What are SHORT (Sell) positions?

SHORT (Sell) positions - is the process of selling an asset (Opening the position) at a high price, with the intent to re-buy the asset (Closing the position) at a lower price when the price of the asset decreases.

Profit or Loss made in this case is the difference between the price at which you Opened the position (sold the assets) and the price at which you Closed the position (rebought the assets).

An Example of a SHORT (Buy) position:

Trader opens a 1 BTC Short (Buy) position at the price of $4000. As stated previously 1:100 leverage allows trader to open this position using only 0.01 BTC of his own funds.

Let’s assume that later, the price of 1 BTC drops to $3900. Trader now closes the position.

Results:

  • Trader sold assets (Opened the position) at $4000 and bought them back at $3900 (Closed the position), leaving him with $100 profit!

  • The 0.01 BTC Margin that was used to open this position will now be “unlocked” and available for trader to use again.

  • The $100 profit is now added to trader's balance and can be further used for trading or withdrawn.

As seen from the example, SHORT positions are better in downtrend markets, when price of an asset is decreasing.