Long/short ratio
Also called: long short ratio · L/S ratio
Definition
The long/short ratio compares how many traders or how much position size on an exchange is long versus short on a futures market, as a gauge of sentiment.
How long/short ratio works
Because every futures contract has a buyer and a seller, total long and short contracts are always equal. So the long/short ratio usually measures something narrower: the share of accounts holding net long positions versus net short ones, or the positions of the exchange's top traders. A ratio of 2 means twice as many accounts are long as short.
Exchanges publish different versions, such as all accounts, top-trader accounts and top-trader positions. These can tell different stories, for example many small accounts long while large accounts lean short. Read the definition on each exchange before comparing numbers.
Traders often use extreme readings as a contrarian hint: when almost everyone is long, there may be few buyers left and many potential forced sellers. That is not a timing signal. Combine it with funding, open interest and price structure rather than trading it alone.
Example
Suppose an exchange reports that 70% of accounts on an ETH perpetual are net long, a long/short ratio of 70 ÷ 30 ≈ 2.33. Because total longs equal total shorts in size, the 30% of short accounts must hold larger average positions. If price drops 4% and long liquidations pile up, that crowded long side can push the fall further.
Common mistakes
- Assuming a high ratio means more money is long than short; in contracts, they are always equal.
- Comparing an account-based ratio on one exchange with a position-based ratio on another.
- Trading the ratio as a direct buy or sell signal.
Learn and practise
FAQ
Is a high long/short ratio bullish?
It shows that many accounts lean long, which can be a crowding warning rather than a bullish sign. It should be read together with funding and open interest.
Why do longs and shorts not balance in the ratio?
Because most ratios count accounts, not contract size. Total long and short contracts are always equal.