What is a Short Position?
Updated
In this position, funds (that the trader doesn’t own) are sold first and then bought at a later time. So when you open a short position, the exchange sells the crypto on your behalf and you owe the quantity of crypto involved in the trade, to the exchange. At a later point, you return this obligation by buying the coin at a lower price. Traders open a short position in the hope that the price will go down in the future.
Eg. If a trader, trading in the XRP/BTC pair, shorts 1000 XRP at 4x leverage. If the BTC equivalent of 1000 XRP is 0.09 BTC (considering XRP/BTC is at 0.00009000), then the exchange lends the trader 1000 XRP against a collateral of 0.0225 BTC. The trader owes the 1000 XRP to the exchange and can return this obligation at a later time, by buying it at a lower price.
