Long and Short in Trading: What You Need to Know to Profit from Both Directions

When it comes to trading, many people often ask, “What does short mean” and how is it used? Today, we will help you understand the concepts of Long Position and Short Position in depth so that you can catch market trends whether it’s an uptrend or a downtrend.

What is a Long Position? Buy high - sell low

Long Position ( or called Buy Long ) is an order that traders send to buy that asset with the expectation that the price will increase in the future, and they want to close the position by selling to realize profit from the price difference.

For example, you think that TECH stock at 200 baht will go higher soon because the company just announced good earnings. You then order Long 1,000 shares at 200 baht ( using 200,000 baht). After that, when the price rises to 230 baht, you close the position by selling all the shares and gain a profit of 30,000 baht from the price difference.

However, Long Position also has risks. If the price does not move as you expected, for example, drops to 180 baht, when you close the position, you will incur a loss of 20,000 baht.

Short Position: Profit when the price drops

Short Position is an order to sell the asset first ( where short means full sale before having the money ), with the expectation that the price will decrease. You sell first to get the money, then buy back when the price drops, earning profit from the price difference.

If you notice that BANK stock at 250 baht has negative news about license revocation, you can order Short 1,000 shares at 250 baht ( to receive 250,000 baht). When the price drops to 210 baht, you buy back 1,000 shares ( using 210,000 baht) and close the position, resulting in a profit of 40,000 baht from this Short position.

But Short Position also carries high risk. If the price rises instead of falling, for example, up to 280 baht, you will have to buy back at 280 baht and incur a loss of 30,000 baht because you sold at 250 baht.

Main differences between Long and Short

Available tools

Long Position and Short Position are not available for all instruments. They are mostly used with derivatives (Derivatives) such as CFDs, futures contracts, and options markets, while most stocks only allow Long Position.

Usage recommendations

1. Study before Shorting: Opening a Short Position should be based on solid analysis.
2. Use Stop Loss: Both Long and Short should set Stop Loss to prevent large losses.
3. Avoid excessive Leverage: Leverage amplifies both gains and losses.
4. Understand the risks: Markets are volatile; profit is not guaranteed.

By understanding Long Position and Short Position correctly, you can make more informed trading decisions and improve your chances of making profits from trading.