Technical Definition

Long / Short

A long position generally benefits when an asset rises in price, while a short position generally benefits when it falls.

By Crypto University Editorial
LeverageMarginFunding rate

✦ 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

Going long expresses positive directional exposure. Going short creates negative directional exposure, usually through borrowing, futures, perpetuals, or another derivative mechanism.

In Practice

“A trader shorts BTC at $100,000. If it falls to $95,000, the position has moved in the trader's intended direction.”

Dig Deeper

Funding rate

A funding rate determines periodic payments between long and short perpetual-futures traders to help keep the contract price near the spot price.

Margin

Margin is capital deposited or maintained to support a leveraged trading position.

Liquidation

Liquidation is the forced reduction or closure of a leveraged or collateralized position when required risk or collateral thresholds are breached.

Leverage

Leverage allows a trader to control a position larger than the capital committed to support it.