I think I got this figured out, but many don’t seem to know. Take coin W at $1 as an example.
It jumped to $10 but then crashed back to $1. If you went long at $1, you’d make $900 from your $100. But if you shorted it at $10 with that same $100 and it dropped to $1, you’d only pocket less than $90. Why is that?
Well, the original post doesn't mention how much the short position was for. Assuming the profit was $250 means the short was for that amount. This is because when you short, your profit can’t exceed what you shorted.
I adjusted the numbers. The profit from shorting would actually be $90 when it falls to $1. And yeah, the long position should be $900 instead of $1000 for accuracy.
You can't get 100% ROI in a short.
I remember asking something similar years ago. Got some helpful replies back then.
Learning the difference between longing and shorting really opened my eyes. Maybe this could help someone else too.
So, going from $1 to $10 is a 900% gain, but from $10 to $1 is only a 90% loss. Shorting has unlimited loss potential since prices can keep rising while a long position has a max loss of 100%. That's why a lot of folks just stick to longing.
Exactly! It’s all about percentage moves vs base prices. Rising from $1 to $10 is a huge gain, but dropping from $10 to $1 isn’t the same. Many think they can make the same profit on the way down, but it's not true. Longs benefit from lower entry prices and shorts are limited.
Not really. Shorts can lead to infinite losses since prices could soar. If you short at $1, you need the price to drop below that to profit. Maximum profit occurs when it hits $0, which is 100%. But losses? They can go on forever. That's why some firms avoid shorting altogether.
Seems like a revenge trade situation. Imagine losing with $900 and then trying with just $100...
Based on my experience, I’d only risk about 10-30% of my capital, so if I lost $270, that’s still better than just throwing it all in. Always better to have a plan before jumping in, not just reacting out of fear.