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The Long and Short of it

  • #1
  • First Post: Jul 9, 2008 6:08pm Jul 9, 2008 6:08pm
Guys

I am a newbie trader and whilst have been watching and learning for the past six months the abreviations really seem to get to me at times.

Could an experienced trader please explain the difference between long and short, when someone says there long in this trade or can we short this what do they mean, I have tried to look around on the net but I can't seem to find a really good explanation of it.

Thanks in advance

Awesome site really great to be on here with like monded individuals

Simon
99% of Traders fail, so don't follow the herd
  • #2
  • Jul 9, 2008 6:56pm Jul 9, 2008 6:56pm
Quoting sweetaction
Guys

I am a newbie trader and whilst have been watching and learning for the past six months the abreviations really seem to get to me at times.

Could an experienced trader please explain the difference between long and short, when someone says there long in this trade or can we short this what do they mean, I have tried to look around on the net but I can't seem to find a really good explanation of it.

Thanks in advance

Awesome site really great to be on here with like monded individuals

Simon
They are generic terms ..Long means to buy..Short means sell

So if you think EUR/USD is going to rise and you buy (bet up)....you are long

You think it is going to fall...you sell (bet down)...you are short
http://en.wikipedia.org/wiki/Short_%28finance%29

Click on link..scroll down to history...best description of short I can find.

(If in doubt "Wikipedia")

Going short could have been invented in Lancashire...reminds me of "Short of a few bob"
The greatest enemy of a good plan is the dream of a perfect plan.
  • #3
  • Jul 9, 2008 7:02pm Jul 9, 2008 7:02pm
Yea basically LONG means that you bought the base currency with the other(which is the first currency in the pair e.g. USD/JPY USD is the base) and SHORT means that you used the other currency to by the base.

LONG on USDJPY means I bought dollars with yen. So a buy position meaning you want a price rise.
SHORT on USDJPY means I bought yen with dollars. So a sell position meaning you want a price fall.
  • #4
  • Jul 9, 2008 7:08pm Jul 9, 2008 7:08pm
oh thank you, thats is so easy to understand

you guys rock thank you

Simon
99% of Traders fail, so don't follow the herd
  • #5
  • Jul 9, 2008 7:13pm Jul 9, 2008 7:13pm
It was requested a long time ago to add a glossary to the main page.
"To Be A Successful Forex Trader, You Need A Successful Forex Mentor."
  • #6
  • Jul 9, 2008 7:13pm Jul 9, 2008 7:13pm
Quoting sweetaction
Guys

I am a newbie trader and whilst have been watching and learning for the past six months the abreviations really seem to get to me at times.

Could an experienced trader please explain the difference between long and short, when someone says there long in this trade or can we short this what do they mean, I have tried to look around on the net but I can't seem to find a really good explanation of it.

Thanks in advance

Awesome site really great to be on here with like monded individuals

Simon
Lets start with "Short".

Trading {at least, Futures Trading} began with Japanese Warlords who were Paid in Rice.

These Warlords would commission Armour from the smith which was to be paid for once the Rice was Harvested. {possibly Months in the Future}

The Nuts of this Contract meant that "The Warlord" was Short 'x' bushels (contracts) of Rice as he had already promised them to the smitty.

Imagine a Warlord who didn't need anymore armour and therfore had an excess of funds (Rice). His Rice Contracts were "Long"
He was in the luxurious position of offering his peers (other Lords) the Rice they needed to pay for their Armour. The Catch was that the Borrower had to pay Current Rice Price on Settlement Day.

Who made the best Deal?
Well that's the game we still play today.

Fast forward 8 centuries or so.
Long = You are a Buyer.
Short = You are a Seller.
  • #7
  • Mar 19, 2010 4:03pm Mar 19, 2010 4:03pm
I’ve been thinking about the terms long and short for about 3 years now.
Maybe I am mistaken but I wonder if these terms are misused!?

We “sell” only to close a buy.
We “long” only to close a short.

We do not “short” to close a buy.
And we do not “buy” to close a short.


So if we say “I have gone long”, if my understanding of the terminology as it was originally intended is correct, effectively means, “I have closed a short position”, not “I have opened a new buy position”.

I know it’s often used this way. But I wonder if this is correct!?.............doesn’t matter in the end, does it
  • #8
  • Last Post: Mar 20, 2010 11:06am Mar 20, 2010 11:06am
You may have also come across the terminology of "covering shorts" and "covering longs", these mean you are reducing or ending your exposure to the short or long position you are holding.
Not necessarily opening a new position in the other direction.
It never gets easier, you just get better
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