Glossary

Short position

A short position is a trade that gains value when the price of the asset falls and loses value when the price rises.

A short position profits from a price decrease. In derivatives markets, a trader sells a futures or perpetual contract. In spot markets, a trader borrows the coin, sells it and plans to buy it back later at a lower price to return it.

The loss on a short has no fixed upper limit, because a price can rise without a limit. A leveraged short is liquidated if the price rises to its liquidation level. A forced buy-back of many shorts can push the price up further. Market participants call this a short squeeze.

Short interest data and long/short ratios show how many shorts exist on a platform. A high number of shorts does not mean that the price must fall or rise. Shorts can also be hedges against a long spot holding. Read the data as a map of positioning, not as a forecast.