What is Long and Short in Crypto Trading?

Cindicator Team -
What is Long and Short in Crypto Trading
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For most people brand new to crypto investing, or for those who are looking to enter the space, it can be daunting to view terms such as long and short, or bullish and bearish, having absolutely no clue how to use them effectively, let alone the meanings of each term.

Nowadays, it is quite simple to perform research on terms such as these, or perhaps even take a course or two on financial investing or trading. Quick help articles and videos are excellent resources that have been proven effective by steering newcomers in the right direction.

Nonetheless, understanding long and short in crypto trading is a critical concept to capture, especially if you plan on day trading and want to get the basics under your belt.

Recent example of a trader talking about Long/Short Positions

What is Long and Short in Crypto Trading?

A long in crypto trading, or a long trade, means that a crypto asset is getting purchased with the expectation of a value increase to then sell at a higher price later on. A short, or short trade, means that a crypto asset is being sold with the expectation of a drop in value to then buy back at a lower entry point.

Generally speaking, newcomers to the space are typically going to buy assets on an exchange with fiat currency, then hold on to it with the expectation of the price going up. At that point, they may decide to sell once the price delivers a certain amount of profit back to the investor. That right there, is a long trade.

Other investors who may sense the market sentiment going down, will end up selling all or a portion of their assets in expectation that the price will soon drop. Those investors will either buy the asset back at a lower price point, or simply walk away with the profits they may have already claimed during the short trade.

Choosing When to Go Long or Short in Crypto

Market conditions often signal whether to go long or short in crypto. Here’s how traders typically decide:

  1. Market Sentiment. Positive news, regulatory clarity, and institutional interest can indicate bullish trends. Conversely, negative news or market crashes may signal a bearish trend.
  2. Technical Analysis. Many traders rely on charts, patterns, and historical data to predict price movements.
  3. Macro-Economic Factors. Inflation, economic policies, and other global factors can influence crypto prices.

Key Differences Between Long and Short Positions in Crypto

Aspect

Long Position

Short Position

Objective

Profit from price increase

Profit from price decrease

Sentiment

Bullish

Bearish

Risk

Loss if price decreases

Loss if price increases

Ideal Market

Bull market

Bear market

Leverage Use

Often used to maximize gains

Frequently used to capitalize on price declines

When to Go Long in Crypto Trading

Crypto traders should go long on a coin or token when they anticipate the exchange rate to increase in value.

Going long is a great strategy when it comes to crypto trading, as long you have completed your due diligence either via technical analysis, fundamental analysis, or as mentioned above, by observing market sentiment. Perhaps you recently heard that a project you are interested in is partnering with another big project / company, or that they reached a long-awaited milestone. In that case, sentiment would be high which could lead to a rise in value of the blockchain’s token or native coin.

Long positions are typically sold once profit from rising value is reached, yet they are also held for years on end with expectation of astronomical growth alongside the evolution of the blockchain space. Some traders have been holding onto their Bitcoin since the early days in 2009 / 2010 when the coin was worth mere cents on the dollar. Going long was and still is a favorable choice for Bitcoin enthusiasts.

Community involvement is huge in crypto. If you happen to get heavily involved in a community such as Steem (which is now Hive) or the XRP Army, then going long on those coins are more likely since you will have developed a strong belief in the positive outcomes of those projects. In addition, opening long positions in coins that you are going to stake makes sense because the more you own, the more staking rewards you will earn.

Going Long in Crypto

When to Go Short in Crypto Trading

Crypto traders should short a coin or token if they anticipate the exchange rate to move down in value.

Has a certain crypto asset been going up in value for an extended period of time with little to no corrections? Perhaps the coin or token has not been able to surpass its resistance level and begins to decline away from it. Shorting that asset could prove beneficial since you would gain back even more of that asset by scooping it up at a lower entry point.

Short positions can capitalize on the cash from the sale used to re-purchase that same asset for a lower price. Shorting is also useful if you want to exit from a particular asset altogether since you believe it will crash and never recover. For instance, in the case of the Terra Luna crash, the stablecoin got de-pegged from the dollar creating a massive drop in value. Quickly shorting that asset would have helped protect your initial investment.

Crypto shorting can be risky, especially if the coin you re-invest in continues to drop in value without returning to pre-short levels. Technical analysis (TA) and fundamental analysis (FA) come into play here to help determine the types of drawdowns an asset has recovered from in the past. Viewing the history of uptrends and downtrends will provide a baseline to jump off of when making a short decision.

Going Short in Crypto

Here are some popular crypto trading platforms that support both long and short positions:

  • Binance. Known for leveraged perpetual futures trading with customizable leverage.
  • Bybit. A derivatives trading platform focused on perpetual contracts and leveraged shorting.
  • Kraken. A regulated platform with options for futures trading, catering to both beginner and advanced traders.

Where does Automated Crypto Trading come into play?

Some investors, even after learning about longs and shorts, are not interested in the type of grind that day trading entails. Multiple hours spent sitting in front of monitors each day is simply not practical for the average person out there. If that’s the case, then what is the cure? How can an investor take advantage of longs and shorts without lifting a finger?

The answer is found in automated crypto trading, or algorithmic trading bots; Sophisticated software designed to automate the trading process day and night, 7-days per week. This form of trading is open to newcomers and experienced traders alike, as it offers multiple ways to make gains depending on your level of risk tolerance.

A good example of an automated crypto bot is Stoic AI, an app that can be downloaded from the Google Play or App Store, connect to an exchange account, then place trades based on years of quant research and collective intelligence. In fact, one of the trading strategies inside Stoic is purposely called Long Short, as it is constantly in either a long or short position working directly inside the Futures market.

Stoic AI Automated Trading App

Long and Short Conclusion

Both long and short are critical terms for every crypto investor to be aware of. If day trading is the route you desire to take, then utilizing these positions will prove useful in your trading journey. If you don’t want to get involved in trading on your own, then an automated trading bot like Stoic AI could be a great choice for you moving forward.

With the evolution and innovations of Web3 comes the ability to streamline the trading process, providing traders with a hands-off approach to portfolio management. Crypto investing does not need to be difficult, as experts in the professional fields of finance and quantitative research have already put in the work so that you don’t have to.

Perhaps you are an ambitious individual and want to explore both manual and automated trading options. No problem! The team here at Cindicator believes that developing your own tailored trading skills will only enhance your opportunities for growth down the road.

Happy trading!

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Author:
Ken Melendez
✍️ Head of Content @ Cindicator
📊 Certified Bitcoin Professional
🔐 Blockchain Chamber - Chapter President

Who is Cindicator?

Cindicator is a world-wide team of individuals with expertise in math, data science, quant trading, and finances, working together with one collective mind. Founded in 2015, Cindicator builds predictive analytics by merging collective intelligence and machine learning models. Stoic AI is the company’s flagship product that offers automated trading strategies for cryptocurrency investors. Join us on Telegram or Twitter to stay in touch.

Disclaimer

Information in the article does not, nor does it purport to, constitute any form of professional investment advice, recommendation, or independent analysis.