Position Types
Understanding Long and Short
In leveraged trading you can open two types of positions:
Long: you profit if the price goes up
Short: you profit if the price goes down
Let's see how long and short positions work in leverage trading.
You place orders to open positions. For more information about order types, please refer to Order Types
Long Position
A long position means you expect the asset price to increase.
How it works:
Open Position: Buy the asset.
Close Position: Sell the asset.
Example
You open a long position on BTC, buying 1 BTC
Entry price: 80,000 USDC
BTC rises to 90,000
Profit 10,000 USDC
BTC drops tp 75,000
Loss 5,000 USDC
Short Position
A short position means you expect the asset price to decrease.
How it works:
Open Position: Sell the asset.
Close Position: Buy the asset back.
Example:
You open a short position on BTC, selling 1 BTC
Entry price: 80,000 USDC
BTC drops top 75,000
Profit 5,000 USDC
BTC rises to 90,000
Loss 10,000 USDC
Hedging
Hedging is a risk management strategy used to reduce exposure to price movements.
It works by opening an offsetting position against an existing one. This can help reduce losses if the market moves in the opposite direction.
A hedge can be:
full, when the offsetting position is equal in size
partial, when the offsetting position reduces only part of the risk
For example:
Long ETH: 1 ETH
Short ETH: 0.5 ETH
If the ETH price falls:
the long position loses value
the short position gains value
How to Hedge
Not all venues allow traders to keep offsetting positions open at the same time on the same pair.
There are usually two models:
One-way mode: if a trader already has a long position and opens a short position on the same market and pair, the short usually reduces, closes, or reverses the existing long position. If a venue does not support hedge mode, an offsetting position can still be opened on a different venue.
Hedge mode: the venue allows both long and short positions to remain open on the same pair at the same time.
VOOI Ultra supports hedging across supported venues, allowing traders to keep both long and short positions open on the same trading pair at the same time:
Understanding Leverage
What is Leverage
Leverage allows traders to open positions that are larger than the amount of funds they deposit.
Instead of using the full position value, the trader provides only a portion of it as collateral (margin). The rest of the position value is effectively borrowed within the trading system.
Example:
1,000 USDC
10x
10,000 USDC
In this example, the trader uses 1,000 USDC as collateral to control a 10,000 USDC position.
Leverage increases both potential profits and losses.
Collateral (Margin)
Collateral is the amount of your funds allocated to open and maintain a leveraged position.
Collateral serves two purposes:
It allows the position to be opened
It absorbs potential losses if the market moves against the position
Position Liquidation
Liquidation is the automatic closing of a leveraged position when the losses approach the collateral used for that position.
When you open a leveraged position you risk only your collateral used for the position. If the market moves strongly against the position, losses reduce the collateral, but not borrowed funds.
When the collateral becomes too small to support the position, the system automatically closes it. This process is called liquidation.
Example:
Collateral: 2,000 USDC Leverage: 40x Position size: 80,000 USDC
You open a long BTC position at 80,000 USDC, buing 1 USDC
If the BTC price falls, the position starts losing value. These losses are deducted from the 2,000 USDC collateral.
If the price drops far enough and most of the collateral is used to cover losses, the system will automatically close the position to prevent further losses. This automatic closure is called liquidation.
In this case, the position would theoretically lose all collateral if the price dropped to about 78,000 USDC.
In practice, liquidation usually happens earlier (for example around 78,500–79,000 USDC) due to maintenance margin requirements and trading fees.
How Leverage Affects Liquidation
5x
~20%
10x
~10%
20x
~5%
40x
~2.5%
Actual liquidation levels may vary depending on:
maintenance margin requirements
trading fees
funding payments
platform-specific risk parameters
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