What is a Long & Short Position in the Crypto Market?

What is a Long & Short Position in the Crypto Market?

There are terms that everyone who enters the cryptocurrency market has heard since day one, but they always confuse them. The two most intriguing terms are "long and short position". These terms reflect whether the value of units will increase or decrease in cryptocurrency trading. To put it briefly, if a currency is thought to rise, it is called a long position; if it is thought to fall, it is called a short position. For this reason, the term long position is used for buying, while the term short position is used for selling.

Long Position

To explain the term long position with a simpler example, you think that gold prices will rise and you want to make more use of this opportunity. Let 1 gold bar be 1000 USD. Let's assume that you only have 1000 USD to invest. However, you want to buy 3 gold bars instead of 1 gold bar, thinking that the gold will increase in value. For this reason, when buying gold, you buy 3 gold bars with 1000 USD. Even if you don't have 3 gold bars, you make a promissory note stating that you have 3 gold bars. Later, if gold rises, you pay your debt and take your profit. However, if it falls, you don't make a profit and you may even lose all your money.

Therefore, in investments that require such expertise, you definitely need to know how to read charts very well. In fact, we recommend that you follow the entire market closely, not just read the charts. Moreover, in some cases, even if you are doing all of these, since the cryptocurrency market has a volatile structure, even a statement made by any important political or economic figure can reverse all of this. You may hear some investors say "I'm in the long game" during this process.

Short Position

Short position means selling the instrument you invested in while the price is still high, assuming that it will decline. If we go by the example again, you have 1 gold bar in your hand and you assume that the gold will fall. Thereupon, you sell your gold bar when its price is high, and then you buy gold again when the price of gold drops. Thus, you have both 1 gold bar and profit. You may hear investors say "I'm in shorts" to this situation.

The examples given here are for clarity only. Therefore it is completely independent from the market. If you want to make money by longing or shorting on the cryptocurrency exchange, you should definitely make an evaluation based on your own research. Then make your investments in line with your own values. To learn more, you can check out our other articles on our blog.

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