Long/Short Ratio
A metric comparing the total value or number of long positions to short positions on a derivatives exchange, used to gauge aggregate trader positioning and sentiment.
The long/short ratio compares the total value or number of long positions to short positions open on a derivatives exchange at a given moment, expressed as a ratio — a reading above 1 means more traders (or more total position value) are positioned long than short, while a reading below 1 means the opposite. It's commonly tracked alongside open interest (see Kaavon's "Open Interest" glossary definition) and the funding rate as a window into aggregate trader positioning and sentiment.
An extreme long/short ratio is sometimes interpreted as a contrarian signal, on the theory that when positioning becomes heavily skewed in one direction, the market has limited remaining capacity to push further in that same direction, making a reversal more likely as over-positioned traders eventually get squeezed out. Like other sentiment-based indicators, the long/short ratio reflects a historically observed tendency rather than a mechanically reliable predictive rule, and different exchanges can report meaningfully different ratios depending on their own specific user base and positioning.
Examples
- A long/short ratio of 3 means three times as much long position value is open as short position value on that exchange at that moment.
- Some traders treat an extreme long/short ratio as a contrarian signal, reasoning that heavily skewed positioning leaves limited room for the crowded side to keep pushing the price further.