Short and long positions are two technical terms used to describe when a particular cryptocurrency will increase or decline.
For the beginner, they might be misled by these terms. However, this is one of the many industry jargon cryptocurrency traders use frequently. Longs and shorts might be technical words. They are essential to trading cryptocurrencies. For the sake of beginners in the cryptocurrency trading world, we shall be explaining these terms.
Summarily, short and long positions are used to describe the two possible directions of the price needed to create profits. By a long position, a trader in cryptocurrencies expects the price to go up from a certain point. In this situation, the trader has gone “long” or purchases this cryptocurrency. On the other hand, the short position means that the trader expects the price to go down from a certain point – this means the trader has gone “short” or sold the cryptocurrency.
Whereas for spot exchanges, it is typical to either sell or buy; however, it is possible to either go short or long without selling or buying your cryptocurrency. You can do this on derivatives exchanges which provide options, futures, plus many other derivatives products. If these derivatives are traded, the trader is exposed to cryptocurrencies through short and long positions without having or dealing with anybody.
At what time should the long position be opened?
It is expected for traders to go longer each time they think that the cryptocurrency price goes up.
People might want to go long when they feel that the cryptocurrency price is looking to increase for some time. However, this will depend on the particular time frame that the trader is working. For instance, when buying and selling on the time frame and think that there will be a price increase in the oncoming weeks or days, then going long might be the thing to do. This means that you get to purchase the asset through the spot exchange, or you could open up a long position through options, futures, and many other derivatives contracts.
Indeed, this decision has to be supported by a specific type of technical or fundamental analysis. For instance, when you see that a particular blockchain project just obtained a big-ticket partnership or is in the process of undergoing a vital upgrade, you might want to go the long position with the long token. Then again, to fully understand the sentiment of the market, you will need to be very active on social media channels. On the other hand, moreover, you might search for patterns using the charts to see, for example, if the price has risen above a specific resistance line, which might mean the growth of an uptrend.
Irrespective of the nature of analysis you depend on, you should be optimistic about the price increases when planning to go long. If you don’t, you could find yourself opposing the market.
Cryptocurrency is not like foreign exchange pairs that do not have any long-term target. Instead, they are more similar to company shares since they are typically traded against traditional currencies, especially the U.S. dollar. Cryptocurrencies usually try to increase in value. This is why most crypto investors like to buy and hold cryptocurrency, especially in the case of Bitcoin.
At what time should Bitcoin traders go short?
On the other hand, if they think that the cryptocurrency price will ever decrease; traders are expected to go short. They might be interested in a particular cryptocurrency when they are expecting the price to decline.
The way it is explained above will need a reliable market analysis to make this decision. Following the rule, short-sellers usually open up positions if the market gets to an overbought state – that is, there has been an increase for some time, and there might have been a super saturation of the uptrend.
Whereas the cryptocurrency industry is still in its infancy, Bitcoin (BTC) and other Altcoins usually show steep fluctuations without having any fundamental analysis supporting these moves. This is one reason that makes this process of analysis somehow tricky. But, you need to know every one of the factors affecting the market before going short or long.
At what time can are you expected to go, either short or long?
Traders can be able to go short or long on any cryptocurrency trading platform. Technically, traders can open both short and long positions on any cryptocurrency platform that offers spots or derivatives trading functions.
Traders typically choose reputable and popular platforms like Binance, eToro, or Coinbase, and others. Coinbase is known as the biggest crypto exchange in the USA, whereas Binance is among the most rapidly growing cryptocurrency exchanges across the world. The platform offers a broad collection of services and features, such as options, futures, spot, and over-the-counter services.
It is essential to state that Binance and Coinbase, plus every other well-used exchange, could appear too complex and technical for beginners. People who are just getting into the crypto business and are looking for some simple experience can try Changelly PRO. Changelly PRO is a straightforward platform that comes with an intuitive terminal and dashboards. But, this platform is not meant for beginners only – experienced traders also have the option to open up both short and long positions using Changelly Pro because this terminal has tools and perks, such as multicurrency, multiple order types, and security layers, plus others.
How margin trading enhance short and long positions
Margin trading enhances the possible results for both the short and long positions position using leverage – that is, borrowed funds.
If the cryptocurrency is in a state of volatility, it could be lucrative to either go short or long. However, professional crypto traders could opt for the margin trading option. They have the potential to increase the possible profits many times. The inherent risks are also expanded to the same level, which means that people should be careful when using margin trading.
With margin trading, you are expected to trade with leverage, which is very important for both short and long positions. Margin accounts make use of funds made available by third parties – for example, other traders or exchange platforms that are given some incentives for contributing funds. This means that you could put in a large amount through leveraging positions and increase the possibility of making a profit many times.
For beginners looking to dabble in the world of cryptocurrency, they might stumble on some technical words such as long and short positions. These are terms used to describe certain tendencies in the markets and must be understood for faster and more profitable cryptocurrency investment.