Main margin trading strategies: long and short positions

Margin trading opens up two main strategies for making a profit—regardless of whether the market is rising or falling. Long and short positions allow traders to profit from both upward and downward trends. Let’s understand how they work in practice and how to open them correctly.

What are long and short: main differences

A long position is a bet on the price of an asset increasing. When you open a long position, you borrow funds from the exchange to buy more cryptocurrency than your current balance allows. If the price indeed rises, you sell the asset at a higher price and make a profit.

A short position is the opposite strategy. It allows you to profit from a decline in the price. You borrow cryptocurrency (for example, BTC), sell it at the current price, and then buy it back at a lower price. The difference between the sale price and the buyback price becomes your profit.

A key feature of both strategies is the use of leverage. With 5x leverage, you can open a position five times larger than your own capital. This increases both potential profit and the risk of losses.

How a long position works: step-by-step example

Imagine you expect BTC’s price to rise. You have 10,000 USDT in your spot account. Here’s how to open a long position:

Initial conditions:

• Trading pair: BTC/USDT
• Current BTC price: 50,000 USDT
• Leverage: 5x
• Your balance: 10,000 USDT

Using 5x leverage, you can open a long position on 1 BTC. The system will automatically borrow an additional 40,000 USDT to supplement your 10,000 USDT to the full purchase amount (50,000 USDT).

Scenario development:

Two days later, BTC’s price rises to 52,000 USDT. You decide to close the position and sell 1 BTC for 52,000 USDT. Then you manually repay the loan of 40,000 USDT.

Profit calculation:

Profit = (52,000 − 50,000) × 1 = 2,000 USDT

This means that on your invested 10,000 USDT, you earned a profit of 2,000 USDT—20% of the initial capital. Without leverage, this same profit would be only 400 USDT on one BTC.

How a short position works: practical scenario

Now, let’s consider the opposite situation. You expect the BTC price to fall. You have the same balance of 10,000 USDT. Here’s how to open a short position:

Initial conditions:

• Trading pair: BTC/USDT
• Current BTC price: 50,000 USDT
• Leverage: 5x
• Your balance: 10,000 USDT

With 5x leverage, you can open a short position on 0.8 BTC. The system borrows 0.8 BTC from the lender and automatically sells it at the current price (50,000 USDT). Your account now shows 40,000 USDT (0.8 × 50,000), which combined with your 10,000 USDT totals 50,000 USDT.

Scenario development:

Two days later, BTC’s price drops to 48,000 USDT, as you anticipated. You buy back 0.8 BTC: 0.8 × 48,000 = 38,400 USDT. Then you return the borrowed 0.8 BTC.

Profit calculation:

Profit = 50,000 − 38,400 − 10,000 = 1,600 USDT

Similarly to the long position, you gained significant profit from a small price movement thanks to leverage.

Long vs. short: when to choose each strategy

Open a long position if:

• Technical analysis indicates an uptrend
• You see increasing buying volume
• Positive news about the project or the overall market
• Support levels are strengthening

Open a short position if:

• A downtrend is forming
• The price approaches resistance levels
• News emerges that could pressure quotes
• Trading volume is decreasing

Important reminder about risks

The examples above do not account for trading fees and interest on borrowed funds. These costs can significantly reduce your profit. Fees are usually charged when opening and closing a position, and interest on the loan accrues daily.

Additionally, be aware of the liquidation risk. If the price moves against your position too quickly, your position may be automatically closed, and you could lose part or all of your initial capital.

As of now (February 2026), BTC’s price is approximately 68,260 USD, allowing for scaling the examples to larger ranges, but the principles remain unchanged.

Conclusion

Long and short positions are powerful tools in margin trading, but they require careful approach. Successful trading depends on proper market analysis, risk management, and understanding all associated costs. Start with small positions, thoroughly test your strategy, and only then increase trade sizes.