Understanding "short" and "long" in crypto trading is the key to truly start making money

In the crypto market, you’ve probably heard the terms “bull” and “bear.” Many beginners find these terms confusing or even confuse them. Actually, these two concepts are simply: one bets on rising prices, the other bets on falling prices. But to truly understand their operational logic and application methods, you need to put in some effort.

Starting with a simple example to understand

Suppose you are bullish on Bitcoin, believing it will rise from $61,000 to $75,000. The most straightforward approach is to buy directly and sell after the price increases. This is a “bull” — you are betting the market will go up.

But if you predict Bitcoin will fall and want to profit from the decline, what should you do? This is when the concept of “bear” comes into play. You can borrow a Bitcoin from the exchange and sell it immediately at $61,000. When the price drops to $59,000, you buy it back at the lower price and return it to the exchange. The difference of $2,000 (minus borrowing fees) is your profit.

This logic may sound strange at first — how can you sell first and buy later? But this is the core meaning of a bear: using leverage to profit from falling prices.

Why are they called “bull market” and “bear market”? Is there a story behind the names?

In the crypto trading circle, “bull” corresponds to “bull,” and “bear” corresponds to “bear.” These are not random names.

A bull’s horns are pointed upward, symbolizing an upward trend. So traders who are optimistic are called “bull market” participants or “bulls.” They believe the market will rise, so they buy assets to increase demand.

A bear’s claws swipe downward, symbolizing a decline. Pessimistic traders are called “bear market” participants or “bears.” They expect prices to fall and exert downward pressure by selling. Interestingly, this metaphor appeared as early as 1852 in the “Merchant’s Magazine and Commercial Review,” indicating that this concept has a history of over 170 years.

How futures contracts help you open long and short positions

In the spot market, you can only buy assets. But entering the futures market changes the situation.

Futures are derivatives that allow you to profit from price movements without actually owning the asset. In the crypto market, the most common are:

Perpetual Contracts: No expiration date; you can hold or close positions at any time.

Cash-Settled Contracts: After trading, you do not receive the actual asset, only the difference between opening and closing prices.

Buying futures can open a long position, while selling futures can open a short position. But be aware that most platforms require you to pay a “funding rate” every few hours — this is the spread between the spot and futures markets. This fee directly affects your final profit.

Using hedging strategies to control risk

The smartest traders not only take one-sided positions but also know how to use “hedging” to manage risk.

For example, you buy 2 Bitcoins, expecting it to rise from $30,000 to $40,000. But you also consider the possibility of an unexpected decline. At this point, you can open a short position to hedge the risk.

If Bitcoin rises to $40,000:

• Long profit: (2 × $10,000) = $20,000
• Short loss: (1 × $10,000) = $10,000
• Net profit: $10,000

If Bitcoin drops to $25,000:

• Long loss: (2 × -$5,000) = -$10,000
• Short profit: (1 × $5,000) = $5,000
• Net loss: -$5,000

This way, you reduce your maximum loss from $10,000 to $5,000. The cost is that your potential gains are also halved.

Hedging is essentially “using part of your profit to buy insurance.” Beginners often make the mistake of opening two equal but opposite positions, thinking they can completely eliminate risk. In reality, this results in profits and losses canceling each other out, and you end up paying double trading fees, ultimately losing money.

Leverage amplifies gains and risks

Many people enter the futures market to use leverage. Leverage allows you to control large positions with a small amount of capital, potentially increasing gains. But the problem is, risks are also magnified proportionally.

When you trade with borrowed funds, the platform requires you to maintain a certain margin (collateral). If the market moves sharply and your margin is insufficient to support your position, the platform will send a “margin call.” If you do not add funds in time, your position will be forcibly liquidated — that is, “margin called.”

To avoid liquidation, you need to:

• Regularly monitor your collateral level
• Avoid over-leveraging
• Learn risk management and set stop-loss points

Going long is easier, going short is more difficult

In actual trading, long positions are relatively easy to understand and execute — just buy and wait for the price to rise. But executing a short position is much more complex:

1. Shorting involves borrowing mechanisms, making the process more complicated
2. Prices tend to fall faster and more violently than they rise, making prediction difficult
3. Shorting psychologically goes against human intuition (people are naturally optimistic)

So even if you fully understand the logic of shorting, psychological biases can cause difficulties in actual operation.

Summary: Long and short, options are in your hands

The core of crypto trading is to establish positions based on your price predictions. If you expect prices to rise, go long; if you expect them to fall, go short. Using futures, hedging, leverage, and other tools, you can implement various trading strategies flexibly.

But always remember: these tools amplify gains as well as risks. Inexperienced traders rushing to use high leverage often end up losing all their capital. The true winners are not the most aggressive, but those who survive the longest. Start small, accumulate experience gradually, and learn to switch flexibly between long and short positions — this is the right way to survive long-term in the crypto market.