Long vs Short: Why Shorting Sounds Easy but Is Actually Very Dangerous

Many novice traders initially want to try shorting to make quick money, thinking that shorting in a bear market can help them sit back and win. But reality is often brutal—the mathematical logic behind shorting determines how dangerous this path really is.

Mathematical Inequality: Why the Shorting Ceiling Is So Low

This is the most critical point. When doing a long position, if the asset drops to 0, you lose everything (100% loss), but the upside is unlimited. You buy a coin at $100, and it can rise to $1,000, $10,000, or even more. But shorting is the exact opposite: you can only earn up to 100% (if the coin drops to 0), but your potential losses are unlimited.

For example, if you borrow coins to short and the price increases by 200%, you lose 200%. A 500% increase means a 500% loss. What if there’s a sudden surge of 1000%? Congratulations, your loss is already ten times your principal, not even counting the risk of liquidation. This is why shorting always involves “limited gains, unlimited risks.”

History Repeats: The Long-Term Upward Market Law

A quick look at history makes this clear. The S&P 500 has risen thousands of percentage points over the past decades. Although there have been crashes like financial crises and stock market collapses, the long-term trend is upward. Behind this are economic growth, increasing corporate profits, and inflation driving asset prices higher.

The biggest challenge in shorting is not only predicting the decline accurately but also timing it correctly. You might get the direction right, but if your timing is off by months, the long-term upward trend can wipe out your position. That’s why most professional traders don’t rely on shorting for their income.

Pitfalls in Practical Operations

Once you choose to short, trouble follows. First, you need to borrow assets from an exchange or other traders, which incurs interest. Second, if the price surges rapidly, your margin ratio will quickly decline, risking a margin call. Sometimes, a sudden market spike can cause your short position to be liquidated immediately, resulting in losses much greater than expected.

In the long run, these hidden costs can significantly erode your profit margins.

Why Going Long Is the Way to Make Money Long-Term

Conversely, going long may sometimes seem less exciting, but its risks are controllable. The worst-case scenario is losing your principal (100% loss), but there’s no possibility of unlimited losses. Plus, you don’t need to predict the market perfectly—just wait. The long-term upward trend of the market will help you profit, even with some volatility along the way.

Additionally, you don’t pay interest on borrowed coins, and there’s no risk of forced liquidation, making trading psychologically much easier.

Summary

It may seem that shorting offers quick profits, but both the mathematical principles and market history tell the same story: going long is a safer, more sustainable way to profit in the long run. When you go long, your profit potential is unlimited, and your losses are limited. Those who short often need to make every trade profitable to recover their losses, and their probability of failure is higher.