How to calculate profits from short and long positions in digital currencies

In digital currency trading, short-selling and long-selling are two profitable strategies: Short-selling: Borrow an asset and buy it back at a lower price after the expected price drops. The profit calculation formula is: (borrowing price - return price) x Borrow quantity. Go long: buy an asset and sell it at a higher price after the price rises. The profit calculation formula is: (selling price - buying price) x trading volume.

Profit calculation for short and long digital currency trading

In digital currency trading, short selling and long trading are the two main trading strategies. Going short means expecting an asset price to fall and profiting from it, while going long means expecting an asset price to rise and making a profit from it.

Short Selling Profit Calculation

When you short, you borrow an asset and sell it at the current market price. If your prediction is correct, the asset price will fall. At this point, you can make a profit by buying the asset at a lower price and returning it to the lender.

The calculation formula for short selling profit is:

Profit = (price of borrowed asset - price of returned asset) price to buy the asset. If your prediction is correct, the asset price will rise. At this point, you can sell the asset at a higher price and make a profit.

The formula for calculating long profit is:

Profit = (price of selling asset - price of buying asset) x trading volume

Example

Suppose you borrow 1 Bit for $10,000 currency and expect its price to fall. If the price of Bitcoin drops to $9,000, you can buy 1 Bitcoin for $9,000 and return it to the lender. Your profit will be:

Profit = ($10,000 - $9,000) x 1 Bitcoin

Profit = $1,000

Now let’s say you buy 1 Bitcoin for $10,000 and expect its price to rise. If the price of Bitcoin goes to $11,000, you can sell 1 Bitcoin for $11,000. Your profit will be:

Profit = ($11,000 - $10,000) x 1 Bitcoin
Profit = $1,000

It is important to note that the above calculation does not include transaction fees, interest charges or other transaction costs. These costs impact your actual profits.

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