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v3
Perpetuals
Tutorials
Choosing the appropriate position (buy or sell)
Choosing the appropriate position (buy or sell)
D
Written by David Gogel
Updated over a week ago

Long

By going long, a trader buys a Perpetual contract with the expectation that the underlying asset will rise in value in the future. Rather than buying and holding the underlying asset, traders buy synthetic exposure to the asset.

To open a long position, click on “Buy” in the left panel once you have selected the order type.

The trader believes that the BTCUSD exchange rate will rise. He has 100 USD of equity; with 10x leverage, he can control a position worth \$1,000 USD. The BTC-USD perpetual contract is trading at \$50,000 USD.

To go 10x long \$1,000 USD worth of BTC-USD Perpetuals contracts he buys: \$1,000 USD / \$50,000 USD / BTC = 0.02 BTC.

If the price of BTC-USD rises by 10% to \$55,000 USD, his futures position is now worth: BTC 0.02 * \$55,000 USD / BTC = \$1,100 USD.

He has made a profit of: \$1,100 USD – \$1,000 USD = \$100 USDC.

His return on 100 USD of equity is: \$100 USD Profit / \$100 USD Equity = 1x, or 100%.

Short

By going short, a trader sells a Perpetual contract with the expectation that the underlying asset will decline in value in the future. Rather than selling the underlying asset, traders sell synthetic exposure to the asset.

To open a short position, click on “Sell” in the left panel once you have selected the order type.

The trader believes that the BTC-USD exchange rate will decline. He has 100 USD of equity; with 10x leverage, he can control a position worth \$1,000 USD. The BTC-USD perpetual contract is trading at \$50,000 USD.

To go 10x short \$1,000 USD worth of BTC-USD Perpetuals contracts he sells: \$1,000 USD / \$50,000 USD / BTC = 0.02 BTC.

If the price of BTC-USD declines by 10% to \$45,000 USD, he can now close his position: BTC 0.02 * \$45,000 USD / BTC = \$900 USD.

He has made a profit of: \$1,000 USD – \$900 USD = \$100 USD.

His return on 100 USD of equity is: \$100 USD Profit / \$100 USD Equity = 1x, or 100%.