Recently, I’ve noticed that many people are still a bit unclear about the concept of short selling, so I’ll briefly explain what long and short positions are all about.

Let’s start with the risks, because that’s the most important part. When taking a long position, your maximum loss is actually quite clear: it’s the amount of capital you invested. For example, if you spend $20,000 to buy one Bitcoin, the worst-case scenario is losing that $20,000—you won’t lose more than that. But short selling is different; theoretically, the risk is unlimited. This is because asset prices can rise infinitely, and your losses can also grow without bound. That’s why short selling requires extra caution.

Now, let’s look at how to operate specifically. A long position is straightforward: buy the asset and wait for it to appreciate. You believe Bitcoin will rise to $25,000, so when it’s at $20,000 now, you buy in and wait patiently. Once the price goes up, you sell and pocket the difference—simple and direct.

For short selling, the logic is reversed. You borrow the asset from a broker, immediately sell it on the market, and then wait for the price to fall before buying it back to return to the broker. For example, you borrow 10 shares of a company’s stock at $100 each, sell them for $1,000. If the stock price drops to $80, you buy back the 10 shares for $800 and return them to the broker, making a $200 profit. It sounds pretty simple, but the problem is if the stock price doesn’t fall and instead rises to $120, your losses start to grow.

So, short selling is indeed a high-risk strategy. Many beginners are afraid to try it, and even experienced traders set strict stop-losses. Long positions are relatively friendlier, with manageable losses. If you’re still exploring these basic concepts, I recommend starting with long positions to get a feel for the market, and only consider short selling once you have enough experience.