What are Short and Long Positions?

There are basic terms that confuse everyone who steps into the cryptocurrency industry. Here is the most asked shot position and long position in this article? What are short positions and long positions, especially in Bitcoin

? It will serve as a guide for those who want to learn.  These two terms reflect whether the investor will increase or fall in value of the cryptocurrency.

Long Position

‘Long position’, which is called long position in Turkish, actually indicates the direction according to which a value will gain upwards, that is, value. The purpose of this gesture is to receive the value that you think will be valued in the future. It often evokes long-term investments. 

You may be interested in continuing for a long time when you feel that the price of a cryptocurrency is about to rise for a period of time depending on the time frame in which you are operating. For example, if you are trading on the daily chart and believe that the price will increase in the following days or even weeks, you can continue for a long time. Especially when it comes to Bitcoin, you will see many investors who prefer to stick to the “buy and hold” strategy. 

As an example of this, let’s say you buy BTC for $10. You got it by opening a long ‘long’ position for yourself. You expect BTC to be $12 after a certain period of time. If your expectation has been fulfilled, if you close your position at that time, you will have made a profit. But if the price of BTC drops to $8 and you still haven’t closed your position, you won’t make a loss even if you don’t make a profit. The reason why it is called long-term is that you have a time and chance to wait, and in this position you can wait for BTC to reach the level you want.

Short Position

‘Short position’, which is called short position in Turkish, actually describes the downward direction of any investment made, that is, it is also called pricing in such a way that its value will decrease. In short, if you think that any value you have will lose its price and you have made a sale, you have put yourself in a short position. 

As explained above, you should back up your decision with a sound market analysis. As a rule, short sellers open their positions when the market reaches the overbought level, that is, it has increased for a long time and the uptrend may be oversaturated. Also, when the price is unable to break a resistance level and begins to break out of it, it makes sense to go into the deficit.

In fact, opening a short position means that you are in debt in the cryptocurrency. In other words, when you borrow in the crypto money that you think will fall and close it when the value drops in the future, you will make a profit. Today you borrowed 1 BTC when it was worth $30,000. You owe 1 BTC and 1 BTC in your hands. Then you sold this 1 BTC from the market. You owe $30,000 and 1 BTC. When the market falls to $ 28 thousand, you will buy 1 BTC with $ 28 thousand of the $ 30 thousand in your hand and when you close your debt, you will not have $ 2 thousand and no debt. This is the logic of the short position. Of course, we have tried to explain in a simple way that there is a guarantee you give here and without taking into account the effects such as value change in it.