Explained: What are long and short positions in crypto?

New Delhi: Long or short? If you are a new investor or trader in the crypto market then you might have heard or seen these terms very frequently. Well, Crypto traders often use these words which are not fully understood by the newcomers.

Here we will explain the two core concepts specifically for newcomers who are expected to flood the crypto market.

What are Long and short positions in a crypto market?

The concept of Long and Short is simple and easy to understand. The basic principle behind long and short trading is imperative for every trader.

Long and short positions are the two potential directions of the price which are required to secure a good profit. Investors who go long in the market expect the price of the coin to go up from a given point. On the other hand, traders who go short hope the price of the coin will decline from the entry point.

In a nutshell, Long and Short reflect whether a trader believes a cryptocurrency is going to rise or fall in value.

If you go Long then it is equivalent to buying the cryptocurrency or opening a long position on the other hand going short is equivalent to selling the crypto.

Buying and selling are basically for spot exchanges while you can go long and short on a crypto coin without actually buying or selling it. This is only possible if your crypto exchange platform offers you future options and other derivatives products.

When you get into these derivatives, you actually get good exposure to the crypto world through long and short positions but without owning or dealing with a particular cryptocurrency.

It is being said that you see more long positions than shorts in a bull market as more traders/investors want to get the benefit from the price fluctuation. If a market is bearish then generally short positions exceed the long ones.

These are only observations and not strict rules to follow as expert traders and investors buy the dips and sell at high prices. Experts sell when the price tests the resistance levels and open long positions when the price retreats.