Long and short positions are the two basic terms every trader learns at the very beginning of their trading journey. Going long is to own the asset and expect the price to increase, while shorting is waiting for the price to go down and buy back the asset at a better price to make a profit.
Unlike other assets, cryptocurrencies are highly volatile, and that can work in the trader’s favour whenever they succeed in deriving profits from price fluctuations. Regardless of what trading style or strategy you’re choosing, understanding core concepts like short and long trades is a must.
Long Positions Action Plan
When going long, traders use a universal profit-making strategy of buying cheaper and selling more expensive. This behaviour is often typical for beginners.
Here’s how you do it:
- Analyse the market, find an asset that is most likely to go in price in the near future, and buy it;
- Wait until the price starts rising. Sometimes, it might take a while;
- Sell the asset and enjoy the profit.
The trickiest part is to sell the asset on time. Considering it is not easy to predict when the price stops rising, chasing the highest price may be a losing game. If you lose the opportunity to sell for profit, you have a couple of options: One is to absorb the losses and sell the assets. Another is to wait until the price rises again.
It’s worth noting that long trades are very common and can be executed on any exchange.
Long Positions Action Plan
When going long, traders use a universal profit-making strategy of buying cheaper and selling more expensive. This behaviour is often typical for beginners.
Here’s how you do it:
- Analyse the market, find an asset that is most likely to go in price in the near future, and buy it;
- Wait until the price starts rising. Sometimes, it might take a while;
- Sell the asset and enjoy the profit.
The trickiest part is to sell the asset on time. Considering it is not easy to predict when the price stops rising, chasing the highest price may be a losing game. If you lose the opportunity to sell for profit, you have a couple of options: One is to absorb the losses and sell the assets. Another is to wait until the price rises again.
It’s worth noting that long trades are very common and can be executed on any exchange.
Short Positions Action Plan
When traders go short, technically, they sell the assets they do not own yet to buy it later at a lower price. Fundamentally, the short trades concept implies that the assets have to be borrowed before selling.
That’s your basic action plan when going short:
- Analyse the market and look for the coins that might go down in price
- Loan them from the exchange and sell them instantly
- When the price falls, buy back the coins you sold and pay back the exchange
Short trades are not universally available, and you need to make sure your exchange is offering margin trading, which allows traders to go short.