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BTC rises 4%. Same 100 USDT at 5x, two sides.+20100Longbuys at 100,000120 USDT−2080Shortsells at 100,00080 USDT
BTC rises 4%.Same 100 USDT at 5x, two sides.+20100Longbuys at 100,000120 USDT−2080Shortsells at 100,00080 USDT

Same rise, two sides. One gains 20, one loses 20.

Long and short

A long gains when the price rises and a short gains when it falls. You close a long by selling and a short by buying.

Lesson 2 of 85 min3 parts

Updated . Cryptathon rules checked on .

A long gains when the price rises, and a short gains when it falls. Profit or loss is the size in coins times the price move. A 0.005 BTC long from 100,000 USDT makes 20 USDT if BTC rises to 104,000, and the same short loses 20 USDT. Close a long by selling, a short by buying.

By the end, you can

  1. 1Work out the profit or loss of a long
  2. 2Work out the profit or loss of a short
  3. 3Say which order closes a long and which closes a short

1 of 3

How does a long make money?

A long position gains when the price rises, and a short position gains when the price falls. On a perpetual future you open either side with the same USDT margin, so you can trade a fall as easily as a rise.

To go long, you buy. The price you buy at is your entry price. Each USDT the price rises above it is profit on each coin of your position's size, and each USDT it falls below it is a loss. Leverage sets how many coins that is; the Leverage lesson shows how.

Worked example

A BTC long at 5x

You put 100 USDT of margin on a BTC long at 5x. You buy at 100,000 USDT, and BTC rises to 104,000 USDT. What is your PnL?

  1. 1
    Find the position sizeMargin times leverage.
    100 × 5 = 500 USDT
  2. 2
    Find the size in BTCHow much BTC your position follows.
    500 ÷ 100,000 = 0.005 BTC
  3. 3
    Find the price moveThe price is above your entry.
    104,000 − 100,000 = 4,000 USDT
  4. 4
    Work out the PnLSize times move. It is the same as 4% of 500.
    0.005 × 4,000 = 20 USDT

AnswerA gain of 20 USDT, which is 20% of your margin.

BTC price, USDTLong PnL at 5x, USDT104,000+20103,000+15102,000+10101,000+5100,0000Entry+4,000 = +20 USDT
BTC price, USDTLong PnL at 5x, USDT104,000+20 103,000+15 102,000+10 101,000+5 100,0000 Entry+4,000 = +20 USDT
Figure 1 A long of 0.005 BTC from 100,000 USDT. Each 1,000 USDT rise is 5 USDT of profit, so at 104,000 the PnL is 20 USDT.
Your turn You put 50 USDT of margin on an ETH long at 4x. You buy at 2,000 USDT, and ETH falls to 1,900 USDT. What is your PnL?
  1. A gain of 10 USDT

    A long loses when the price falls. ETH fell from 2,000 to 1,900.

  2. A loss of 10 USDT

    Right. 200 ÷ 2,000 = 0.1 ETH, and 0.1 × 100 = 10 USDT against you.

  3. A loss of 100 USDT

    That is the move for one whole ETH. Your size is only 0.1 ETH.

  4. A loss of 2.50 USDT

    That is 5% of your margin. The 5% fall counts on the 200 USDT position.

Show the answer

B: A loss of 10 USDT. 200 ÷ 2,000 = 0.1 ETH, and 0.1 × 100 = 10 USDT against you.

2 of 3

How does a short make money?

To go short, you sell first. On a perpetual you do not borrow or own the coin: a short is a contract like a long, the other way round. Your profit is how far the price falls below your entry price.

Worked example

An ETH short at 4x

You put 100 USDT of margin on an ETH short at 4x. You sell at 4,000 USDT, and ETH falls to 3,800 USDT. What is your PnL?

  1. 1
    Find the position sizeMargin times leverage.
    100 × 4 = 400 USDT
  2. 2
    Find the size in ETHHow much ETH your position follows.
    400 ÷ 4,000 = 0.1 ETH
  3. 3
    Find the price moveThe price is below your entry, which is good for a short.
    4,000 − 3,800 = 200 USDT
  4. 4
    Work out the PnLSize times move.
    0.1 × 200 = 20 USDT

AnswerA gain of 20 USDT. If ETH had risen 200 USDT instead, you would have lost 20 USDT.

ETH price, USDTShort PnL at 4x, USDT4,100−104,00003,900+103,800+20Entry−200 = +20 USDT
ETH price, USDTShort PnL at 4x, USDT4,100−10 4,0000 3,900+10 3,800+20 Entry−200 = +20 USDT
Figure 2 A short of 0.1 ETH from 4,000 USDT. The price falls and the short gains: each 100 USDT fall is 10 USDT of profit, so at 3,800 the PnL is 20 USDT.
Your turn You put 30 USDT of margin on a BTC short at 10x. You sell at 100,000 USDT, and BTC rises to 101,000 USDT. What is your PnL?
  1. A gain of 3 USDT

    A short loses when the price rises. BTC rose by 1,000 USDT.

  2. A loss of 3 USDT

    Right. 300 ÷ 100,000 = 0.003 BTC, and 0.003 × 1,000 = 3 USDT against you.

  3. A loss of 0.30 USDT

    That is 1% of your margin. The 1% rise counts on the 300 USDT position.

  4. A loss of 1,000 USDT

    That is the move for one whole BTC. Your size is 0.003 BTC.

Show the answer

B: A loss of 3 USDT. 300 ÷ 100,000 = 0.003 BTC, and 0.003 × 1,000 = 3 USDT against you.

3 of 3

How do you close a long or a short?

You close a position with an order on the opposite side, for the same size. To close a long, you sell. To close a short, you buy. When the closing order trades, your PnL is fixed, and your margin plus that PnL goes back to your free balance, less the trading fee.

If you close only part of the size, the rest of the position stays open.

Worked example

Close the BTC long

You hold the BTC long from the first part: 0.005 BTC bought at 100,000 USDT. BTC is at 104,000 USDT and you close. What do you do, and what comes back?

  1. 1
    Find the size to sellYou sell the same size you bought.
    500 ÷ 100,000 = 0.005 BTC
  2. 2
    Fix the PnLThe close turns the PnL into a fixed result.
    0.005 × 4,000 = 20 USDT
  3. 3
    Add it to your marginMargin plus PnL goes back to your free balance.
    100 + 20 = 120 USDT

AnswerSell 0.005 BTC. 120 USDT goes back to your free balance, less the trading fee on the close.

To close, take the other sideYou open withYou close withLongBuySellShortSellBuy
To close, take the other sideYou open withYou close withLongBuySellShortSellBuy
Figure 3 You close with the side opposite to the one you opened with. A long opens with a buy and closes with a sell. A short opens with a sell and closes with a buy.
Your turn You are short 0.1 ETH. Which order closes the whole position?
  1. Sell 0.1 ETH

    Selling is the side you opened with. To close, you take the other side.

  2. Buy 0.1 ETH

    Right. A short closes with a buy of the same size.

  3. Buy 0.01 ETH

    That closes only a tenth of the short. Buy the full 0.1 ETH.

  4. Wait for the price to come back to your entry

    A position stays open until an order closes it.

Show the answer

B: Buy 0.1 ETH. A short closes with a buy of the same size.

Common questions

Is a short riskier than a long?

At the same leverage, a long and a short have about the same distance to liquidation, but that does not make their chance of loss the same. A 10x long from 200 USDT is liquidated near 181, and a 10x short near 219. Cryptathon uses isolated margin, so a position's losses stay within its own margin. Trading fees come from your free balance, on top of the margin.

Do longs or shorts pay funding?

It depends on the sign of the funding rate. On Cryptathon, when the rate is positive, longs pay shorts; when it is negative, shorts pay longs. Funding is paid every 8 hours, only by positions open at that moment. At a rate of +0.01%, a 1,000 USDT long pays 0.10 USDT and a 1,000 USDT short receives 0.10 USDT. The payment is on the position value, not on your margin.

Does a short pay more in fees than a long?

No. Fees do not depend on the side. On Cryptathon a market order pays the taker fee, 0.05%, and a limit order that waits in the book pays the maker fee, 0.02%. Both are a share of the position size. Opening and closing a 1,000 USDT long or short with market orders costs 0.50 + 0.50 = 1 USDT in fees.

Check yourself

Three questions on the whole lesson.

Question 1 of 3 You and a friend each hold a 500 USDT BTC position. You are long and your friend is short. BTC rises 4%. What are the two PnLs?
  1. You +20 USDT, your friend −20 USDT

    Right. 500 × 4% = 20 USDT, gained by the long and lost by the short.

  2. Both +20 USDT

    A short loses when the price rises.

  3. You +4 USDT, your friend −4 USDT

    That is 4% of 100. The move counts on the 500 USDT position.

  4. You +20 USDT, your friend 0 until they close

    PnL moves with the price on both sides while the positions are open.

Show the answer

A: You +20 USDT, your friend −20 USDT. 500 × 4% = 20 USDT, gained by the long and lost by the short.

Question 2 of 3 You put 60 USDT of margin on a SOL short at 5x. You sell at 150 USDT, and SOL falls to 135 USDT. What is your PnL?
  1. A loss of 30 USDT

    A short gains when the price falls. SOL fell from 150 to 135.

  2. A gain of 30 USDT

    Right. 300 ÷ 150 = 2 SOL, and 2 × 15 = 30 USDT.

  3. A gain of 6 USDT

    That is 10% of your margin. The 10% fall counts on the 300 USDT position.

  4. A gain of 15 USDT

    That is the move for one SOL. Your size is 2 SOL.

Show the answer

B: A gain of 30 USDT. 300 ÷ 150 = 2 SOL, and 2 × 15 = 30 USDT.

Question 3 of 3 You are long 0.005 BTC. Which order closes the whole position?
  1. Sell 0.005 BTC

    Right. A long closes with a sell of the same size.

  2. Buy 0.005 BTC

    Buying is the side you opened with. To close, you take the other side.

  3. Sell 0.0005 BTC

    That is a tenth of your size, so most of the long stays open.

  4. No order: wait for it to expire

    A perpetual has no expiry. It stays open until an order closes it.

Show the answer

A: Sell 0.005 BTC. A long closes with a sell of the same size.

What to remember

  1. How does a long make money?A long gains when the price rises above your entry price and loses when it falls below it.
  2. How does a short make money?A short gains when the price falls below your entry price and loses when it rises above it.
  3. How do you close a long or a short?Close a long by selling and a short by buying, for the same size.

Short version: read the blog post.

Next lessonLeverage