What is the reason for the difference in trading costs between going long and going short?

Traders often notice that the margin costs for long and short positions of the same contract size are not exactly the same when placing orders. Behind this seemingly subtle difference lies the risk management logic of the trading platform. What factors cause the cost calculations for long and short positions to differ? The main reasons stem from two aspects: the difference in bankruptcy prices and the way limit order prices are set.

How the Bankruptcy Price Difference Determines Fee Costs

To understand why the costs for long and short orders differ, it’s essential to first grasp the concept of the “bankruptcy price.” When a trader opens a position, the system pre-calculates a bankruptcy price based on parameters such as leverage and entry price—this is the liquidation point under extreme market conditions.

The calculation methods for bankruptcy prices differ between long and short positions, directly leading to differences in closing fees. For example, consider a BTCUSD contract with an entry price of USD 7,500, a contract size of 1,000, and 20x leverage:

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

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

As seen, under the same leverage, the bankruptcy price for a short position is higher, while for a long position it is lower. This is because the risk parameters faced by short positions differ from those of longs. The system then uses this bankruptcy price to calculate the closing fee:

Closing fee = (contract size ÷ bankruptcy price) × 0.055%

Since the bankruptcy price for shorts is higher, the resulting closing fee calculation will be slightly lower. Conversely, for longs, with a lower bankruptcy price, the fee tends to be higher.

It’s important to note that the system’s reserved closing fee is only a theoretical worst-case estimate—covering costs in extreme market volatility or forced liquidations. In practice, most traders close positions proactively at take-profit or stop-loss points. If there is remaining margin in the account, this reserved fee is refunded to the available balance.

How Order Price Placement Affects Opening Costs

Beyond the bankruptcy price difference, the position of the limit order price set by traders also impacts the opening fee and overall order costs. When calculating the opening fee, the system considers the relative position of your order price compared to the current market price and applies different calculation methods accordingly.

When the order price is better than the market price (for longs: order price below market; for shorts: order price above market)

The system directly uses your set order price to calculate the opening fee. This means that placing an order at a more favorable price results in a lower fee basis, thus reducing the total order cost.

When the order price is worse than the market price (for longs: order price above market; for shorts: order price below market)

The system uses the best available market price from the order book (usually the best bid or ask) to calculate the fee. In this case, traders cannot lower costs by setting more aggressive prices, as the system defaults to the current best executable price.

Understanding the System Design Logic Behind These Differences

The reason why long and short order costs differ fundamentally reflects the derivatives trading platform’s risk assessment and capital requirement differences for each position type. Short positions carry different risk profiles in extreme market conditions compared to longs. The platform’s use of different bankruptcy price calculations ensures consistent risk management across both directions.

For traders, understanding these cost calculation principles can help in more accurately assessing trading expenses and making more informed strategic decisions. Whether going long or short, mastering how order costs are computed is key to improving trading efficiency.