Why Are Long Position Costs Different? An In-Depth Analysis of Long and Short Order Fee Differences

In digital asset trading, many traders notice an interesting phenomenon: the commission costs for long and short orders with the same contract size can differ. The reason behind this is not arbitrary; it is determined by the exchange’s risk management mechanisms and calculation logic. Let’s explore from a trader’s perspective why the costs for long and short orders are different.

Differences in Bankruptcy Price Calculations for Long and Short Positions

To understand the difference in commission costs, first, it’s essential to grasp a core concept: bankruptcy price (also called liquidation price). This is a theoretical price point set by the exchange to protect the system from risk. When market fluctuations reach this price, the system forcibly liquidates losing positions.

The calculation logic for bankruptcy prices differs between long and short positions, which is the fundamental reason for the variation in commission costs. For example, consider a BTCUSD contract with:

• Entry price: USD 7,500
• Contract size: 1,000 units
• Leverage: 20x

Long position bankruptcy price: 7,500 × [20 ÷ (20 + 1)] = 7,143 USD

Short position bankruptcy price: 7,500 × [20 ÷ (20 - 1)] = 7,894.50 USD

Notice that the short position’s bankruptcy price is farther from the entry price, resulting in a larger risk coefficient in the calculation.

How Opening Fees Affect Long Position Costs

The system calculates the closing fee as: (contract size ÷ bankruptcy price) × 0.055%

Since the bankruptcy price for longs (7,143) is lower than for shorts (7,894.50), the denominator is smaller, leading to a relatively lower closing fee. Conversely, the higher bankruptcy price for shorts results in a higher closing fee.

It’s important to clarify that the closing fee is not the actual final cost paid by the trader. The system only reserves a margin based on the worst-case scenario (forced liquidation at bankruptcy price). If traders close their positions proactively at better prices, the system refunds the excess margin to the user’s available balance.

In other words, because of the difference in bankruptcy price settings, the commission cost for longs tends to be slightly lower than for shorts, but this difference only manifests in the worst-case scenario and is not necessarily the actual cost incurred.

How Limit Order Prices Influence Long and Short Costs

Besides the difference in bankruptcy prices, the way order prices are set also impacts the final commission costs.

When traders use limit orders, the system determines how to calculate opening fees based on the order price relative to the current market price.

Scenario 1: Limit price better than market price

• Long: limit price set below current market price
• Short: limit price set above current market price

In this case, the system uses the limit order price to calculate the opening fee, affecting the total cost.

Scenario 2: Limit price worse than market price

• Long: limit price set above current market price
• Short: limit price set below current market price

Here, the system switches to using the best available market price from the order book to calculate the opening fee, which can produce different cost implications for longs.

Practical Application and Risk Management Perspective

Understanding these differences is crucial for traders’ actual operations. Due to the leverage calculation’s specifics, long positions generally show lower theoretical costs under the same conditions. However, this does not mean longs are always cheaper than shorts—the actual costs depend on your entry and exit prices and the real market execution.

Traders should note that the displayed order costs are the risk margins reserved by the system based on the bankruptcy price, not the final fees paid. As long as you close your position before reaching the bankruptcy price, the actual fees paid will be lower than the reserved margin.

In essence, the cost differences between long and short orders reflect the exchange’s risk assessment for different positions. This design helps maintain the stability of the trading system.