Long / Short
A long position generally benefits when an asset rises in price, while a short position generally benefits when it falls.
✦ Key Insight
Understanding direction is essential when reading derivatives positions, funding rates and liquidation data.
✕ Common Misconceptions
Shorting can involve leverage and potentially large losses if price rises sharply.
Detailed Explanation
In Practice
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Funding Rate
A funding rate is a periodic payment exchanged between long and short traders in many perpetual futures markets. Its purpose is to help keep the perpetual contract price aligned with the underlying spot market.
Margin
Margin is the collateral a trader provides to open and maintain a leveraged trading position. It is not the same as the total value of the position.
Liquidation
Liquidation occurs when a leveraged trading platform forcibly reduces or closes a position because the trader no longer has enough margin to satisfy the required maintenance margin.
Leverage
Leverage allows a trader to control a position larger than the capital committed to support it.