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A Beginner's Guide to Understanding Long and Short Positions in Contracts Quickly, Even with Zero Foundation

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The document discusses the core concepts of short selling (做空) and long buying (做多) in trading, along with practical examples and risk warnings. ### Short Selling (做空) - **Bearish Outlook**: Predicting a market downturn. - **Strategy**: Sell assets based on the expectation of a price drop, often using futures or leveraged contracts. - **Example**: Selling an asset at 10 units, borrowing against collateral, and repurchasing it at a lower price (5 units) for profit. - **Risk**: If the price rises instead, losses can exceed collateral, leading to forced liquidation. ### Long Buying (做多) - **Bullish Outlook**: Anticipating a market upturn. - **Strategy**: Buy low and sell high to profit from price increases. - **Example**: Purchasing an asset at 140 units and selling it at 280 units for a 100% return. ### Market Dynamics - Both short and long positions are taken by groups of investors with similar market expectations. ### Summary Table | Strategy Type | Market Expectation | Operation Logic | Profit Source | |---------------|--------------------|-----------------------|-----------------| | Long | Bullish | Buy low → Sell high | Positive price difference | | Short | Bearish | Sell high → Buy low | Negative price difference | The document also includes promotional offers for new users and links to additional reading on cryptocurrency trading platforms and experiences.

Today, friends are also consulting basic concepts—the core logic of short selling and going long, with special diagrams to aid understanding.

1. Bearish and Short Selling System#

Bearish: Predicting that the market will enter a downward channel
Short Selling: An active trading strategy based on bearish judgment. Direct operations in the spot market are not possible and must be achieved through futures/contract leverage.

Detailed Explanation of Short Selling:

  1. Investors believe the current coin price is overvalued and predict it will decline in the future.
  2. Immediately sell off held assets (or borrow coins through collateral).
  3. After the coin price drops, repurchase to close the position and earn the price difference.

Practical Case Analysis:

  • Current price 10 yuan/coin, collateral of 2 yuan to borrow 1 coin.
  • Immediately sell at the market price of 10 yuan to obtain cash.
  • When the coin price drops to 5 yuan:
    ▶ Spend 5 yuan to repurchase 1 coin to return.
    ▶ Net profit of 5 yuan (before deducting interest).

Risk Warning:
If the coin price rises against expectations, the margin will incur losses. When losses exceed the collateral amount, forced liquidation (margin call) will be triggered, and the principal will be reduced to zero.

2. Bullish and Going Long Mechanism#

Bullish: Predicting that the market will enter an upward cycle.
Going Long: A trading strategy that profits from buying low and selling high, applicable to spot/leverage markets.

Bullish Operation Logic:

  1. Investors are optimistic about the future trend of the underlying asset.
  2. Buy at the current price to establish a position.
  3. Sell for profit after the price rises.

Typical Case Demonstration:

  • Current price 140U to purchase SOL.
  • Hold the coin until it rises to 280U and then sell.
  • Achieve a 100% return (140U profit).

Essence of Market Roles:
Both bulls and bears are not specific individuals but a collective of investors with the same market expectations.

image

Core Summary:

Strategy TypeMarket ExpectationOperation LogicSource of Profit
Going LongBullishAccumulate at low price → Sell at high pricePositive price difference
Short SellingBearishBorrow coins to sell → Repurchase at low priceNegative price difference

@Uncomprehending sol Original

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