Long Short is - the two main strategies for trading and profiting from bullish or bearish markets.

In the world of trading, what allows investors to make more profits is understanding what long and short mean and how to utilize them. Both orders give traders the opportunity to profit from both rising and falling markets, which is a necessary skill for those aiming for maximum returns.

What is Long Short: The Difference Between Buying and Selling

Long short is a basic trading order that indicates the direction of investment. A long order means the trader expects the asset’s price to rise, so they open a buy position to wait for a sale. Conversely, a short order is the opposite: the trader expects the price to fall, so they open a sell position first and buy back when the price drops.

The main difference lies in the direction: a long position is a bullish play—buy low and sell high. A short position is a bearish play—sell high first and buy back low. Although these are different strategies, their goal is the same: to profit from price volatility in the market.

Long Position Strategy: Profiting from an Uptrend

A long position or initiating a buy means the trader places an order to purchase the asset, expecting its price to go higher. When the price increases as anticipated, the trader closes the position by selling the asset to realize the profit from the price difference.

This technique is suitable for markets trending upward. Buy low—sell high is a simple yet effective concept. However, if the market moves against expectations and prices keep falling, the trader must close the position at a lower price than entry, resulting in a loss.

Practical Example: Suppose a trader hears that PEAR company’s earnings have improved from last year, so they open a long position by buying 100 shares at $350 each (investment of $35,000). Later, when the market reacts positively, the stock price rises to $400. The trader sells all shares and makes a profit of $5,000.

Short Position Strategy: Profiting from a Downtrend

A short position is a slightly more advanced order, where the trader sells an asset they do not own, expecting the price to decline. When the price drops, they buy back the asset at the lower price. The concept is selling high and buying low—short selling.

This technique allows traders to profit even when the market is falling, without waiting for an uptrend. However, if the short sale reverses and prices rise sharply, the seller must buy back at a higher price, incurring a loss.

Practical Example: Suppose a trader hears rumors that the manufacturing country of ORANGE company will suspend exports. They decide to short by borrowing 100 shares from a broker and selling them at $350 each (receiving $35,000). When the news proves true, the stock drops to $300. The trader buys back 100 shares at this price ($30,000) and returns them to the broker, making a profit of $5,000 from the short cover.

Examples of Using Long and Short in Different Instruments

Long and short orders are not available on all trading instruments. They are mostly found in derivatives such as CFDs, TFEX, or BlockTrade, designed to give traders more flexibility.

For regular stocks, placing a long order is straightforward. Short selling, however, requires borrowing shares from a broker, which involves more steps and restrictions. Nonetheless, with current CFD tools, traders can easily short stocks by opening a short position on the platform, with quick execution.

Which Instruments Support Long and Short Orders?

Not all assets allow short trading. Traders should verify whether their chosen instruments support short selling.

• CFD (Contract for Difference): Allows both long and short positions on various assets.
• TFEX (Thai Futures Exchange): Supports both long and short positions.
• BlockTrade: Offers long and short trading on digital assets.
• Regular stocks: Long positions are always available, but short selling requires special procedures.

Choosing the right instrument is crucial, as each has different requirements and cost structures. Investors should study these before making decisions.

This is why long and short are essential skills for all traders, whether beginners or experienced. By understanding and correctly applying both strategies, traders can increase their chances of profiting from both rising and falling markets, enhancing their overall trading success—while managing risks appropriately and selecting suitable tools.