{"version":1,"id":"short-position","title":"Short Position","summary":"Short Position is a glossary term that describes a trading strategy that profits when an asset's price falls, covering spot and derivative mechanisms, perpetual futures mechanics, risks, examples, and common use cases like hedging.","content":"**A short position** is a trade in which the holder profits when the price of an asset falls and loses when it rises. In [cryptocurrency](https://iq.wiki/wiki/cryptocurrency) trading, a short position is a directional bet against an asset: it expresses a bearish view, the expectation that a token's price will decline over time.[\\[1\\]](#cite-id-ntq8b6o4xq)​[\\[2\\]](#cite-id-mdcj7shwlb) \n\nA short is the opposite of a [long position](https://iq.wiki/wiki/long-position), which profits when the price rises; the two are the basic directional bets in futures trading.[\\[3\\]](#cite-id-sqtam15cs4) Short positions are the mechanism that makes perpetual futures markets bidirectional—without them, traders could only profit from rising prices, whereas with them traders can express bearish views on any asset and hedge existing spot holdings against downturns.[\\[1\\]](#cite-id-ntq8b6o4xq)​\n\n## How a Short Position Works\n\nThe core of a short position is inverse price exposure: the position's unrealized profit or loss moves inversely with the underlying asset's price.[\\[3\\]](#cite-id-sqtam15cs4) In practice, a trader opens a short at the current market price. If the price falls, the position gains value; if the price rises, the position loses value. The trader can close the position at any time to realize the accumulated profit or loss.[\\[1\\]](#cite-id-ntq8b6o4xq)​\n\nThere are two broad ways to execute a short. In the traditional, spot-based form, a trader borrows the asset from a broker or lender, sells it at the current market price, and later repurchases it at a lower price to return to the lender, keeping the difference. For example, a trader who expects [Ethereum](https://iq.wiki/wiki/ethereum) to fall from $3,000 to $2,000 could borrow 1 ETH, sell it at $3,000, buy it back for $2,000 after the decline, return the coin to the lender, and keep the $1,000 profit.[\\[2\\]](#cite-id-mdcj7shwlb) \n\nClosing such a margin short is done by buying back the borrowed [cryptocurrency](https://iq.wiki/wiki/cryptocurrency) and returning it, an action also known as buying to cover.[\\[2\\]](#cite-id-mdcj7shwlb)​\n\nThe second form uses derivatives—futures or perpetual contracts—and does not require owning or borrowing the underlying asset first. In perpetual futures, shorting simply involves opening a contract that pays out when the price declines.[\\[1\\]](#cite-id-ntq8b6o4xq)​[\\[2\\]](#cite-id-mdcj7shwlb) \n\n## Leverage and Liquidation\n\n​[Leverage](https://iq.wiki/wiki/leverage) allows a short position to control a larger position size than the margin alone would allow. It magnifies both potential profit and potential loss: a 1% price drop on a 10x leveraged short moves the position's profit and loss up by roughly 10%.[\\[3\\]](#cite-id-sqtam15cs4) Choosing lower leverage reduces [liquidation](https://iq.wiki/wiki/liquidation) risk for the same entry price.[\\[3\\]](#cite-id-sqtam15cs4)​\n\nLiquidation is the forced closure of a position when losses exceed the trader's available margin—specifically when margin falls below the platform's maintenance requirement. At that point the exchange may automatically close some or all of a leveraged short to prevent further losses.[\\[2\\]](#cite-id-mdcj7shwlb)​[\\[1\\]](#cite-id-ntq8b6o4xq) \n\n​\n\nBecause of this, understanding entry price, leverage, and liquidation price matters before opening a short.[\\[3\\]](#cite-id-sqtam15cs4) Both long and short leveraged positions face liquidation risk: a sharp decline can liquidate a leveraged long, while a sharp increase can liquidate a leveraged short.[\\[2\\]](#cite-id-mdcj7shwlb)​\n\nA standard illustration is a 10x short position on [Ethereum](https://iq.wiki/wiki/ethereum) opened at an entry price of $3,000 with $1,000 of margin, producing a position size of $10,000. If the price falls to $2,700, the position gains $1,000, a 100% return on margin. A fall to $2,850 yields a $500 gain, or 50%. At $3,000 the position is flat. If the price instead rises to $3,150 the position loses $500, or 50%, and a rise to $3,300 produces a $1,000 loss—a 100% loss of margin that results in liquidation.[\\[1\\]](#cite-id-ntq8b6o4xq)​\n\n## Short Versus Long Positions\n\nA short position is the mirror image of a [long position](https://iq.wiki/wiki/long-position) across several dimensions. A short profits when the price falls and loses when it rises, giving it a bearish direction; a long profits when the price rises and loses when it falls, giving it a bullish direction.[\\[1\\]](#cite-id-ntq8b6o4xq) \n\nThe profit and loss profiles are asymmetric. A short's maximum profit is limited, because a price can only fall to zero, while a long's maximum profit is theoretically unlimited. Conversely, a short's maximum loss is in theory unlimited, since a price can rise without bound, whereas a long's maximum loss is limited to the margin committed.[\\[1\\]](#cite-id-ntq8b6o4xq)​\n\nWithout [leverage](https://iq.wiki/wiki/leverage), percentage outcomes are symmetric around the entry price. Shorting [Bitcoin](https://iq.wiki/wiki/bitcoin) at €60,000 that then falls to €54,000 gains 10% before fees, while a rise to €66,000 produces a 10% loss before fees; leverage magnifies both outcomes.[\\[2\\]](#cite-id-mdcj7shwlb) One analysis holds that the overall structural risks of a short—such as a platform demanding additional funds as losses accrue—are the same as those of a long, while still emphasizing the greater downside that shorts carry because of their uncapped loss potential.[\\[2\\]](#cite-id-mdcj7shwlb)​\n\n## Use Cases\n\nTraders open short positions for several reasons. A bearish technical setup—breakdown patterns or momentum indicators—can prompt a short. Fundamental concerns such as regulatory risk, a hack, or declining network activity can also justify betting against an asset.[\\[1\\]](#cite-id-ntq8b6o4xq) \n\nBeyond directional speculation, shorts serve as a hedging tool: a trader can offset existing long spot exposure during an expected drawdown, protecting a portfolio without selling the underlying holdings.[\\[1\\]](#cite-id-ntq8b6o4xq) Shorts also enable pair trading, in which a trader shorts a weaker asset while going long a stronger one to profit from the relative difference in their performance.[\\[1\\]](#cite-id-ntq8b6o4xq)​","categories":[{"id":"glossary","title":"glossary"}],"tags":[],"images":[{"id":"QmQ3tKcZC7mVrMDs4GtoLokHghnduoPdx67F6ecgW7Ug1e","type":"image/jpeg, image/png"}],"media":[],"metadata":[{"id":"references","value":"[{\"id\":\"ntq8b6o4xq\",\"url\":\"https://trustwallet.com/glossary/short-position\",\"description\":\"Trust Wallet short position definition\",\"timestamp\":1790941873127},{\"id\":\"mdcj7shwlb\",\"url\":\"https://www.yieldfund.com/news/long-vs-short-positions-in-crypto-explained\",\"description\":\"Yieldfund short position definition\",\"timestamp\":1790941873127},{\"id\":\"sqtam15cs4\",\"url\":\"https://pluang.com/en/faq/crypto-futures/crypto-futures-transaction/g-pengertian-short-position\",\"description\":\"Pluang on short as directional bet\",\"timestamp\":1790941873127}]"},{"id":"main-image-origin","value":"{\"imageId\":\"QmQ3tKcZC7mVrMDs4GtoLokHghnduoPdx67F6ecgW7Ug1e\",\"originalId\":\"QmQ3tKcZC7mVrMDs4GtoLokHghnduoPdx67F6ecgW7Ug1e\"}"},{"id":"commit-message","value":"Add wiki \"Short Position\""}],"events":[{"type":"DEFAULT","title":"\"Long vs Short Positions In Crypto Explained\" published by Yieldfund","date":"2025-09-01","description":"Yieldfund article defining short positions, explaining spot borrowing and derivative methods, risks (including unlimited loss potential), liquidation mechanics, and guidance for traders.","link":"https://www.yieldfund.com/news/long-vs-short-positions-in-crypto-explained","multiDateStart":null,"multiDateEnd":null,"id":"ae73101a-8ca7-4ed7-9571-61657bbb3324"},{"type":"DEFAULT","title":"\"Short Position\" published by Trust Wallet","date":"2026-04-01","description":"Trust Wallet glossary entry defining short positions, describing perpetual futures mechanics, example 10x ETH short, comparative features vs. longs, reasons to open shorts, and platform-specific availability via Hyperliquid and Aster DEX.","link":"https://trustwallet.com/glossary/short-position","multiDateStart":null,"multiDateEnd":null,"id":"d3131789-04b8-4b10-8278-a7d781ce348d"},{"type":"DEFAULT","title":"Trust Wallet glossary entry updated","date":"2026-09-01","description":"Trust Wallet updated its Short Position glossary entry.","link":"https://trustwallet.com/glossary/short-position","multiDateStart":null,"multiDateEnd":null,"id":"e0f3cd6b-84f1-422f-a081-3b8ffab44bbe"}],"linkedWikis":{"founders":[],"blockchains":[],"speakers":[]},"user":{"id":"0x8af7a19a26d8fbc48defb35aefb15ec8c407f889"},"author":{"id":"0x212Cb3F4aE6611054637f9f78F18fB628AD258bb"},"language":"en","operator":{"id":"0x212Cb3F4aE6611054637f9f78F18fB628AD258bb"}}