How to Short Cryptos on KuCoin

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TL;DR- KuCoin offers shorts on sixty or so coins. If you strongly believe that the price of a crypto is going to go down, you could make a short trade on KuCoin and make some cash. Be careful, though: the more leverage you use, the more likely you are to get wiped out.

Can you short on KuCoin?

Yes, you can absolutely short cryptos on KuCoin, with leverage up to 5x without Know-Your-Customer (KYC) and up to 20x with KYC. Leverage multiples used to be much greater than this, but leverage has a nasty habit of causing market crashes. There’s a theory with strong evidence showing that the May 2021 crypto crash was the doing of over-leveraged accounts. Yes, the China FUD was palpable- but the market reaction was outsized. Most of the crypto exchanges have thus been reigning in how much leverage is available. Exchanges are also doing this because they know that extreme leveraged positions tend to piss off various regulatory bodies in different countries.

What is short selling?

Let’s say you and your friend Kevin Costner are arguing whether the price of Facebook stock is too high. It’s currently sitting at $2,300/share. Keven Costner thinks it’s fairly valued at $2,300- you think the stock is worth way less. You think this for a lot of reasons. The government is going to break up Facebook, and Apple/Google are going to limit Facebook’s intrusive ads, and the company’s cashflows are shrinking.

You decide to act on your beliefs. Kevin Costner lets you “borrow” 20 shares of Facebook stock. You turn around and sell the 20 shares at the market price of $2,300/share. A week later, Facebook’s share price has indeed fallen to $1,500/share. You buy 20 shares back at this price, and return them to Kevin Costner, who let you borrow them. Since your initial sale was (20*$2,300 = $46,000) and you bought the shares back at (20*$1,500= $30,000) you cleaned up with a ($46,000-$30,000= $16,000) profit on the trade. It pays to be right! All you need to know to become a billionaire is to be able to perfectly predict the future. Now pretend that Kevin Costner is KuCoin, and Facebook stock is Shiba Inu coin. Or whatever coin you think is going down.

Leverage- will I owe money if I use leverage and lose on my trade?

No, you won’t owe money. KuCoin will automatically liquidate your position and take your money before this happens. When you place a short trade, KuCoin will show you the approximate price the coin has to make it to for you to be liquidated. This doesn’t mean leverage can’t wreck you, though. If you leverage heavily on a short, the crypto only needs to move up a small amount for you to lose everything you put in. Because of this, I wouldn’t recommend using the leverage feature when doing your first dozen or so short trades with KuCoin. If you lose 50%, 75%, or even 90% of your trade, you can always come back from it. If you get wiped out, you’re out of luck!

Trading vs. Gambling

I’ll let you in on a secret- most people who do “day trading” are really just gambling. At some point it stops being about educated guesses and analyses and starts being all about those dopamine hits. Let’s face it- it feels great when a coin we own has an epic pump. It’s why we’re all in crypto. This is fine, but you should be honest with yourself about what you’re doing. If you’re ok losing what you’re trading, and most of your serious savings are somewhere else, that’s fine. It can be a good way to learn the options game and get better at it.

A crazy high percentage of day traders end up losing money- something around 90%. My preferred strategy for investing is and has always been to buy and hold. As Warren Buffett and Charlie Munger once said in a letter to shareholders- “our favorite holding period is forever.” If I’m shorting cryptos on KuCoin, it’s only with small fractions (1%-2%) of my portfolio. I’ve got a kung-fu death grip on my other coins.

Steps to short cryptos on KuCoin

Let’s get down to business. Today I’ll be showing you how to short any crypto using KuCoin Futures.

1. You’ll need to be set up with KuCoin and have your KuCoin account funded.

2. The next step will be to fund your KuCoin Futures account. Go to the Assets Overview homepage after logging in to your KuCoin account. In the middle left of the page under the Futures Account square, choose Transfer. Fund your futures account using any of your other accounts.

3. On the top bar of the KuCoin homepage, select the derivatives drop down and select Futures Pro.

4. Across the top of the Futures Pro homepage you’ll see the trading pairs. There are currently 60 or so pairs to choose from. Select the crypto you’d like to short.

5. On the right side of the trading window, enter the number of coins you’d like to short underneath Amount. Underneath Price, enter the price you’d like to buy the coin at. I usually go for whatever the price of the coin is immediately at that moment. After entering this amount, you should see the cost of the trade underneath the red ‘sell/short’ button on the bottom right.

6. If you’d like to use leverage on your trade and risk getting wiped out quicker for a potential bigger reward, use the sliding scale to click what multiple you’d like to use.

7. Click Sell/Short and when the pop up window comes into view select Sell. Input your trading password if prompted. You’ve just set up your first short on KuCoin. Congrats! Now all you need to do is sit there and hope the crypto gods smile on you.

Always do stop loss & take profit

It’s important to set boundaries on your trade and do stop losses and profit takes at certain price points. For example, if a crypto you’re shorting is at $100, you could set a stop loss at $105 so you won’t lose and more money. KuCoin will automatically close your trade once the price reaches $105. Likewise, if you short a $100 crypto and the price goes down to $95, you can set an automatic profit-take where KuCoin will close your position when the price hits $95. To do this, click the clipboard and pen icon on the right side of the trade info toward the bottom of the page. Enter either the prices you’d like to set a stop loss and profit-take at, or click the percentage gains or losses you can tolerate. Select the mark price to set these at market prices.

How do you close a position on KuCoin futures?

To exit your position, click the empty square with the pen hovering over it on the bottom right of the screen next to your trade info. Select a profit take or stop loss thats below or above what you’re currently at. Select limit and hit Confirm.

A final word
I have found options trading (longs and shorts, especially with leverage) to make me completely mentally preoccupied. I’m usually checking my phone every 2-3 minutes and unable to sleep, which I really don’t like. In February of 2021, I traded options the entire month and lost sleep and was far less productive at work. In addition to losing time and mental energy, I lost money. I prefer to rest easy with my investments. This is why my portfolio contains majority large caps like Bitcoin, Ethereum, and Cardano, with no options. Shorts and longs especially with leverage are playing with fire. You’ve been warned!

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