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Many people new to futures trading get confused by terms like "going long" and "going short." Everyone understands spot trading—buy low and sell high to make money—but how do you make money when going short in a falling market? In futures trading on the official Binance website, you can freely choose to go long or short, giving you the opportunity to make money regardless of whether the market goes up or down. Downloading the official Binance App allows you to trade anytime. Apple users can check the iOS installation guide to install it.
What Does Going Long Mean
Going long (Long) means you are bullish and expect the price to rise. You "buy to open" a position at a certain price, and after the price rises, you "sell to close" the position, earning the price difference in between.
This logic is the same as spot trading: buy low and sell high. For example, if you go long on BTC at 60,000 and close your position when the price reaches 65,000, you earn a 5,000-point difference. If you use 10x leverage, your profit is also amplified 10 times.
The steps to go long are very simple. On the Binance futures trading page, select the trading pair and leverage multiplier, enter the quantity you want to open, and then click the "Buy/Long" button. This way, you have opened a long position. When you feel it's enough, click "Close Position" in the position list to end it.
When going long, you make money if the price goes up and lose money if the price goes down. If it drops too much and triggers a forced liquidation, your margin is gone.
What Does Going Short Mean
Going short (Short) means you are bearish and expect the price to fall. You "sell to open" a position at a certain price, and after the price drops, you "buy to close" the position, similarly earning the price difference in between.
The logic of going short might be a bit harder to understand. You can think of it this way: you first "borrow" a BTC and sell it at a high price, and when the price drops, you buy it back at a lower price and return it, with the difference being your profit. In futures trading, you don't actually need to borrow it; the system handles it automatically.
For example, if you go short on BTC at 60,000 and close your position when the price drops to 55,000, you earn a 5,000-point difference. Conversely, if the price rises, you lose money.
The steps to go short are also very simple. On the Binance futures trading page, after setting the parameters, just click the "Sell/Short" button. The operation to close the position is the same as going long.
Detailed Comparison between Going Long and Short
Profit and Loss Calculation
Profit/Loss for Long = Position Size × (Closing Price - Opening Price) ÷ Opening Price. Profit/Loss for Short = Position Size × (Opening Price - Closing Price) ÷ Opening Price.
Let's take a specific example. You use 1,000 USDT margin and 10x leverage to open a 10,000 USDT position.
In the case of going long: BTC rises from 60,000 to 63,000 (up 5%), your profit = 10,000 × 5% = 500 USDT. But if BTC drops from 60,000 to 57,000 (down 5%), your loss = 10,000 × 5% = 500 USDT.
In the case of going short: BTC drops from 60,000 to 57,000 (down 5%), your profit = 10,000 × 5% = 500 USDT. But if BTC rises from 60,000 to 63,000 (up 5%), your loss = 10,000 × 5% = 500 USDT.
Risk Characteristics
Theoretically, the maximum loss for going long is limited (the price drops to zero), but the maximum profit is unlimited (the price can rise infinitely). The maximum profit for going short is limited (the price can at most drop to zero), but the maximum loss is theoretically unlimited (the price can rise infinitely).
Of course, in actual futures trading, you have margin limits and a liquidation mechanism, so unlimited losses will not occur. However, going short does carry the risk of a "short squeeze"—when the price rises rapidly, short sellers are forced to close their positions, which pushes the price even higher.
Impact of Funding Rate
Going long and going short have opposite impacts regarding the funding rate. When the funding rate is positive, longs must pay shorts; when it is negative, shorts pay longs. Most of the time, the funding rate in the crypto market is positive, meaning it costs more to hold a long position long-term.
When Should You Go Long
It is suitable to go long when the market is in an uptrend. You can judge an uptrend by a few signals: the price is running above major moving averages (like MA50, MA200); candlesticks continuously create higher highs and higher lows; trading volume expands during upward movements.
Rallies driven by positive news are suitable for going long. For example, after news like the approval of a Bitcoin ETF, large institutions announcing purchases, or favorable regulatory policies, there is usually an upward wave.
You can consider going long when technical indicators flash buy signals. For example, RSI rebounding from the oversold region, a MACD golden cross, or the price breaking through a major resistance level.
Near key support levels is also a good place to go long. When the price pulls back to a major support level and shows signs of stopping its decline, you can try going long near the support level, with a stop-loss set below it.
When Should You Go Short
It is suitable to go short when the market is in a downtrend. Signals for a downtrend: the price is running below major moving averages; candlesticks continuously create lower lows and lower highs; trading volume shrinks during rebounds.
Declines driven by negative news are suitable for going short. For example, regulatory crackdowns, major projects running into trouble, or macroeconomic deterioration.
You can consider going short when technical indicators flash sell signals. For example, RSI falling back after entering the overbought region, a MACD death cross, or the price breaking below a major support level.
Near key resistance levels is also a good place to go short. When the price rebounds to a resistance level and faces rejection, you can try going short, with a stop-loss set above the resistance level.
Important Notes for Beginners on Going Long and Short
Do Not Trade Against the Trend
The easiest mistake for beginners to make is to go short in an obvious uptrend or go long in an obvious downtrend. They always feel that it has risen too much and should fall, or it has fallen too much and should bounce. The power of the trend is very strong, and trading against it has a very low success rate.
Do Not Go Long and Short Simultaneously
Some people think that opening both long and short positions at the same time can hedge risk. In fact, for beginners, doing this easily leads to losing money on both ends—the short position loses when it goes up, and the long position loses when it goes down. If you cannot clearly judge the direction, the best choice is not to open a position and just wait.
Be Aware of Short Squeeze Risks When Going Short
The cryptocurrency market frequently experiences short squeezes. When a large number of short sellers gather at a certain price level, whales might pump the price to force the shorts to trigger their stop-losses, and the buying orders from these stop-losses further push the price up, creating a chain reaction. You must set your stop-loss properly when going short.
Pay Attention to the Long/Short Ratio
Binance provides "Long/Short Ratio" data, showing the current proportion of longs to shorts in the market. When the long/short ratio is too extreme, it often means the market might reverse. For example, if 90% of people are going long, the market might be topping out; and vice versa.
Control Position Sizing
Whether going long or short, position control comes first. The risk of a single trade should not exceed 2% to 5% of your total funds. This way, even if you judge wrong, it won't be devastating.
Practical Strategies for Going Long and Short
Trend Following Strategy
Trade with the trend after confirming its direction. Go long in an uptrend, go short in a downtrend. You can use moving averages to judge the trend: go long when the short-term moving average is above the long-term moving average, and go short otherwise.
Breakout Trading Strategy
Go long when the price breaks above a major resistance level, and go short when it breaks below a major support level. It is best if the breakout is accompanied by trading volume, making the breakout more reliable.
Pullback Entry Strategy
In an uptrend, wait for the price to pull back to a support level before going long; in a downtrend, wait for the price to rebound to a resistance level before going short. The entry point for this strategy is better, the stop-loss is tighter, and the risk-reward ratio is higher.
Frequently Asked Questions
Do I need to own cryptocurrency to go short?
No. Going short in futures trading does not require you to actually hold the cryptocurrency. You only need USDT as margin to short any trading pair. This is the difference between futures trading and spot margin short selling.
Can I switch between going long and short at any time?
Yes. You can close a long position and open a short position at any time, or close a short position and open a long position. Binance also supports a "Reverse Position" operation, turning a long position into a short position with one click. But frequently switching directions easily wastes money on fees.
Which is more dangerous, going long or short?
Theoretically, going short is slightly more dangerous because there is no upper limit to price increases. However, in actual trading, with stop-loss protection, the risk is about the same for both. The bigger risk comes from the leverage multiplier and position size, rather than whether you are going long or short.
Can I only go long in a bull market?
No. Even in a bull market, there are pullbacks and consolidations. During pullbacks, you can go short to earn the price difference. However, going short in a bull market requires more caution because the overall trend is upward, leaving less margin for error for short positions.
How to judge whether I should go long or short currently?
Look at the major trend direction (using daily and weekly charts), look at key support and resistance levels, and pay attention to market sentiment and news. If these signals all point in the same direction, the win rate for the trade is higher. If the signals are confusing and contradictory, it is recommended to stay on the sidelines and not trade.