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Beginner's Quick Guide to Long and Short Contract Operations

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The document discusses two trading strategies: short selling (空头) and long buying (多头). 1. **Short Selling (空头)**: This strategy is based on the expectation that market prices will decline. Investors borrow assets at a high price, sell them, and then aim to repurchase them at a lower price to profit from the difference, minus borrowing costs. For example, if a token is priced at 10 units, an investor can borrow and sell it, then buy it back at a lower price (e.g., 5 units) to make a profit. 2. **Long Buying (多头)**: This strategy anticipates that market prices will rise. Investors buy assets at a low price and sell them at a higher price to realize gains. For instance, if an asset is purchased at 140 units and later sold at 280 units, the investor achieves a 100% return. **Core Summary**: - Long buying: Expectation of price increase → Buy low → Sell high. - Short selling: Expectation of price decrease → Borrow and sell → Buy back at a lower price. - Participants in the market can be categorized as either bullish (long) or bearish (short) based on their expectations.

1. Analysis of Short Selling and Shorting Mechanisms#

Short Selling: Expectation of a market downturn
Shorting: A trading strategy implemented based on a bearish judgment. Direct short selling is not possible in the spot market and must be achieved through futures contracts or leveraged trading.

Principle of Short Selling:
Investors believe that the current cryptocurrency price is overvalued and predict a future decline. They arbitrage through the "borrow first, sell later - buy back at a low price" model:

  1. Borrow and sell digital assets at the current high price
  2. Buy back at a low price after the cryptocurrency price drops
  3. Profit from the price difference (interest on borrowing must be deducted)

Practical Case:
A certain token is currently priced at 10 yuan, and the investor pledges 2 yuan as margin to borrow 1 unit of the token:

  • Immediately sell to obtain 10 yuan (funds in a frozen state)
  • If the price drops to 5 yuan, use 5 yuan to buy back and return
  • After unfreezing the funds, net profit is 5 yuan (interest not accounted for)
  • If the price rises to 15 yuan, additional margin must be provided, or liquidation will occur

2. Detailed Explanation of Bullish and Long Strategies#

Bullish: Expectation of a market upturn
Long: A basic trading strategy to gain price difference profits through "buy low, sell high"

Bullish Operation Model:
Investors are optimistic about the asset's appreciation potential and execute the "buy at current price - sell at high price" strategy:

  1. Buy the target asset at the current price
  2. Sell at an opportune time after the price rises
  3. Achieve capital appreciation

Practical Case:
When SOL is priced at 140 U, a position is established:

  • Close the position when the price rises to 280 U
  • Achieve a 100% return (140 U profit)

Note: Both bulls and bears are not specific individuals but a collective of investors with similar market expectations.

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Core Summary:

  • Long: Expectation of an upturn → Establish position at low price → Close position at high price
  • Short: Expectation of a downturn → Borrow and sell → Buy back at low price
  • Bull: Market participants who are bullish
  • Bear: Market participants who are bearish

@Unintelligible sol Original

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Further Reading#

2025 China's Top Ten Digital Asset Trading Platforms Authority List Released 🔥【Must-Have for Collection】

【Decrypting the Wealth Code in the Crypto Circle】From Zero to Millions and then to Debt Rebirth: My Crypto Investment Revelation

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