Long and Short Positions: How a Trade Makes or Loses Money
Going long means buying first and selling later. You make money if the price rises.
What you'll learn
- What going long and going short mean
- How you profit when prices fall
- How to work out profit and loss on any trade
Going long
Going long means buying first and selling later. You make money if the price rises.
Buy gold at $2,400, sell at $2,420: you made $20 an ounce.
Going short
Going short means selling first and buying back later. You make money if the price falls.
How can you sell something you do not own? On CFDs and futures you never own the asset anyway; you hold a contract whose value moves with the price, so selling first is as simple as pressing Sell. (Short selling actual shares means borrowing them from your broker, but traders on CFD and futures accounts do not deal with that.)
Sell gold at $2,400, buy back at $2,380: you made $20 an ounce.
The one formula you need
- Long: profit = (exit price minus entry price) times size
- Short: profit = (entry price minus exit price) times size
A negative answer is a loss. Costs (spread, commission and overnight fees) come off on top.
Worked example
You short 2 micro E-mini S&P 500 contracts (MES) at 5,800.00 and buy them back at 5,790.00. Each MES point is worth $5.
- Points gained: 5,800 minus 5,790 = 10 points
- Per contract: 10 points times $5 = $50
- Two contracts: $100, before commission
If the market had risen to 5,810 instead, you would have lost $100.
Is shorting riskier?
On a share you buy, the most you can lose is what you paid; the price cannot go below zero. On a short, the price can in theory keep rising. In practice, traders limit both sides the same way: with a stop loss placed when the trade is opened (Course 3). The risk is set by your stop and your size, not by the direction.
Words you will see
| Term | Meaning |
|---|---|
| Long, buy | Profit if price rises |
| Short, sell | Profit if price falls |
| Open position | A trade you have not closed yet |
| Flat | No open positions |
| Close, exit | End the trade and lock in the result |
How this works at a prop firm
Prop firms let you trade both ways, and a short counts exactly like a long towards your profit target and loss limits. Some firms have rules about holding a long and a short on the same instrument at once, or across two accounts, which they treat as hedging. Check the hedging rules before you try it, and compare firm rules side by side in the comparison tool.
Key takeaways
- Long = buy first, profit when price rises. Short = sell first, profit when price falls.
- Profit on a short = (entry minus exit) times size.
- Your stop loss and size set your risk, whichever way you trade.
Check yourself
3 quick questions. Your answers stay on this device.
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You short EURUSD at 1.0900 and close at 1.0860. Profit or loss?
Profit: you sold high and bought back lower.
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You go long 1 MES at 5,750 and close at 5,746. MES is $5 a point. What is the result?
4 points times $5 = $20 loss.
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What limits your risk on a short trade?
A stop loss and a sensible position size.
Go deeper
Educational content, not financial advice. Trading carries a high risk of loss, and most traders lose money. How we make money.