What Is Long and Short Positions?
Also known as: Long Position, Short Position, Going Long, Short Selling
In short
A long position is a buy position opened in expectation that an asset's price will rise; a short position is a sell (short selling) position opened in expectation that the price will fall, aiming to profit from the decline.
In a long position, the investor buys the asset or takes the buy side of a futures contract; they profit if the price rises and lose if it falls. In a short position, the investor sells an asset they do not own by borrowing it or using a derivative contract, and aims to buy it back at a lower price. In cryptocurrency markets, short positions are mostly opened through futures, perpetual contracts or margin trading.
For example, an investor who shorts a coin at $100 and closes the position when the price falls to $80 gains $20 per unit, excluding fees; if the same coin rises to $120, they lose $20. In addition to speculation, these positions are also used for hedging: someone holding coins can limit potential losses by opening a short against a price decline.
There is an important difference in risk between the two positions. In an unleveraged long position, the loss can be at most the amount invested, whereas in a short position the loss potential is unlimited because the price has no theoretical upper limit. When leverage is used, liquidation risk arises in both directions.
Last updated: · This content is for information purposes only and is not investment advice.