Long, Short and Flat Positions

The basis of all trading, whether stock, futures, or any other financial instrument, involves buying and selling. Long and short are terms used to describe the buy and sell transactions.

Long Position

You are going long when you open a position to buy a security, commodity or some other financial instrument. Once you have made that purchase, you are considered to have a long position in that security or commodity. More than likely, you are bullish toward this particular market because you are buying anticipating upward direction (or a continuation of upward direction).

Short Position

You are going short when you open a position to sell a security, commodity or some other financial instrument. You are most likely bearish toward this particular market, and are selling anticipating a downward direction in the market price. When you go short, you are actually borrowing the shares or contracts from a brokerage firm in order to sell. If the market maintains its bearish trend, you will be able to actually buy those shares at a lower cost later to fulfill your loan commitment, therefore making money. To open a short position, you must establish a margin account. For more information on margin requirements, you should contact your broker or brokerage firm.

Flat Position

When you have bought contracts or shares, you are in a long position. When you sell contracts or shares, you are in a short position. When you have either a long or a short position, you have an open position in the market. When you liquidate your open position, you have exited your position. This is also called going flat.