Explore What Long Is and How It Works in Cryptocurrency Trading

What is long? This is one of the most basic questions anyone starting cryptocurrency trading needs to understand. Long is essentially a trading position where the investor predicts the asset’s price will rise, so they buy in with the expectation of selling at a higher price. This approach is the foundation for most profit-making strategies in the modern cryptocurrency market.

What is long - a buy position with expectations of price increase

What does long mean in actual trading? It is a position where you buy an asset at the current price with the goal of selling it after the price increases. For example: if an investor is confident that a token currently priced at $100 will rise to $150 in the near future, they will buy that token and wait for the target price. The profit in this case is the difference between $50 — calculated as the selling price minus the initial purchase price.

To better understand what long is, know that this position is easy to grasp because it works similarly to normal commodity trading. You buy when prices are low, sell when prices are higher, and profit from the difference.

What is short - a short-selling strategy from A to Z

Conversely, what is short? Short is a short position opened when a trader predicts the price will fall. To implement this strategy, the investor borrows the asset from the exchange, sells it immediately at the current price, then waits for the price to drop to buy back the same amount of the asset at a lower price, and returns it to the exchange.

An illustrative example: if Bitcoin is currently $61,000 and you forecast it will drop to $59,000, you can borrow one Bitcoin from the exchange and sell it at $61,000. When the price drops to $59,000, you buy back the same Bitcoin and return it to the exchange. The profit is $2,000 (minus borrowing fees).

Although this mechanism sounds complex, in reality everything happens automatically “inside” the trading platform within seconds. For the user, it’s just a matter of clicking the corresponding buttons to open or close positions.

The history and origin of long and short in trading

What is long and what is short are not new concepts in financial history. While the exact origins of these terms are hard to pinpoint, one of the earliest public documents mentioning “short” and “long” appears in the January-June 1852 edition of The Merchant’s Magazine and Commercial Review.

According to one version, the origins of these terms relate to their original meanings. A trade predicting growth was called “long” because price increases rarely happen quickly, so the position is held for a longer period. Conversely, an activity designed to profit from falling prices is called “short” because it takes less time to execute.

Bull and Bear - the main characters in the market

The terms “bull” and “bear” are widely used to refer to the main groups of market participants depending on their positions and forecasts.

“Bull” traders believe that the market or a particular asset will grow, so they open long positions. This helps increase demand and asset value. The name comes from the image of a bull “pushing” the price up with its horns.

On the other hand, “bear” traders expect prices to fall and open short positions. The term originates from the idea that bears influence the price downward. Based on these names, the concepts of bull market and bear market have been formed.

Futures contracts and derivative tools

Futures contracts are derivative instruments that allow you to profit from price fluctuations of an asset without owning it directly. Although many types of futures are used in stock, commodity, and financial markets, in the crypto industry, perpetual contracts and cash-settled futures are the most common.

Perpetual contracts mean there is no specific expiration date. This allows traders to hold positions as long as needed and close them at any time. Cash-settled futures mean that after the trade is completed, the trader does not receive the asset but only the difference between the opening and closing prices, calculated in a certain currency.

Buying futures is used to open a long position, while selling futures opens a short position. The first implies purchasing an asset in the future at a predetermined price at the time of opening, the second involves selling the asset under the same conditions. Note that to maintain most positions on trading platforms, you must pay a funding fee every few hours — the difference between the spot market price and the futures market price.

Hedging - how to protect your portfolio

Hedging is a risk management method involving taking opposite positions to minimize losses if prices suddenly reverse. For example, a trader buying Bitcoin expecting a rise but not ruling out a potential drop due to an event can hedge to reduce potential losses.

A common hedging strategy is opening opposite positions. For example, if you believe Bitcoin will rise, you might open a long position on two Bitcoins to profit from the increase. Simultaneously, you open a short position on one Bitcoin to cut losses if your forecast is wrong.

Suppose the asset rises from $30,000 to $40,000. The profit is calculated as: (2-1) × ($40,000 - $30,000) = 1 × $10,000 = $10,000.

If an adverse scenario occurs and Bitcoin drops from $30,000 to $25,000, the result is: (2-1) × ($25,000 - $30,000) = 1 × -$5,000 = -$5,000.

Thus, hedging can reduce losses — from $10,000 down to $5,000. However, it’s important to consider that, as a “premium,” you also halve your potential gains from price increases.

A common mistake among beginners is believing that opening two opposite positions of equal size can fully protect against risks. In reality, this strategy results in profits from one trade being completely offset by losses from the other, and paying commissions makes this approach unprofitable.

Liquidation - dangers to avoid

Liquidation is the forced closing of your position when trading with borrowed funds. This usually happens when the asset’s value changes sharply, and the margin (collateral) is insufficient to support the position.

In such cases, the trading platform will send you a “margin call” — an offer to deposit more funds to maintain the position. If you do not act, at a certain price level, the trade will be automatically closed. Risk management skills and monitoring multiple open positions can help you avoid liquidation.

Advantages and risks of using long and short

When using long and short in trading strategies, consider some important points:

Long positions (buy) are easier to understand because they basically work like buying an asset on the spot market. You buy, wait for the price to rise, then sell to profit.

Short positions (sell short) are more complex and often counterintuitive. Additionally, prices tend to fall faster and are harder to predict than rising prices, creating unique challenges.

Many traders use leverage to maximize their financial results. However, it’s important to remember that borrowing funds can lead to higher potential profits but also increased risks. You must constantly monitor your collateral levels and be prepared for sudden market volatility.

Conclusion

What is long and what is short are two core concepts of modern cryptocurrency trading. Depending on price forecasts, traders can use buy and sell positions to profit from price increases or decreases. Based on their positions, market participants are categorized as “bulls” expecting growth or “bears” betting on decline.

Typically, futures contracts or other derivative tools are used to open long or short positions. These tools allow making money by speculating on an asset’s price without owning it, and also open opportunities for additional income through leverage. However, it’s important to remember that using long and short strategies not only increases potential gains but also comes with increased risks.