For beginner traders, what are Long and Short? Let's get to know these trading commands first.

To maximize your trading benefits and increase the chances of making profits from price movements, understanding the meaning of short is crucial. Short selling means selling in advance with the expectation of buying back at a lower price. Let’s study this concept in detail.

Long Position and Short Position in Trading Markets

Long and Short orders are mostly applicable to derivative (Derivatives) instruments such as futures contracts, CFDs, and others.

What is a Long Position

A Long Position refers to placing a buy order for an asset, expecting the price to rise. The trader then closes the position by selling to profit from the price difference.

This strategy is used in bullish markets, based on the principle of “buy low, sell high.” For example:

Scenario 1 (Profit): The trader buys an asset at 41 baht, expecting the price to increase. When the price rises to 42 baht, the trader sells, making a profit of 1 baht.

Scenario 2 (Loss): The trader buys at 41 baht, but the price drops, so they sell at 40 baht, incurring a loss of 1 baht.

What is a Short Position

A Short Position involves selling in advance, expecting the price to decline. The trader then closes the position by buying back at a lower price to profit from the price difference.

This strategy is used in bearish markets, based on the principle of “sell high, buy back low.” Short selling is only available for derivative instruments and CFDs, not all trading tools.

Scenario 1 (Profit): The trader sells at 41 baht, expecting the price to fall. When the price drops to 40 baht, they buy back, making a profit of 1 baht.

Scenario 2 (Loss): The trader sells at 41 baht, but the price rises to 42 baht, so they buy back at a higher price, incurring a loss of 1 baht.

Examples of Using Long and Short in Investment

Example 1: Long Position in Stocks

Suppose an investor hears that the earnings of a certain company are improving, so they expect the stock price to rise. They decide to buy 100 shares at 350 baht (total 35,000 baht).

When this good news becomes public, the stock price rises to 400 baht. The investor sells the 100 shares, earning a profit of 5,000 baht.

Example 2: Short Position in Stocks

A trader receives information that a company will face supply chain issues, so they expect the stock price to decline. They borrow 100 shares from a broker and sell them at 350 baht (receiving 35,000 baht).

Later, negative news causes the stock price to fall to 300 baht. The trader buys back 100 shares at this price (spending 30,000 baht) to return to the broker, making a profit of 5,000 baht.

Summary

Understanding that short means selling in advance to profit from a decline in price, along with the difference between Long and Short positions, is a fundamental skill for all traders. Whether trading derivatives or CFDs, you can profit in both bullish and bearish markets by making correct decisions and managing risks effectively.