When starting to trade crypto, the most confusing concepts are Long and Short. I see many beginners still don't fully understand how these work, and how investor psychology during market movements can affect prices. Today, I want to share some things I’ve learned from my trading experience.

First, it’s important to understand the concept of Position or stance. Simply put, it’s your holding status for a particular currency pair in the market. There are two main types: long position and short position. A long position (Long Position) is when you have invested money to buy a cryptocurrency pair, expecting to profit when the price rises. Conversely, a short position (Short Position) is when you predict the price will fall and place a short sell order.

Long action – Buy – occurs when a trader purchases a cryptocurrency pair hoping to sell it later at a higher price. The profit here comes from the market’s price increase. When you forecast that the price will go up, the first step is to buy. However, you don’t always get a good entry price, so most traders split their funds to buy at multiple levels, so that when the price actually rises, they can close each long position and realize profits. A simple way to understand: Buying EUR/USD = Buying EUR + Selling USD.

What about Short? Shorting appears when a trader sells a currency pair short, predicting it will decrease in value. In this case, profit comes from the market’s decline. When you expect the price to drop, you place a sell order on the currency pair you believe will fall in the future. However, you don’t own the pair outright, so you use a margin account with leverage to execute the short sell. When the price indeed drops, you close the short positions and take the profit. The formula: Selling EUR/USD = Selling EUR + Buying USD.

Interestingly, investor psychology greatly influences the market. If most investors share the same view that prices will rise, they will all rush to buy. When the number of long positions becomes too high, the exchange rate can spike rapidly in a very short time. Conversely, if everyone expects a sharp decline, they will all short sell. When short positions are too numerous, the exchange rate can plummet quickly.

Long and Short positions are often associated with bullish and bearish speculation. Therefore, it’s crucial to understand their nature and set stop-loss orders in each trade to avoid unnecessary losses. The initial action of buying or selling is called opening a position, and it ends when you close the position. Until you close the trade, all profits and losses are only on paper. All buy and sell values are converted and reflected based on the currency in your account.

Understanding Long and Short will help you trade crypto more intelligently. If you find this article helpful, please share it with your friends so everyone can get a clear grasp.