Beginner's Guide to Long and Short Contracts with Zero Foundation

Today, friends still ask me about this fundamental question—the core principles of short selling and going long. To help everyone understand intuitively, I have created a diagram.

1. Short Selling and Shorting Mechanism#

Short Selling: The cognitive judgment that market prices will decline
Shorting: The selling operation implemented based on the bearish judgment. Note that short selling cannot be done directly in the spot market and must be achieved through futures contracts or leveraged trading.

Short Selling Logic:
When investors believe that the current coin price is overvalued and will decline in the future, they profit through a reverse operation of "selling first and buying later." The specific process:

Pledge margin (e.g., 2 yuan) to borrow 1 token at the current price of 10 yuan from the platform
Immediately sell at the market price of 10 yuan to obtain cash
When the coin price drops to 5 yuan, buy back the token for 5 yuan to return to the platform
After deducting interest, net profit of 5 yuan from the price difference

Risk Warning:
If the coin price rises instead of falling, when the loss exceeds the margin threshold, it will trigger a liquidation, resulting in a total loss of principal.

2. Bullish and Going Long Strategy#

Bullish: The market judgment that prices will rise
Going Long: Achieving profit through "buy low and sell high" in positive trading, directly buying in the spot market is going long.

Long Position Example:
Taking SOL at a current price of 140U as an example:

Bullish, buy 1 SOL for 140U
When the coin price rises to 280U, sell
Achieve a net profit of 140U

Market Role Positioning:
Bulls and bears do not refer to individuals specifically but represent groups of investors with the same market expectations.

Core Summary:

Going Long = Bullish Buy → Sell at High Price
Short Selling = Bearish Borrowing → Buy Back at Low Price
Bulls = Bullish Investor Camp
Bears = Bearish Investor Camp

@Uncomprehending sol Original

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