Types of Trade in crypto.
In cryptocurrency trading, short trades and long trades represent two opposite strategies based on the trader’s expectations of the market's direction:
1. Long Trade
Definition: A long trade involves buying a cryptocurrency with the expectation that its price will increase over time.
Objective: To sell the asset later at a higher price, making a profit from the price increase.
Example: If Bitcoin is priced at $30,000, you buy it expecting the price to rise to $35,000. When it reaches $35,000, you sell it and make a profit.
Used When: The market trend is bullish (prices are expected to rise).
Risk: If the price drops instead of rising, the trader incurs a loss.
2. Short Trade
Definition: A short trade involves borrowing and selling a cryptocurrency that the trader does not own, with the expectation that its price will decrease.
Objective: To buy back the asset at a lower price and return it to the lender, keeping the difference as profit.
Example: If Ethereum is priced at $2,000, you borrow and sell it. If the price falls to $1,800, you buy it back and return the borrowed amount, making a $200 profit.
Used When: The market trend is bearish (prices are expected to fall).
Risk: If the price rises instead of falling, the trader has to buy it back at a higher price, leading to a loss.