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The principle of shorting a currency, what does it mean to triple short a digital currency?

2022-01-25

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Short selling is an investment term such as stock futures, which means that for example, when an investor expects a stock to fall in the future, he sells the stock owned by the investor when the current price is high, and then buys it when the stock price falls to a certain extent. This difference is the investor's profit. This article will give you a detailed explanation of the principle of shorting a currency and what it means to triple short a digital currency.

The principle of short currency

Shorting a currency refers to various investments made by investors who believe that one or several currencies will become worthless in order to gain income from the devaluation of this currency.

When it comes to currency investment, we have to mention the exchange rate of the currency. When various countries conduct material exchanges and international trade, they need to determine the price of commodities. Within each country, commodity prices are denominated in the country's legal tender. Therefore, in international trade, each country needs to formulate the exchange ratio between different currencies, and this exchange ratio is the exchange rate.

If investors are not optimistic about currency A, they think that the exchange price of currency A will fall. That is to say, with the development of time, the same amount of currency A can be exchanged for less and less other currencies. Then investors can short currency A based on this judgment.

What does triple shorting of digital currency mean?

Triple shorting means that investors short a certain target with a leverage ratio of 300%. Triple shorting is relatively common in the futures and foreign exCM Trade. It enables investors to buy more targets with less funds, allowing investors to invest It triples the investor's return and triples the investor's risk.

For example, when the underlying object purchased by the investor falls by 10%, the short-selling investor will achieve a return rate of 30% under the action of 3x leverage. When the underlying asset purchased by the investor has risen by 10%, the short-selling investor will lose 30% under the action of 3 times leverage. When the investor's loss rate reaches 100%, the position will be liquidated.

Generally speaking, in the absence of extreme market conditions, when the investor's loss rate reaches 90%, the futures company will notify the investor to make a margin call. If the investor does not make a margin call, the futures company will force the liquidation.

This article focuses on explaining the principle of shorting a currency. In short, it means that there are no goods to sell first and then buy. Of course, there are many details in the specific operation that need to be paid attention to, and this kind of shorting currency often requires more experience. It is not recommended for novice investors to Go early to try. As for the meaning of triple short digital currency, it is easier to understand. You can basically understand the distance in the content.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The principle of shorting a currency, what does it mean to triple short a digital currency?

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