What is the long/short ratio? Learn

What the long/short ratio measures

The long/short ratio compares how many traders hold long positions with how many hold short positions on a futures market. A ratio of 1.5 means 60% of accounts are long and 40% short; a ratio of 0.67 means the opposite. Exchanges publish it in two common versions:

• All accounts — every account with a position counts once, whatever its size. This is "the crowd".
• Top traders — only the largest accounts by margin balance, measured by the size of their positions. This is closer to "the money".

Accounts are not money

The ratio of all accounts can be misleading on its own. A thousand small accounts long and a few large accounts short give a high ratio while most of the money is short. That is why the crowd and the top traders are best read side by side: when they disagree strongly, the large accounts are positioned against the crowd.

How to read it

• Extremes. When 75% or more of accounts are long, the long side is crowded. Crowded sides are what squeezes are made of: if the price turns, many traders exit at once. A heavily short crowd is rarer — retail traders lean long most of the time.
• Fast shifts. A large change in the ratio within half an hour shows traders changing sides quickly, often in reaction to a sharp move.
• Divergences. Accounts adding longs while the price falls — or shorts while it rises — show positions building against the move. If the move continues, those positions become fuel for it.
• With open interest and funding. A crowded ratio with rising open interest and extreme funding is a stronger sign of one-sided leverage than any of the three alone.

Limits to keep in mind

The ratio is published in 5-minute steps and covers one exchange; it shows positioning, not intentions. A crowded side can stay crowded for a long time in a trend — the contrarian reading works at turning points, not every time. Use the ratio to understand who would be hurt by the next move, not to predict when it comes.