How to open a short position on Kraken?

To short on Kraken, borrow crypto via margin, sell it immediately, and buy back later at a lower price—but beware of liquidation risks and funding fees. (154 characters)

Jul 22, 2025 at 05:00 pm

Understanding Short Positions in Cryptocurrency

A short position allows traders to profit from a decline in the price of an asset. On Kraken, this is primarily done through margin trading or futures contracts. When you open a short, you are essentially borrowing an asset—like Bitcoin or Ethereum—from Kraken, selling it immediately at the current market price, and planning to buy it back later at a lower price to return the borrowed amount. The difference between the sell and buy prices is your profit (minus fees). It’s vital to understand that shorting carries significant risk, including unlimited loss potential if the market moves against you.

Prerequisites for Shorting on Kraken

Before opening a short position, ensure your Kraken account meets the following criteria:

• You must have a verified Kraken account with margin or futures trading enabled.
• You need sufficient collateral in your margin wallet—this can be stablecoins like USDT, USD Coin (USDC), or other supported assets.
• Your account must pass Kraken’s margin eligibility check, which considers your trading history and risk profile.
• Ensure you have funds to cover initial margin and maintenance margin requirements. These vary by asset and leverage level.
  

  How to Access Margin Trading on Kraken

  
  Kraken offers both spot and margin trading interfaces. To access margin:
• Log in to your Kraken account and navigate to the “Trade” section.
• Select “Margin” from the top menu or the left sidebar.
• Choose the trading pair you want to short—e.g., BTC/USD or ETH/USD.
• Make sure your desired asset is available for margin trading by checking the leverage options (e.g., 2x, 3x, 5x). If no leverage is shown, that pair may not support margin.
• Transfer funds to your margin wallet from your spot wallet using the “Transfer” button under the “Balances” tab.
  

  Step-by-Step: Opening a Short Position

  
  To open a short position on Kraken:
• Select your trading pair in the margin interface.
• Switch the order type to “Sell / Short” instead of “Buy.”
• Choose between limit order (set your own price) or market order (execute immediately at current price).
• Enter the amount you wish to short—this must not exceed your available margin balance.
• Review the leverage multiplier and estimated liquidation price shown on the order confirmation panel.
• Click “Place Order” to open the short position.
• Confirm the action in the pop-up window if prompted for 2FA or additional verification.
  

  Monitoring and Managing Your Short Position

  
  Once your short is open:
• Go to the “Open Positions” tab in the margin section to view active shorts.
• Track the liquidation price—if the market rises to this level, your position will be automatically closed to prevent further losses.
• You can add more margin to reduce the risk of liquidation by clicking “Add Margin” next to the position.
• To close the position manually, click “Close” and choose between market or limit order to buy back the asset.
• Always keep an eye on funding rates if holding overnight—they can increase your cost or reduce profits depending on market conditions.
  

  Common Mistakes to Avoid When Shorting

  
  New traders often make avoidable errors:
• Overleveraging—using 5x or higher leverage without understanding the amplified risk can lead to rapid liquidation.
• Ignoring funding fees—these accrue every 4 hours and can erode profits if positions are held long-term.
• Not setting a stop-loss—even experienced traders use stop-loss orders to limit downside risk.
• Forgetting to transfer funds back to the spot wallet after closing a position—this can lead to confusion in your balance overview.
  

  Frequently Asked Questions

  Can I short on Kraken without margin?
  
  No. Shorting requires either margin trading or futures contracts. Spot trading alone does not allow short positions because you cannot sell assets you don’t own outright.

  What happens if my short position gets liquidated?
  
  If the price rises to your liquidation level, Kraken automatically closes the position at market price. You will lose the margin allocated to that trade, and any remaining funds may be subject to a liquidation fee.

  How do I check my liquidation price on Kraken?
  
  After opening a short, go to the “Open Positions” tab. The liquidation price is displayed in real time next to your position. It updates based on your margin balance and current market volatility.

  Is shorting available for all cryptocurrencies on Kraken?
  
  No. Only select pairs like BTC/USD, ETH/USD, SOL/USD, and others support margin shorting. Check the margin trading section to see which assets are eligible—look for the leverage indicator next to the pair.