Short Position
Also known as: Going Short, Selling
A trade executed with the expectation that the asset's price will fall in value.
Plain-English Meaning
Going short allows you to potentially benefit from a falling market. Essentially, you are borrowing the asset to sell it at today's high price, hoping to buy it back later at a lower price to return it, keeping the difference.
Why It Matters
Short selling means a trader isn't restricted to waiting for prices to go up. It provides a mechanism to capture value during market downturns, crashes, or simple corrective pullbacks.
Simple Example
If you take a short position on Bitcoin at $60,000 and the price drops to $55,000, your position is in profit. However, if the price rises to $65,000, your short position is losing money.
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Forgetting that short positions theoretically have unlimited risk. An asset's price can only drop to zero, but it can technically rise infinitely, meaning losses on an unprotected short trade can quickly spiral.