Long position – what is it in cryptocurrency trading?
Traders engage in numerous transactions on a daily basis. Buying and selling cryptocurrencies can be a profitable activity when based on technical analysis. In the hopes of price appreciation, a trader places an order on an exchange. Such actions have their own names, which will be further explored.
Long Position
This term is fundamental and straightforward, so it is important to remember its meaning.
A long position refers to a trader placing a buy order for a cryptocurrency. This action is easily understood by anyone.
The essence of this action is that the trader anticipates a potential increase in the asset's value. They take a long position (acquire the asset) with the intention of selling it at a higher price. Selling the cryptocurrency marks the completion of the transaction and is referred to as closing the long position. Closing the position occurs when the asset's price rises, and the trader calculates their profit from the trade.
Examples of Trades and Potential Risks
Fantastic purchases 10 Cardano (ADA) tokens for $1 each. Thanks to favorable circumstances, he sells ADA for $2 after some time. The moment of purchase is considered the opening of a long position. The waiting period is regarded as being in a long position, and the successful sale is the closing of the trade.
Trading on the upward price movement carries risks. In the aforementioned example, the trader could lose $10 if the price of Cardano approaches zero. Conversely, profits are not limited in the event of a sharp increase in the asset's value.
Main Rules
The rules are very simple. If the purchased asset appreciates, the long position holder earns a profit. If the asset's price falls below the purchase price, the trader incurs losses.
A trade is opened and closed with a single mouse click, but it is important to remember the commission charged by the exchange for executing the trade.