Defining ‘Long’ and ‘Short’ Trade
- Long Trade
- Short Trade
The two most commonly used terms in cryptocurrency trading are long and short trade. In the financial sector, a long and short trade is the duration of the time for which investments are made. In trading, however, long and short positions are the decisions taken with buying and selling of the cryptocurrencies in response to price movement.
The high volatility of the cryptocurrency encourages traders to invest in the crypto market to make quick profits. A trader in the crypto market could earn from both the increase and decrease of the market by using spot and margin trading.
In long trade, the trader buys the cryptocurrency in hope that the asset price will rise in the future. A long position is one in which the trader buys a crypto token at a low price and then sells it at a high price to earn a profit.
When planning to go for long trade, investors should wait for the price to break above a strong resistance or should trade while there is an ongoing surge in prices, hoping that it will continue. Another option for the traders is to buy a cryptocurrency and hold it for a long duration. This option is not feasible for day traders.
In short trade, the trade bets on the slump in the market. When a trader believes that the market has reached its saturation or that the prices will fall in the future, they short sell the cryptocurrency. This is also known as short position or going short. In short trade, it is important to understand that a trader will ‘borrow’ and not ‘buy’ the cryptocurrency from a broker, that he believes would fall. He will then sell it so that he could later buy it at a lower price. This difference is what is earned by the trader in profit.
Where a long trade is straightforward, a short trade can be very complex. In short, when the trader short sells, he is actually buying the quote currency. For example, Bitcoin is being sold by investors so that they can buy US Dollars or any other crypto token. When the prices of the cryptocurrency are expected to fall, traders short their position, meaning they sell the crypto token and buy back later when the prices have fallen.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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