Short Position
Share post
In Brief
A short position in crypto trading is a bet that an asset's price will fall — the trader profits when the price goes down and loses when it goes up.
What Is a Short Position?
A short position (or "going short") is a trade in which the trader profits when the price of an asset falls. In perpetual futures, shorting does not require owning the asset first — the trader simply opens a contract that pays out when the price declines.
Short positions are the mechanism that makes perpetual futures markets bidirectional. Without shorts, traders could only profit from rising prices. With shorts, traders can express
bearish views on any asset — and hedge existing spot holdings against downturns.
How Does a Short Position Work?
The trader opens a short position 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.
In leveraged trading, if losses exceed the margin, the position is liquidated.
Example: 10x Short Position on ETH
Entry price: $3,000
Margin: $1,000
Leverage: 10x
Position size: $10,000
| ETH Price | Position P&L | % Return on Margin |
|---|---|---|
| $2,700 | +$1,000 | +100% |
| $2,850 | +$500 | +50% |
| $3,000 | $0 | 0% |
| $3,150 | −$500 | −50% |
| $3,300 | −$1,000 | −100% (liquidation) |
Short Position vs Long Position
| Feature | Short Position | Long Position |
|---|---|---|
| Profits when price | Falls | Rises |
| Losses when price | Rises | Falls |
| Direction | Bearish | Bullish |
| Maximum profit | Limited (price to zero) | Unlimited |
| Maximum loss | Unlimited (in theory) | Limited to margin |
Common Reasons to Open a Short Position
Bearish technical setup — breakdown patterns or momentum indicators
Fundamental concerns — regulatory risk, hack, declining network activity
Hedging spot holdings — offsetting long exposure during expected drawdowns
Pair trading — shorting a weaker asset while longing a stronger one
Risks Specific to Short Positions
Uncapped upside risk — in theory, a price can rise indefinitely, so losses on a short have no ceiling without stop-loss discipline
Short squeezes — rapid upward price movements can liquidate many short positions in quick succession
Funding costs — in bullish markets, shorts often receive funding payments, but in bearish markets they may pay
Short Position and Trust Wallet
Trust Wallet users can open short positions on 100+ perp markets via Hyperliquid and Aster DEX, with leverage up to 200x on Aster and 40x on Hyperliquid. Shorting is a core tool for
expressing bearish views and hedging spot portfolios — all while remaining in full self-custody.