What is Short Position?
A trade that profits when the asset price goes down — you sell a contract expecting the price to fall.
Short selling allows traders to profit from declining prices. In crypto futures, shorting is straightforward: you open a short contract, and if the price falls, you profit.
How shorting works in futures:
You open a short BTC contract at $50,000. If BTC falls to $45,000:
Profit = $5,000 per contract (before fees and funding)
If BTC rises to $55,000:
Loss = $5,000 (position moves against you)
Short position liquidation:
For shorts, liquidation occurs when the price rises to your liquidation level — the opposite of longs. Use the same liquidation formula:
Liquidation Price ≈ Entry × (1 + 1/Leverage − Maintenance Margin Rate)
At 10× leverage, a short is liquidated approximately 9% above your entry price.
Short selling in spot markets:
In spot trading, shorting requires borrowing the asset — complex, expensive, and not available everywhere. Crypto futures make short selling accessible to any trader with a derivatives account.
When shorts make sense:
The squeeze risk:
Heavily shorted markets are vulnerable to short squeezes — rapid price rises that force short sellers to close (buy back), which accelerates the price rise further. Monitor short funding rates as a warning signal.