In forex every position is both, because a currency pair is a ratio - long EUR/USD is long euros and short dollars at the same time. In crypto, shorting requires margin, futures or a perpetual, which brings funding and liquidation into the trade.
Short positions have a different risk shape: a long can only lose what you put in, while an unhedged short has theoretically unlimited loss, which is why exchanges liquidate them aggressively.
The mistake it causes: shorting a strong uptrend at high leverage because something "has gone up too much".
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A long can only lose what you put in. An unhedged short has theoretically unlimited loss, because price can rise without bound while it can only fall to zero. That asymmetry is why exchanges liquidate shorts aggressively and why shorting requires margin, futures or a perpetual rather than simply buying.
| Long | Short |
|---|
| Profits when | Price rises | Price falls |
| Maximum loss | Your stake | Theoretically unlimited |
| Instrument needed | Spot works | Margin, futures or perp |
| Carry | None in spot | Funding or borrow cost |
In forex you are always both
A currency pair is a ratio, so buying EUR/USD is buying euros and selling dollars in one transaction. There is no one-sided position. This is why dollar strength shows up simultaneously across every major pair, and why holding long EUR/USD, GBP/USD and AUD/USD is one bet at triple size. See correlation.
Shorts carry a cost that longs may not
In crypto, shorting a perpetual means paying or receiving funding depending on which way the crowd is leaning. In equities it means a borrow fee. Either way, a short usually has a running cost that a spot long does not, so time works against it.
The squeeze
When price rises against crowded shorts, forced buying from liquidations pushes it higher, triggering more liquidations. Short squeezes are violent and fast, and they are the practical reason high-leverage shorts in a strong uptrend are among the most reliably expensive trades available.
What to do with this
- Never short a strong trend at high leverage because something has "gone up too much".
- Price the carry before holding a short overnight.
- Size shorts with the same discipline as longs, and respect that the tail is fatter.
