Risk Considerations
1. Long Position Risk: The downside risk of a long position is relatively clear—your maximum loss is limited to the amount you invested. If the asset's price drops to zero, you will lose the entire value of your investment.
2. Short Position Risk: The risk associated with a short position is significantly higher because there is no upper limit to the asset's price increase. If the price skyrockets, the losses can theoretically be infinite. For example, if you short an asset at $100 and its price soars to $300, your loss per unit when you buy back the asset will be $200.
Understanding these strategies is crucial for navigating the dynamic trading world, whether you are investing in cryptocurrencies, stocks, or other financial instruments.
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