Home Crypto for Beginners What are long and short positions

What are long and short positions

If we want to explain it in short, long positions are opened positions, where a trader speculates on a rise of a price of an asset (buy). Short positions are opened positions, where a trader speculates on a fall of a price of an asset (sell).

Buying and selling are mostly used on spot exchanges, but you may go long and short on a cryptocurrency without actually buying or selling it. This is only possible if your cryptocurrency trading platform provides future options and other derivatives products. When you invest in these derivatives, you gain strong exposure to the crypto market through long and short positions without owning or dealing with a specific coin.

It is stated that in a positive or bull market, there are more long holdings than short ones since more traders/investors aim to profit from price fluctuations. When a market is negative or bear market, short holdings often outnumber long positions.

Obviously, your selection must be supported by fundamental or technical analysis. If you learn that a blockchain project has obtained a high-profile collaboration or is launching a significant update, you can consider going long on its native coin. In general, in order to effectively understand market mood, you need be highly active on social media and read news on a daily basis. Alternatively, or in addition, you may look for patterns on the charts, such as if the price has broken over an important resistance line, which could imply the continuation of an uptrend. If you aim to go long, you should be certain that the price will rise regardless of the analysis you use. Otherwise, you will be going against the grain.

Unlike foreign currency pairings, which have no specific long-term aim, cryptocurrencies behave similarly to corporate shares in that they are typically traded against fiat currencies, primarily the US dollar, and they constantly try to go higher. This is why many investors choose to use the "buy and hold" method, particularly when it comes to Bitcoin.

Going long or short on a cryptocurrency may be profitable, especially when it is volatile. Nonetheless, skilled traders prefer margin trading since it allows them to double prospective earnings by several orders of magnitude. However, the hazards grow proportionally, which is why margin trading should be done with prudence. Margin trading is a type of leveraged trading that may be used for both long and short positions. Margin accounts make use of money given by third parties, such as the exchange platform or other traders who are compensated for providing funds. As a result, by leveraging positions, you may invest larger sums and multiply the potential reward multiple times.

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