What are Long & Short Positions in the Crypto Market?
There are terms that everyone who enters the cryptocurrency market has heard since day one, but they always confuse people. The two most intriguing terms are “long and short position”. These terms reflect that the value of units will increase or decrease in cryptocurrency trading. To put it briefly, if a currency is thought to rise, it is called a long position, if it is thought to fall, it is called a short position. For this reason, the term long position is used to buy, while the term short position is used when selling.
Long Position (Long Position)
To explain the term long position through a simpler example, you think that gold prices will rise, and you want to make more use of this opportunity. Let 1 gold bar be 1000 USD. Let’s assume that you only have 1000 dollar to invest. But you want to buy 3 bars of gold, not 1 bar of gold, thinking that gold will appreciate. For this reason, when buying gold, you buy 3 bars of gold with 1000 dollar. Even if you do not keep 3 bars of gold, you make a promissory note that you have 3 bars of gold. Later, if gold rises, you pay your debt and take your profit. However, if it falls, you do not make a profit and you may even lose all your money.
Therefore, in such specialized investments, you need to know how to read charts very well. In fact, we recommend that you follow the whole market closely, not just reading charts. Also, in some cases, even if you are doing all this, since the cryptocurrency market is volatile, even a statement made by an important political or economic figure can turn all this upside down. In this process, you may hear some investors say, “I’m long”.
Short Position
A short position is selling while the price is still high, assuming that the instrument you are investing in will fall. Again, if we go through the example, you have 1 bar of gold in your hand and you assume that gold will fall. You then sell your 1 bar of gold when the price is high and then buy gold again when the price of gold falls. Thus, you have both 1 gold bar and a profit. You may hear investors refer to this as “shorting”.
The examples given here are for illustrative purposes only. They are therefore completely independent of the market. If you want to earn by going long or short on a cryptocurrency exchange, you should make an assessment based on your own research. Then make your investments according to your own values.
To become a Bitcoin owner, you can exchange fiat money with another Bitcoin owner to buy Bitcoin from that person, or you can sell goods or services in exchange for Bitcoin, or you can buy Bitcoin from one of the approximately 2000 Bitcoin exchanges globally, which is an easier method.
As is well known, Bitcoin does not have a fixed value. Bitcoin prices are valued according to a free market economy, and although an average market price is set, everyone determines the value of their own Bitcoin. Bitcoin exchanges also work on this logic. We have compiled a few concepts that will be useful for you to survive on these platforms where buyers and sellers meet and to buy bitcoins at the best price.
Some Order Types on Bitcoin Exchanges
- Market Price: The price of cryptocurrency is based on supply and demand. The last price realized in that market is the market price.
- Market Order: It is an order type that is executed by specifying only the quantity without specifying the price. It is executed by matching the best price given by the counterparty.
- Limit Order: This is an order type where the price and quantity are determined by the person. The person can offer to sell or bid to buy their own cryptocurrency at any price. The price set must be in line with market conditions. Otherwise, there will be no buyer or seller to meet the limit order.
- Market Maker: A person or persons who place buy and sell orders in the market to ensure that prices are formed, and the market remains liquid.
- Market Taker / Market Buyer: The person or persons who fulfill the buy and sell orders placed in the market.
- Stop Order: When the market reaches a certain price level, a limit order is activated. It is used to prevent loss or guarantee gains when you cannot follow the market.
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