Today, friends are still consulting about basic financial concepts, so here is a diagram explaining the core principles of short selling and going long.
1. Short Selling Mechanism and Operations#
Definition of Short Selling: Anticipating that market prices will decline
Essence of Short Selling: Active short selling behavior based on bearish judgment (requires the use of derivatives such as futures/contracts)
Analysis of Short Strategies
When investors determine that the current inflated coin price has room to fall, they take a reverse operation of "sell first - buy back later":
- Borrow the underlying asset (e.g., BTC) by mortgaging margin
- Immediately sell at market price to lock in the current price
- Buy back at a lower price after the coin price drops
- The difference minus interest is the net profit
Practical Case Demonstration
For a TokenX priced at 10U, the operation process is:
① Mortgage 2U margin to borrow 1 TokenX
② Immediately sell to obtain 10U cash (funds frozen)
③ When the coin price drops to 5U:
- Use 5U to buy back 1 TokenX to return
- Unfreeze the remaining 5U (net profit after deducting interest)
⚠️ Risk Warning: If the coin price rises against expectations, the margin will face forced liquidation risk.
2. Bullish Logic and Long Strategies#
Definition of Going Long: Expecting that market prices will rise
Essence of Going Long: Obtaining rising profits through spot purchases or leveraged long positions
Breakdown of Bullish Strategies
Investors implement "build position first - profit later" operations based on bullish judgment:
- Purchase the target asset at the current price
- Hold the coin until it rises to the target price
- Sell at a high price to realize capital appreciation
Practical Case Explanation
Taking SOL as an example:
- Entry price: 140U each
- Target price: 280U each
- Yield: 100% (excluding transaction costs)
💡 Market Consensus: Both bulls and bears represent different investor groups with varying market expectations.
Summary of Key Points#
| Operation Type | Market Expectation | Trading Logic | Source of Profit |
|---|---|---|---|
| Going Long | Bullish | Buy low, sell high | Positive price difference |
| Short Selling | Bearish | Sell high, buy low (borrow and return) | Negative price difference |
@Uncomprehending sol Original
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