Short Position

Short Position

It is a position at which you suppose that an asset will weaken, so you sell it now to buy it later at a lower price. Traders may use words sell, short sell, go short, and short interchangeably. The strategy that involves shorting is considered bearish. 

In the case with currency pairs, you are going short on a base currency and long on a quote one. 

For example, if you sell the GBP/USD pair at rate 1.2345. It means that 1 pound costs $1.2345.  If the conditions in the market make you think that the value of GBP against USD will go down, you can sell. Imagine the rate goes down to 1.2334. In this case, if you buy after the fall, you will make 11 pips. 

The price of 1 pip is: 

0.0001X100,000 (lot size)=$10

Your profit from 11 pips is:

11X$10=$110

Use position trading as your main strategy only if you have extensive knowledge of fundamentals and good stress management skills.

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2020-07-27 • Updated

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