What does long and short selling mean in currency speculation? Understand the long and short positions of currency speculation in one article
- WBOYOriginal
- 2024-07-24 14:51:011082browse
In cryptocurrency trading, going long means buying an asset in anticipation of an increase in price, while going short means borrowing an asset in anticipation of a decrease in price. The key differences between these two strategies are the direction of the trade, the assets traded and how to profit. Long traders profit when prices rise, while short traders profit when prices fall.
Long and short trading
In cryptocurrency trading, long and short are two common trading strategies that allow traders to make profits by predicting price movements.
Long
Long refers to the trading strategy that expects the price of an asset to rise. Traders buy a cryptocurrency in the expectation that its value will rise. If the prediction is correct, traders can make a profit when selling cryptocurrencies.
Short selling
Short selling is a trading strategy that anticipates that the price of an asset will fall. A trader borrows a cryptocurrency and then sells it immediately. When the price drops, traders then buy the cryptocurrency to return the borrowed asset. If the prediction is correct, the trader can profit from the difference between the initial sale and the subsequent purchase.
Key differences between long and short
- Trading direction: Long traders expect prices to rise, while short traders expect prices to fall.
- Trading Assets: In a long trade, the trader buys an asset. In a short trade, the trader borrows the asset.
- How to profit: Long traders make profits when the price rises. Short traders profit when prices fall.
Example
Assume that the current price of Bitcoin is $10,000.
- Long trade: Trader buys 1 Bitcoin in anticipation of an increase in price. If the price of Bitcoin rises to $11,000, a trader can sell Bitcoin at $11,000, making a profit of $1,000.
- Short Trading: Trader borrows 1 Bitcoin in anticipation that the price will fall. The trader immediately sold Bitcoin for $10,000. If the price of Bitcoin drops to $9,000, a trader can buy Bitcoin at $9,000 to return the borrowed asset, making a profit of $1,000.
Risk
Both long and short trading involve risks. If prices move contrary to traders' predictions, they may suffer losses.
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