欧易编辑部

欧易编辑部

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A Beginner's Guide to Long and Short Contract Operations That Zero-Basis Learners Can Easily Master

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The document explains the basic concepts of short selling (做空) and going long (做多) in trading, using simple language and illustrative diagrams. ### Short Selling Mechanism - **Bearish Outlook**: Predicting a decline in market prices. - **Short Selling**: A trading strategy based on the bearish outlook, typically executed through futures contracts or leveraged trading. - **Process**: Investors borrow an asset (e.g., cryptocurrency) and sell it at a high price, planning to buy it back at a lower price to profit from the difference. - **Risk**: If the asset price rises instead of falling, investors may face margin calls and potential liquidation of their positions, leading to total loss of capital. ### Going Long Strategy - **Bullish Outlook**: Predicting an increase in market prices. - **Going Long**: Buying low and selling high directly in the spot market. - **Example**: Buying an asset at a lower price and selling it at a higher price for profit. ### Market Dynamics - Both long and short positions represent groups of investors with similar market expectations, and their interactions drive price fluctuations. ### Key Comparison | Concept | Operation Logic | Profit Condition | Risk Characteristic | |---------|------------------------|------------------|---------------------| | Going Long | Buy low → Sell high | Price increase | Capital depreciation risk | | Short Selling | Borrow & sell → Buy back low | Price decrease | Unlimited loss potential | The document also includes promotional information for new users on a trading platform and additional reading resources related to cryptocurrency trading.

Today, many friends are still asking about basic concepts, so I will explain the underlying logic of short selling and going long in the simplest way, along with diagrams to aid understanding.

1. Bearish and Short Selling Mechanism#

Bearish: Anticipating that market prices will decline
Short Selling: An active trading strategy based on bearish judgment. In the spot market, short selling cannot be done directly and must be achieved through futures contracts or leveraged trading.

Detailed Explanation of Short Selling:
When investors believe that the current coin price is inflated and predicts that the future price will drop, they adopt an "borrow first, repay later" arbitrage model:

  1. Pledge margin (e.g., 2U) to borrow 1 coin worth 10U from the platform
  2. Immediately sell at market price of 10U to obtain funds
  3. When the coin price drops to 5U, repurchase 1 coin to return to the platform
  4. After deducting interest, net profit is 5U (10U selling price - 5U repurchase price)

Risk Warning:
If the coin price rises to 15U, additional margin must be paid. When losses exceed the pledged assets, forced liquidation (margin call) will be triggered, resulting in a total loss of principal.

2. Bullish and Going Long Strategy#

Bullish: Anticipating that market prices will rise
Going Long: The act of buying low and selling high for profit; in the spot market, directly buying is going long.

Bullish Practical Case:
Taking SOL coin as an example:

  • Buy 1 coin at the current price of 140U
  • Hold until the price rises to 280U and sell
  • Net profit of 140U (excluding transaction fees)

Essence of Market Roles:
Bulls and bears do not refer to individuals but represent groups of investors with the same market expectations. The bull-bear game constitutes the fundamental logic of market price fluctuations.

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Core Point Comparison:

ConceptOperational LogicProfit ConditionRisk Characteristics
Going LongBuy at current price → Sell at high pricePrice risesRisk of principal depreciation
Short SellingBorrow coin and sell → Repurchase at low pricePrice fallsPotential for unlimited losses

@Uncomprehending sol Original

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Extended Reading#

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