Today, a friend surprisingly asked me this basic question—what is the principle of shorting and going long? I specially created this image to help everyone understand.
1. Bearish and Shorting#
Bearish: Refers to the belief that the market will decline.
Shorting: A selling action taken based on bearish expectations. In the spot market, shorting cannot be done directly, but it can be achieved through futures or contract leverage trading.
Short seller: Refers to investors who, despite the current high price of a cryptocurrency, hold a pessimistic view of the future of the cryptocurrency market, expecting the price to fall. Therefore, they sell the cryptocurrency they hold at the current price and buy it back after the price drops, thus earning a profit from the price difference. This operation of selling first and buying later is the strategy of short selling.
For example: Suppose a cryptocurrency is currently priced at ten yuan, and you predict that its future price will drop. However, you only have two or three yuan, which is not enough to buy one cryptocurrency. At this point, you can use this two yuan as collateral to borrow one cryptocurrency from a third party (such as an exchange). After borrowing the cryptocurrency, you immediately sell it on the market for ten yuan, obtaining ten yuan in cash. However, this ten yuan cannot be withdrawn directly because you have not yet returned the borrowed cryptocurrency.
When the price drops to five yuan as expected, you use five yuan from the ten yuan cash to buy back one cryptocurrency and return it to the third party. After repaying, the remaining five yuan is your profit (excluding interest). This is the process of making a profit from shorting.
However, if the price does not drop but instead rises, you will incur a loss on your collateral. If the loss exceeds the collateral's capacity, a liquidation will occur, and you may lose all your principal.
2. Bullish and Going Long#
Bullish: Refers to the expectation that the market will rise.
Going long: In the spot market, buying actions are considered going long. By buying at a low price and selling at a high price after the price rises, earning a profit from the price difference, all fall under going long.
Bull: Refers to investors who are optimistic about the cryptocurrency market's prospects, believing that the price will rise, and therefore buy cryptocurrencies at the current price, selling them later when the price rises to earn a profit from the price difference. This operation of buying first and selling later is the strategy of going long.
For example: The current price of SOL is 140 U. You are optimistic about this cryptocurrency, so you spend 140 U to buy it. Later, when the price of SOL rises to 280 U, you sell it and earn a profit of 140 U. This process is going long.
In fact, bulls and bears do not refer to specific individuals or institutions, but rather to a group of people holding similar market expectations.
The above is a detailed explanation of going long and shorting, as well as bulls and bears.
In summary: "Going long" refers to being optimistic about the market rising, buying low and selling high to earn a profit; "shorting" refers to being bearish on the market, borrowing cryptocurrencies to sell and then buying back after the price drops to earn a profit. Bulls represent bullish investors, while bears represent bearish investors. The two reflect different market expectations.
@Uncomprehending sol Original
OKX Activities This Month#
New users registering on OKX this month can receive a blind box or Dogecoin gift package. Domestic users can register directly: Click here–>Go to the official website to register an OKX account, some regions may require a VPN or Alternative link
🔥 Solving the Issue of Accessing OKX Exchange in China#
Many exchanges' original domain names may be blacklisted, or access speed may be affected due to servers being located overseas. For ordinary users, this situation often leaves them feeling helpless, even questioning whether there is a problem with the exchange itself. In fact, this is more due to the network environment rather than a service interruption on the platform itself. To address this situation, exchanges like OKX and Binance typically update their backup domain names regularly to ensure users can continue to access the official website through alternative addresses.
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- OKX Backup Domain Overseas OKX - Requires VPN or Alternative link
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- Binance Backup Domain Binance
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- Bitget Backup Domain Bitget
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- Gate Backup Domain Gate.io
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