Cryptocurrency Trading Basics: Long and Short Positions Explained

In daily discussions within the crypto community, terms like “going long,” “going short,” “bullish,” and “bearish” frequently appear, especially in market analysis and trading discussions. Many novice investors still have only a partial understanding of these concepts. This article will help everyone understand these fundamental yet crucial concepts from the perspective of actual trading.

Going Long: Buying in anticipation of a price increase

The core meaning of going long

Going long refers to a trading operation that is bullish on the market trend. Simply put, it means expecting the price to rise, and realizing gains by buying low and selling high. In the spot market, all buying actions are essentially going long.

The same concept is also called “long position,” which is the same trading strategy expressed differently. Regardless of terminology, the core logic remains consistent: buy first, sell later, and profit from rising prices.

The meaning of bullish (long position)

“Long” does not refer to a specific person or institution, but broadly to all investors who expect the market to rise and engage in long trading. They anticipate the coin price will go higher, so they buy a certain amount of digital currency at the current price, and wait for the price to increase before selling at a higher price to earn the difference.

Real-world example of going long

Suppose a certain coin is currently priced at 10 yuan. You are optimistic about it and buy one at 10 yuan. When the price rises to 15 yuan, you sell it and make a profit of 5 yuan. This entire process is a typical long trade. This type of operation is entirely based on the spot market and does not involve borrowing or leverage.

Going Short: Selling after expecting a price decline

Basic concept of going short

Going short is the opposite of going long; it is an operation based on expecting the market to decline. Investors believe the price will fall, so they sell in advance to hedge risks or to gain profits. However, in the spot market, short selling cannot be done directly; it requires futures contracts or leveraged trading to implement.

The meaning of bearish (short position)

“Short” refers to investors who expect the coin price to fall. They think the current price is high and the outlook is not optimistic, so they sell their digital currency holdings first, and buy back after the price drops to profit from the difference. The characteristic is a sequence of selling first, then buying.

How short selling works

Short selling involves complex trading mechanisms. Suppose a coin is currently priced at 10 yuan. You predict it will decline, but only have 2-3 yuan in cash, which is insufficient to buy. At this point, you can use your 2 yuan as margin and borrow 1 coin from an exchange or third party. After borrowing, you immediately sell the coin on the market, receiving 10 yuan in cash. But this 10 yuan cannot be withdrawn directly because you still need to repay the borrowed coin.

When the price drops as expected to 5 yuan, you use 5 yuan to buy back 1 coin, and return it to the lender. After repayment, you keep the remaining 5 yuan as profit (excluding fees and interest).

Risks of short selling

Short selling carries much higher risks than going long. If the price does not decline but instead rises, the margin will gradually be depleted. Once losses exceed the margin, the system will automatically close the position, known as “liquidation.” Liquidation means the principal is lost, which is the most severe consequence of short trading.

The substantive difference between going long and going short

Going long is based on spot trading, with relatively controllable risks. Going short relies on borrowing and leverage, involving interest, fees, and liquidation risks. Novice investors should first master basic long operations and gradually understand the market before considering engaging in short selling.