Long and short are the basics that anyone who wants to trade in the cryptocurrency futures market should know. In this article, I will show you how to open long and short positions, how to make money from it, and what risks you must consider.
For example, we will use the Bybit exchange. If you do not have an account yet, I recommend creating one. I am a partner of the exchange, and for registering using the link under the video, you will receive bonuses worth hundreds of dollars, which you can use to trade futures and withdraw the profits.
Preparing for futures trading
After registration, you should have funds on a single trading account. You can transfer them via the "Transfer" button. If you need to replenish the exchange balance, watch the previous video on my channel.
Next, we move on to the futures market: click "Trade", select the "Futures" section and select a trading pair, for example BTC/USDT. At the bottom of the terminal you will see two buttons - "Long" and "Short".
What is a long and how does it work?
A long position means that we expect the price of the asset to increase. For example, if you opened a long position on BTC/USDT and the price of Bitcoin started to increase, you make a profit. If the price falls below the entry point, the position becomes negative.
To enter into a deal, you can use:
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limit order - you set the entry price yourself;
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Market order - the deal is opened instantly at the current price.
After opening a position, you see PnL — this is your current profit or loss, which is updated in real time.
How to lock in profit on a long position
If the price has increased from your entry point and you want to lock in a profit, simply:
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close the deal with a market order;
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or place a limit order in the plus and wait for automatic closing.
Below in the terminal you can immediately see what profit you will receive when closing the position.
What is a short and how do they make money on it?
A short position works the other way around. Here we bet on a price drop. If you open a short and the asset price drops, you make money. If it starts to rise, the position goes into the red.
The mechanics of opening a short are the same: you choose the order type, the entry amount, and confirm the deal.
Liquidation price and main risks
When trading futures, it is very important to pay attention to the liquidation price. This is the level at which the exchange will automatically close your position due to a lack of margin.
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A long is liquidated if the price drops sharply.
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A short is liquidated if the price increases sharply.
Liquidation cannot be turned off, but it can be postponed:
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by adding funds to the balance;
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or opening deals for a small percentage of the deposit.
Conclusion
Long is a bet on growth, short is a bet on decline. These are basic futures trading instruments that offer the opportunity to earn in any direction of the market, but at the same time carry increased risks.
If you want to understand futures in more depth, there is a detailed video on my channel where I explain all the elements of the trading terminal and the nuances of trading.