Short position

A position that gains value when the price of the underlying asset falls and loses value when it rises. On a perpetual DEX you go short by selling a contract, without owning or borrowing the asset itself.

Definition

Going short means holding a short position: exposure that profits from a falling price. On a perpetual futures market you take it by selling the contract, and you close it by buying the same size back. Unlike shorting on a spot venue, nothing is borrowed and no asset needs to be located.

The asymmetry to understand

A long can lose no more than the position is worth, because a price cannot fall below zero. A short has no equivalent ceiling: a price can keep rising, and the loss rises with it.

In practice you never live through the unbounded version, because liquidation closes the position long before then. The point of the asymmetry is what it does to a position that goes against you: it accelerates, and the same percentage move costs more on the short side than on the long side of your entry.

The costs of holding one

Perpetual contracts stay anchored to spot through the funding rate. When more traders are short than long, shorts typically pay longs; when the balance flips, they receive instead. On pool-based venues, a borrow fee accrues while the position is open regardless of direction.

Being paid funding is not a reason on its own to hold a position. The rate is small relative to the price moves that decide the outcome.

Where you will run into it

Short and long are the two sides of every perpetual market. The balance between them drives funding, open interest imbalance, and on some protocols the fee you pay to open in one direction rather than the other.