The differences between long and short forex positions are very distinct. As a matter of fact, they are the exact opposite of each other. These positions are one of the many fx tools can use to make a good career when applied efficiently.
DEFINITION OF THE TERM SHORT IN FOREX
In the market, you can sell a security before you own the security. The intention of traders in the short-term trade is to sell a security before buying it hopefully at a time the price is lower than what you bought it. From another perspective, you can say a trader is said to be in a short trade when the borrows some security which she sells off in the current market in hopes that the value of the security would come down and she can then buy it back, make some profits from it, and then return the security to the owner together with the interest as agreed. A trader can say “I am short Company-Z” when the borrowed some company-A shares and sold them off in the market. This is called a “short position”.
WHAT IS THE MEANING OF “LONG” IN THE MARKET?
When a trader is in a “long trade”, it means the bought some assets in hopes that the price of the assets would increase so that she can quickly sell them off and make some profits. When a trader says something like “I am long company-A” it means the currently owns share of company-A. To “go long” or “going long” is what a trader says to indicate interest in buying a security/opening a long term position. It is referred to as “long position”.
WHAT IS THE DIFFERENCE BETWEEN LONG AND SHORT FOREX
Here are the most notable differences between long and short positions:
- Long is associated with buying while short is associated with selling. Open a long position, she has to buy the stipulated security from his trade capital; while opens a short position if she sells some borrowed security.
- The account of trading a long position reads in positive while that of the trading a short position reads in negative. The positive figure shows that the long position does not owe her brokers; while the negative figure displayed in the short position shows that she has some debt to pay courtesy of the securities she borrowed.
- Just like the names imply, a short position is not expected to last for a long time, while a long position is not expected to last for a short time. The definition of “long” in this context is determined by the type of the position. Long may be anything around a year; but for a position, long is in the neighbourhood of 10 years and more.