Long and Short? What does it mean?

Published: Jan 10, 2023 Est. read time: 2 minutes

Our Jargon Guide covers lots of terms and acronyms but sometimes we need to dig a bit deeper. In this guide, we will cover "long" and "short". 

If you're new to the markets, the terms 'long' and 'short' might be unfamiliar to you. On their own, it can be difficult to understand what they mean. So let's clear it up.

"Long" or "going long" on a coin is another way of saying that you are buying the coin, and going "short" on a coin is another way of saying that you are selling the coin. But it's a bit more nuanced than that.

"Long" means that you expect the price of an asset to increase, so you buy the asset with the hope of selling it at a higher price in the future. For example, if you go "long" on a coin, you're buying that coin with the expectation that its price will go up. People can describe themselves as being "long" without actually having an active trade. This would just be a way of describing that they are bullish.

"Short" means the opposite. You expect the price of an asset to decrease (bearish), so you sell the asset with the hope of buying it back at a lower price in the future. For example, if you go "short" on a coin, you're selling the coin that you "borrowed" from someone else, with the expectation that you'll be able to buy it back at a lower price later on. Exchanges and platforms make shorting easy and although you're technically borrowing often completely transparent.

Origins of the term

Apparently, it is not entirely clear where the terms "long" and "short" originated, but they do come from the traditional finance world. One common theory is that they come from the practice of borrowing money to finance trades. In the past, traders who wanted to buy an asset but didn't have enough money to pay for it upfront would borrow money from a lender in order to finance the trade. This type of trade was known as a "long" trade because the trader was "long" the borrowed money and would eventually have to pay it back.

Likewise, traders who wanted to sell an asset but didn't actually own it could borrow the asset from someone else, sell it on the market, and then buy it back at a later date to return it to the original owner. This type of trade was known as a "short" trade because the trader was "short" the asset and would eventually have to return it.

Over time, the terms "long" and "short" have come to be used more generally to describe a position in the market, regardless of whether the trader is borrowing money or assets to finance the trade. These terms are key to the crypto markets too.