What Is Short And Long Trading?

What Is Short And Long Trading?

The trading glossary may be a tough one. There are a lot of words that are interchangeable with each other. They are also regular words that we use every day. But when we step into the world of trading they change meaning completely. That can be quite confusing. Such are the words “long” and “short” trading. What do they mean in the world, completely different from everyday life?

Terms used by professional traders

Long and short are the terms used by professional traders to indicate whether a certain trade-in is worth buying or selling. It also indicates the action of buying or selling itself. A long trade is the one initiated by buying and the assets are expected to rise in price and be sold for the trader’s profit. A short trade is the one when a trader sells off his assets with the intention that every asset back after they fall in price. That would also come to be profitable for the said trader.

Long trades

Long trades are the ones where a trader bought an asset. Some of the brokers even went as far as not to have a BUY button in their interface. Instead, they have a LONG button for the same purpose. Traders also quite frequently use the term long as in owning an asset. So, saying “I am long Microsoft shares” means that the traders own said shares. To go long means that a trader is interested in purchasing a certain asset.

Short trading

Short trading on the other hand has a whole different concept. Of course, there is the same goal in mind, but short trading stands for a much more complicated process than a long one. First, a trader has to sell chosen assets and wait for the price for them to drop lower than the one for which he sold them. After that, the assets are bought back and not sold until they are back up in price again. Most of the financial markets allow traders to go short. Most of the stocks are quite prone to be short.

So that is the difference between going short and long in trading. Simple. But there is a certain beauty to it.

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