What does short-selling and long-selling mean in currency speculation?

In cryptocurrency trading, short selling refers to predicting the price of an asset to fall, borrowing the asset, selling it at a high price, buying it at a low price, returning it, and earning the difference. Going long means predicting that the price of an asset will rise, buying it at a low price, selling it at a high price, and earning the difference. In terms of risk, you may face unlimited losses if you go short, and limited losses if you go long, up to the investment amount.

Short-selling and long-selling in cryptocurrency trading

In cryptocurrency trading, short-selling and long-selling are two common methods. Trading straregy. They are essentially opposites, but both aim to profit from price movements.

Short selling

Short selling refers to the trading strategy of predicting that the price of an asset will fall and profiting from it. Traders borrow an asset, sell it when the price is high, and then buy it back when the price falls, earning the difference.

Going long

Going long refers to the trading strategy of predicting that the price of an asset will rise and making a profit from it. Traders buy an asset when the price is low and then sell it when the price rises, pocketing the difference.

Operation Example

Assume that Bitcoin is currently trading at $20,000.

• Short Selling: Traders predict that the price of Bitcoin will fall. They borrow 1 Bitcoin and sell it for $20,000. If the price of Bitcoin drops to $15,000, the trader makes $5,000 in profit after buying 1 Bitcoin and returning it.
• Go long: Traders predict that the price of Bitcoin will rise. They buy 1 Bitcoin for $20,000. If the price of Bitcoin rises to $25,000, the trader makes a profit of $5,000 after selling 1 Bitcoin.

Risk and Reward

The potential reward for both short and long positions is unlimited. However, the risks vary:

• Short Selling: Short sellers may face unlimited losses if the asset price increases.
• Go Long: If the price of an asset declines, longs may face limited losses, up to the amount of their investment.

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