Going Long vs Going Short
A long position aims to benefit when a price rises. A short position aims to benefit when it falls. Both can lose money if the market moves against you.
Going Long: when Prices Rise
When you go long, you buy because you expect the price to rise. If you close at a higher price, the difference is your gross profit before trading costs. If the price falls, the position makes a loss.
Going Short: when Prices Fall
When you go short on a CFD, you open a sell position. You close it with a buy. A lower closing price produces a gross profit before costs; a higher closing price produces a loss. You do not need to own the underlying asset to open a CFD position.
Long vs Short at a Glance
▲ Going Long (Buy)
- You expect the price to rise
- Open with a buy, close with a sell
- Profit grows as price goes up
- Loss grows if price falls
▼ Going Short (Sell)
- You expect the price to fall
- Open with a sell, close with a buy
- Profit grows as price goes down
- Loss grows if price rises
A Quick Worked Example
You go short EUR/USD at 1.0850 and close at 1.0800. Again 50 pips, again about +$500 before costs, because you sold high and bought back lower.
Both Directions Carry Risk
Both directions carry risk. A short position loses money when the price rises, while a long position loses money when it falls. A Stop Loss can help manage losses, but execution can occur beyond the requested level during gaps or fast price movements.
Key Takeaways
- Going long means buying to profit from a rising price.
- Going short means selling first to profit from a falling price.
- You close a long with a sell, and a short with a buy.
- Both directions can profit, and both can lose if the market moves against you.
- A Stop Loss can help manage risk, but it does not guarantee the maximum loss.
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