Recently, when explaining trading concepts to beginners, I found that many people are still a bit confused about the terms "long" and "short." These two concepts appear very frequently in crypto trading, but not many truly understand what "short" means.

Let's start with where these terms come from. Interestingly, the earliest recorded use of these terms was in a business magazine in 1852. As for why they are called "long" and "short," one explanation is that it relates directly to their trading characteristics. "Long" positions usually refer to bullish positions because prices tend to rise over time, and these positions are held for the long term. Conversely, "short" positions are different—they bet on the price falling and are usually executed more quickly.

So, what exactly does "short" mean? Simply put, it means a trader expects an asset's price to decline, so they borrow the asset from an exchange and sell it immediately at the current price. When the price drops, they buy back the same amount of the asset at a lower price and return it to the exchange. The difference between the selling and buying price is their profit. For example, if you think Bitcoin will drop from $61,000 to $59,000, you borrow one Bitcoin and sell it right away. When the price falls to $59,000, you buy it back and return it to the exchange. The $2,000 difference (minus borrowing costs) is your profit.

"Long" is much easier to understand—buy an asset and wait for the price to go up. If you believe a token currently priced at $100 will rise to $150, you buy it now and hold. Your profit is the difference between the selling price and the purchase price.

Both of these operations happen behind the scenes on trading platforms and can be completed within seconds. For users, it’s just a matter of clicking a few buttons.

The market terms "bull market" and "bear market" are based on this. Bull traders believe the market will rise; they open long positions and buy assets, increasing demand. The word "bull" refers to using its horns to push things upward. Bear traders, on the other hand, expect prices to fall; they open short positions and sell assets, pushing prices down. The "bear" is characterized by claws pressing downward.

If you want to reduce risk, hedging is a good strategy. Simply put, it involves opening opposite positions simultaneously. For example, if you hold two Bitcoin long positions and also open one Bitcoin short position, then if the price rises from $30,000 to $40,000, your net profit is (2 - 1) × (40000 - 30000) = $10,000. But if the price drops to $25,000, your loss becomes (2 - 1) × (25000 - 30000) = -$5,000. This way, your risk is halved. However, the cost is that when the market moves as you expect, your profits are also halved due to the hedge.

What role do futures play here? Futures are derivatives that allow you to profit from price movements without actually holding the asset. In crypto, the most common are perpetual contracts, which have no expiration date—you can hold them as long as you want. Buying futures to open long positions, selling futures to open short positions. But note that holding futures positions requires paying financing rates, which compensate for the price difference between spot and futures markets.

Another important concept is liquidation. When you trade with borrowed funds, if the asset price fluctuates sharply and your margin becomes insufficient, the platform will forcibly close your position. The platform will first send a margin call; if you don’t add funds, and the price hits a certain level, your position will be automatically liquidated. To avoid liquidation, you need to learn risk management and monitor your margin levels carefully.

In summary, longs and shorts give traders flexibility—you can profit from both rising and falling markets based on your judgment. But these tools also carry additional risks, especially when using leverage to amplify positions. Borrowed funds can increase profits but also magnify losses. So, before using these strategies, make sure to do your homework and understand where the risks lie.