a short position
Choose the trading pair, order type, futures contract, leverage, and quantity of funds to trade. Proceed to execute the trade by setting a limit order, market order, or stop order, then confirm the short position. There are options to enter a stop-loss and take-profit with the short order, which is recommended to avoid significant losses during rapid volatility.
Is it Profitable to Short on KuCoin?
Yes, shorting on KuCoin can potentially be a profitable crypto investment strategy, although very risky due to the volatility in the market. The strategy is best suited for advanced traders who understand how to read technical data and manage risks.
In other words, short-selling Bitcoin can work in favor of the investor if their prediction of a price decrease is accurate. However, if the price of the coin increases instead of decreasing, the exchange would implement a margin call, asking for more collateral. In the event the trader can't provide additional capital, KuCoin can close out the position, which would see the investor lose out his capital and incur fees.
Who Can Short on KuCoin?
Shorting crypto is ideal for experienced traders only who can navigate the volatile market better with expert technical analysis. However, not all KuCoin customers can short on the platform because the exchange limits its Bitcoin shorting feature to certain countries. For example, countries like the USA and China are exempted from KuCoin verification because the platform is not licensed to operate in those countries. This means traders from such regions can't access the platform’s complete features, including futures trading.
However, traders from over 200 countries can short on KuCoin. These include residents of Angola, the United Kingdom, Germany, Turkey, Sweden, Australia, Spain, South Africa, and Singapore, to name a few.
Frequently Asked Questions
KuCoin doesn’t require KYC for short-selling crypto. However, unverified accounts have a daily withdrawal limit of 1 BTC.
Margin trading is a type of trading account on KuCoin that allows traders to borrow capital from the exchange to initiate large crypto trades. To get started on margin trading, head over to the margin market page and transfer collateral to the margin account. Once the funds are transferred, borrow additional funds from the KuCoin exchange, and use leverage to create either long or short positions.
KuCoin offers many advanced trading tools that investors can leverage to short cryptocurrencies like Bitcoin on its platform. Shorting can be a profitable investment but it is better suited for advanced traders who understand the risks and technical analysis involved. However, we have provided this how-to guide to help traders better understand how to short on the KuCoin with margin and futures.