Long and Short Positions
Long · Short · Going long · Going short
A long gains when the price rises and a short gains when it falls; the terms come mostly from futures trading.
Simple explanation
Background: Korean exchanges (Upbit, Bithumb, Coinone and Digital X, formerly Korbit) offer spot trading only, not futures. On spot you buy the coin itself, so you only make money if it goes up; on the futures markets of overseas exchanges such as Binance you can also take the side that gains when the price falls. That is where "long" and "short" come in.
A long is a bet that the price will rise: you gain as it goes up and lose as it goes down, the same direction as holding the coin. A short is a bet that the price will fall: you start by selling a futures contract without owning any coin, so you gain as the price drops and lose as it climbs.
Profit or loss is roughly the position size times the percentage the price moved (for the common USDT-settled futures). Opening a position is called entering; closing it with the opposite order is called closing out, which is not the same as being liquidated by the exchange. The result is locked in when you close; until then it is unrealised profit or loss.
Futures need only part of the position's value as margin. The higher the leverage, the bigger the gain or loss on that margin for the same price move, and if losses shrink the margin below a set level, the exchange closes the position for you (liquidation). You can lose all of the margin you put in.
A price cannot fall below zero but has no ceiling, so in theory a short's loss has no limit. In real futures trading the margin runs out first and the position is liquidated. Even a 1x short loses all of its margin if the price doubles.
On perpetual futures, which never expire, longs and shorts pay each other a funding rate at set times while the position is open. The longer you hold, the more funding adds to or takes from the result.
Every futures contract pairs one long with one short, so across the whole market the number of long and short contracts is always equal. The long/short ratio that exchanges publish usually compares the number of accounts on each side, or the positions of top traders. Traders read it as a sign of mood, but it does not tell you where the price will go.
Holding a coin and opening a short of the same size to cut the risk of a fall is called hedging. In kimchi premium arbitrage, some traders also use an overseas futures short to limit price risk while their coins are in transit.
Example
Margin ₩1,000,000 at 1x leverage → Bitcoin position ₩1,000,000 (entry price ₩100,000,000)
The price rises 10% to ₩110,000,000 → long +₩100,000 · short -₩100,000
The price falls 10% to ₩90,000,000 → long -₩100,000 · short +₩100,000
The price doubles to ₩200,000,000 → short -₩1,000,000 = all of the margin (in practice liquidated before that)
At 5x (a ₩5,000,000 position), the same 10% rise → long +₩500,000 · short -₩500,000
(Trading fees and funding are left out)
※ Example numbers, for illustration only
See it on CoinGaja
- CoinGaja does not show futures prices or long/short ratios. The gap between Korean and overseas spot prices (the kimchi premium) is here:
- Bitcoin Kimchi Premium›
- Kimchi Premium by coin›
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