What are "Long" and "Short" Position?

Long is a strategy where a trader or investor buys an asset with the intention of selling it later at a higher price. Simply put, a long position is a bet on the price of an asset going up. The trader buys the asset, expecting its value to rise, and plans to profit from the difference between the purchase and sale price.

You buy 1 Bitcoin at a price of $20,000, expecting its value to rise to $25,000. If the price does indeed increase, you sell the Bitcoin and make a profit of $5,000 (excluding fees and other costs).

Short is a strategy where a trader borrows an asset (like stocks) from a broker and sells it on the market, intending to buy it back later at a lower price. A short position is a bet on the price of an asset going down. The trader sells the asset, expecting its price to drop, and plans to profit from the difference between the sale and repurchase price.

You borrow 10 shares of a company at $100 per share and sell them, receiving $1,000. If the share price drops to $80, you buy back the 10 shares for $800 and return them to the broker, keeping the $200 difference as profit (excluding fees and other costs).

Risks

🔵 Long: The maximum risk in a long position is limited to the amount you invested in the asset. If the asset's price drops to zero, you lose your entire investment.

🔵 Short: The risk in a short position is theoretically unlimited, as the asset's price can rise indefinitely. If the price of the asset spikes, the losses can be much greater than the initial amount invested.