When you first step into crypto, you realize there are two main things you need to understand: trading and holding. Among them, trading has many difficult-to-understand terms, and what long and short mean are actually two fundamental concepts that everyone must grasp.

First is the issue of position, or stance. Simply put, it’s the state of holding a certain amount of cryptocurrency or a currency pair under specific market conditions. There are two main types of positions: long and short. This is quite important because it determines how you make a profit.

Long is when you buy a currency pair with the expectation that the price will rise. You invest money, wait for the price to go up, then sell at a higher level to make a profit. But I realize that it’s not always possible to buy at a good price, so most traders split their funds to buy at different positions. When the price actually increases, you close your long positions earlier and take the profit. For example, buying EUR/USD = buying EUR + selling USD.

Conversely, short is when you sell a currency pair with the prediction that the price will fall. This method allows you to profit from a decline in price. But the problem is, you don’t have that currency in hand, so you need to use a margin account and leverage. When the price really drops, you close your short positions and take the profit. For example: selling EUR/USD = selling EUR + buying USD.

What’s interesting here is that what long and short actually mean is closely related to investor psychology. If everyone opens long positions at the same time, meaning they are all buying, the price will skyrocket. Conversely, if everyone short sells, the price will plummet uncontrollably. Therefore, understanding what long and short are helps you grasp market psychology.

I often advise friends that they need to set stop-loss orders in each trade to avoid unnecessary losses. The act of buying or selling at the start is called opening a trade, and ending it is closing the trade. Until you close it, profit or loss is only on paper. All of it will be converted and reflected based on the currency in your account when the trade ends.

Understanding what long and short are is the first step for you to trade more consciously, rather than just following your feelings. I hope this sharing helps you better grasp these two basic concepts.