What is Long and Short?

What is Long and Short?

Beginners can be confused by the term “short” position or “long” position, although for more experienced market participants these are the simplest concepts. Let's talk about what they mean.

The position is an opened deal.

  1. If you clicked Buy at the opening of the transaction, then you have opened a long position. That means a long position is an opened Buy transaction. A trader who has a long position benefits from rising prices. It can also be called - “get up long,” “go long”>.
  2. If you clicked Sell at the opening of the transaction, then you opened a short position That means a short position is an open Sale transaction. A trader who takes a short position will benefit from lower prices. It can also be called - “get short”, “short”.

Is it possible to open a short position on a financial asset that you do not have? Indeed, how to sell, for example, tokenized shares, if you have not bought them before?

In fact, this can be done in most cases, if the exchange allows it. For example, you have replenished an account and want to open a short position on a certain asset. In this case, there is a simplified way - the exchange will lend you this asset for sale. When the price drops, you buy the asset cheaper and return it to the exchange, and put the difference in price (profit) into your account.

Where did the terms Long and Short come from?

There is no correct answer.

The earliest reference to the terms dates back to 1872. Their meaning is explained in the book “The Bryant and Stratton Business Arithmetic”:

From that time, the meaning of the concept has not changed, but the history of its occurrence remains vague.

Perhaps the terms “long” and “short” position are rooted in the use of counting sticks for recording debts in medieval Europe. In those days, the wand was used to record debt. The wand was divided into two parts, and both sides of the transaction had part of it. The shorter part was the recipient of the funds, and the longer part (which, by the way, was called stock) was held by the person who gave the money in debt.

It is possible from this practice that the terms “long and short position” come to mean which side you are trading on.

Now you know exactly what Long means on the exchange, and what Short means.