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. Short selling cannot be done directly in the spot market and must be achieved through futures contracts or leveraged trading.
Detailed Explanation of Short Selling:
When investors believe that the current cryptocurrency price is inflated and anticipate a future price drop, they adopt an "borrow first, return later" arbitrage model:
- Pledge margin (e.g., 2U) to borrow 1 coin worth 10U from the platform
- Immediately sell at the market price of 10U to obtain funds
- When the coin price drops to 5U, repurchase 1 coin to return to the platform
- 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: A trading behavior that profits from buying low and selling high, where direct purchase in the spot market is considered going long.
Bullish Practical Case:
Taking SOL as an example:
- Buy 1 coin at the current price of 140U
- Hold the coin until the price rises to 280U and sell
- Net profit of 140U (excluding transaction fees)
Essential Nature of Market Roles:
Bulls and bears do not specifically refer to individuals but represent groups of investors with the same market expectations. The bull-bear game forms the basic logic of market price fluctuations.
Core Points Comparison:
| Concept | Operational Logic | Profit Condition | Risk Characteristics |
|---|---|---|---|
| Going Long | Buy at current price → Sell at high price | Price rises | Risk of principal depreciation |
| Short Selling | Borrow coin to sell → Repurchase at low price | Price falls | Potential for unlimited losses |
@Uncomprehending sol Original
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