I just realized that many new people entering the market don’t really understand what long and short are, so I want to share some things I’ve learned.

There are two core concepts you need to understand: a Long order (buy) is when you expect the price to rise—you buy at a low price and then hope to sell higher to profit from the difference. Conversely, a Short order (sell) is when you believe the price will fall—you borrow assets from the exchange, sell at the current price, and then buy them back at a lower price to return to the exchange and keep the profit.

But what’s the strongest part of long and short? It’s leverage (Leverage). Instead of needing 100% of your money to trade, you only need to put up a small portion (called Margin). For example: if you have 1.000 USD with 1:10 leverage, you can open a position worth 10.000 USD. If the price moves in your favor by 10%, you profit 1.000 USD (double your capital). But if it moves against you by 10%, you lose everything—that’s called “liquidation” (cháy tài khoản).

In reality, trading long and short isn’t always easy. There are two major risks you need to avoid:

First is Margin Call—when losses exceed the amount of maintained margin, the exchange will warn you and automatically close your order if you don’t add more funds. The account goes to 0.

Second is Short Squeeze—the nightmare of short sellers. The maximum loss for a Long order is 100%, but a Short order can have unlimited losses because the price can rise without limit. When an asset suddenly surges, shorts will rush to buy back to cut their losses, which pushes the price up even more. The 2021 GameStop event is a classic example—wiping out billions of dollars of hedge funds.

Using long and short effectively requires knowing how to analyze. For Long orders, you should wait for positive news (low inflation, good GDP) or technical signals such as a piercing pattern, double bottom, MACD, and RSI. For Short orders, it’s the opposite—you should wait for a negative trend or patterns like double top, with MACD crossing downward.

There’s also a strategy called Hedging—not to speculate, but to protect your portfolio. For example: you hold 1000 shares of Apple long-term, but you’re worried the market will drop in the short term. Instead of selling everything, you can open a Short position on S&P 500 or even on Apple itself. The profit from the Short position will offset the decline in your portfolio, helping you stay safe through the storm.

You also need to know that what “long and short” means depends on the market. In Vietnam’s spot stock market there is no short selling, but in the derivatives market or Forex, there is. As for Crypto, everything runs 24/7 with extremely large price fluctuations, leverage up to 1:100—so the risk of liquidation (cháy lệnh) happens much faster and more harshly.

One more thing—when you hold a position overnight, you have to pay overnight fees (Swap/Funding Rate). If you trade for the long term over many weeks or months, these fees will erode your profits.

In summary, what is long and short? It’s a powerful tool to make profits in both rising and falling markets, but it also requires discipline and good risk management. Don’t rush—learn carefully before you start.