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Trading Basics

Short Selling

Short selling is taking a position that profits when the price falls, by selling a borrowed or derivative position and buying it back later.

Also known as: short, going short

A short trader sells first and buys back later. If the price falls the buy-back is cheaper and the difference is profit; if it rises the loss has no ceiling in theory, because a price can rise without limit. In crypto, shorting is usually done with futures or margin loans.

Shorts are squeezed when the price rises and forced buy-backs push it higher, a short squeeze. The opposite position, buying in expectation of a rise, is a long.

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