Short bonds. Buy deal (purchase, buy, long deal, “long”, long). What does it mean to short on the stock exchange - general provisions
What is a short is a type of stock exchange transaction in which a trader sells borrowed shares. Those. actually " what is a short“This is the sale of those securities that are not available. In another way, such a transaction is called short selling or short selling.
Such transactions are concluded by short sellers - or. By holding a short position, a trader makes money when the market declines and loses money when the market rises.
The mechanism of the short operation is very simple - the trader sells shares borrowed from the broker at a high price, and then, when the price has fallen, buys the securities back, closing the debt to the broker, resulting in a profit remaining in the account.
A standard deal works like this: first you buy a share at a low price, and then sell it at a higher price, making a profit. This happens not only on the stock exchange; the situation is similar in business - you buy a product cheaply, which you plan to sell at a higher price and, as a result, receive income.
What is a short - essentially it is the same transaction, only these two stages follow in the reverse order, i.e. first there is a sale at a high price, and then a purchase at a low price. As a result, you make a profit.
What is a short using an example
I can borrow 1,500 shares from a broker and sell them as my own for 318 rubles. Those. I borrowed 1,500 securities, not money, but 1,500 shares, and I will return not money, but a number of securities. I sell them for 318 rubles and receive 477,000 rubles into my account. (per sale). That. there is money in the account from the sale of Gazprom securities +477,000 rubles. and debt to the broker in the form of -1500 shares.
The price drops to 117 rubles. and I decide to close the deal, repay the debt and leave the market. I buy 1,500 shares of Gazprom at a price of 117 rubles, i.e. I spend 175,500 rubles on this, close the debt to the broker in the form of securities, and I have a profit of 301,500 rubles at my disposal. (+477,000 – 175,500 rub.).
What is a short and how to borrow securities from a broker?
It is technically very easy to do this - you just need to sell those securities that are not available, and you do not need to write special applications for a loan, everything happens automatically.
Not all securities presented there are offered short on the stock market. You can only short stocks that meet specific requirements. These requirements are established by the Federal Financial Markets Service, and it also determines the list of shares allowed for this transaction. Basically, these are the most liquid securities of large Russian issuers.
The broker has the right to offer clients loans in the form of securities only for those shares that are on the FFMS list; the broker is prohibited from shorting other securities.
Everyone is familiar with the standard formula for profitable sales “buy cheaper, sell more expensive and make money on it.” The main goal of each participant in the financial market, foreign exchange or stock market, is to make a profit. To do this, different types of transactions are carried out on exchanges using a bearish game (short positions) or a bullish game (long positions).
The terms “Short” (translated from English as “short”) and “Long” (“long”) refer to types of financial transactions that are often used on exchanges. In simple words they mean the following:
- Shorting the stock market means selling first, then buying back at a low price, and making a profit.
- To go long means to buy, wait for the “price” to rise, then sell.
Short and long – trading strategies in stock markets. The essence of shorting (short positions) is to make a profit when the value of shares or any other financial instruments decreases, and use the fall of the market in order to make money. Short positions (short sales) are sales of securities borrowed from a broker with collateral.
When making short trades, you need to consider:
- behavioral structure of the market: the presence of a trend and a flat (a period of time when the price does not rise or fall);
- good liquidity of the instrument;
- previous course for a certain time.
The usual strategies for long-term investors and any traders are considered long (long positions). They differ only in the retention period of the acquired assets. The essence of a long is the purchase of securities (if it is assumed that their price will rise in a certain period of time), subsequent sale, and receiving income from the difference in value.
If it turns out that the acquired assets are priced too high and their price is expected to fall, it is advisable to open a short position.
The essence of short and long trades:
| Short trading | Long trading |
| Selling a trading instrument borrowed from a broker at a high price | Buying a trading instrument at a low price |
| Expectation of a decline in the asset price | Waiting for the trend to move up |
| Buying an asset at a low price | Selling an asset at a high price |
Examples of short and long
Shorts are opened to increase the deposit when quotes fall. The trader analyzes the current rate, and if the price of a trading instrument decreases, he sells it at the current price, borrowing from the broker. After the price decreases, the asset is bought back and returned to the broker at a low price. Thus, the stockbroker makes a profit on the difference in the cost of selling and buying.
Traders who trade short are called "bulls" because their trading is associated with an uptrend and a bull that lifts the market and pushes it higher. 
Longs are opened in the hope of making money on the upward movement of quotes. Bear traders buy assets at low prices, wait for market prices to rise, and sell when prices rise. The difference between the purchase price and the sale price of the asset is the net profit of the exchange trader. When long trades are made in trading, the stockbroker is risking a large number of securities, and must take into account the direction of quotes over a long period of time.
In the exchange jargon of traders, various variations of the terms long and short are used: go long, go long, go long, get out of long, go long, short, put on shorts, short, take off shorts, etc. Stock traders even have their own version of the well-known phrase “execution cannot be pardoned,” when the profitability or unprofitability of a financial transaction “short cannot be long” depends on the comma.
Features of short and long trading
Any trading strategies, including short and long positions on the stock exchange, have their own conditions and patterns. To achieve success, you need to act according to a certain pattern. Traders use a trading system that includes analyzing quote movements, entering and exiting, and holding an order. In practical trading, it is necessary to take into account all the components of exchange instruments. Ill-considered actions can lead to the collapse of the deposit.
A profitable trading scheme can be compared to a triangle, in which the edges mean:
- Trading strategy.
- Estimated risk of the deposit.
- Trader psychology.
Short trade:
The cost of a certain share is $60. There is information that by evening its price will drop to $50. Let's say there is a friend who will lend you 100 of these shares. The shares are borrowed and immediately sold for $60, the proceeds will be $6,000. The forecast turned out to be correct, and by the evening the shares began to cost $50. One hundred shares are bought again for $5,000 and returned to the friend. The net profit from the financial transaction was $1,000.
A similar mechanism works on the stock exchange, but the broker will not simply provide the asset. Interest must be paid daily for using borrowed shares. Consequently, the trader must calculate the income in such a way that it exceeds the payment for using financial instruments.
Risks of short trades
Since massive short transactions to lower quotes can contribute to the destabilization of financial markets, control authorities introduce legislative restrictions. Since 2009, brokers in the Russian Federation have been prohibited from allowing such commercial transactions with shares whose price has decreased by more than 3% of the closing price.
Shorts are not available for any shares on the stock exchange, but only for those on the list of margin securities of the broker (whose services the trader uses) and if he has these shares in the required period of time. Shorting, like other leveraged strategies, has many risks and is not recommended for new stock traders or those using a long-term investment trading strategy.
To make high profits on short trades, the value of the asset must fall rapidly. Only very experienced stock speculators can take advantage of this situation in a timely manner and make good money from it.
To begin with, a beginner needs to work with long trades and work out short trades in demo mode. A stock speculator is not an investor. The purpose of his transactions is not to ensure a sustainable return on funds over a long period of time. The trader’s goal is to make a profit from both the growth and the fall in the value of the financial instrument chosen for speculation.
Short and long in the Forex market
The terms Short and Long are most often used in the stock markets. In Forex, financial transactions are usually referred to as:
- purchase "Buy";
- sale "Sell".
The designation of long positions “long” and short positions “short” are found on special platforms for communication between stock traders. Trading on the Forex market involves two actions: selling a currency pair or buying it. 
Among stock traders, the sale of a financial instrument is called a short position (Short), and the purchase of a currency pair is called a long position (Long). However, these concepts have nothing to do with the duration of holding a position open. Buy or sell orders can be open for several minutes or several weeks.
Short and long in the cryptocurrency market
Cryptocurrency trading allows you to make a profit through speculative operations (short-term or long-term) on fluctuations in the prices of assets traded on the exchange. You can make money by buying a certain cryptocurrency and then selling it at an increased price. In addition, you can make a profit from a decrease in the price of cryptocurrency by opening a short trade.
The Buy and Hold strategy is the most successful and most common way to generate income during periods of rising cryptocurrency prices. By adhering to this strategy, traders have the opportunity to make money by increasing the price of financial instruments in any market: cryptocurrency, foreign exchange, stock, commodity.
The key features of this strategy are:
- The correct entry into a long position after a strong correction in the market.
- Holding an open transaction until the target is achieved, which is determined by technical analysis.
In order to correctly understand the meaning of these words and understand the mechanics of trading on the market, you need to dig a little deeper into the essence of these concepts.
What is a short and long position on the stock exchange?
Analyzing visual technical charts, we can come to the conclusion that for the most part, the growth of quotes occurs slowly and progressively. Accordingly, the concepts “ purchase" And " long term position"have become synonymous. This is how the concept “ long» ( from English long – long).
In turn, all stock market crashes and major falls occurred very abruptly and unexpectedly. And in order to profit from a fall, you should open a position for a short period of time, take profit, and close it immediately. In contrast to the bullish longu", fall work began to be called " shorts", from " short» ( English - short).
Short and long in simple words
To begin with, all stock markets rise over the long term. If you consider the dynamics of any stock index with a history of more than 50 years, you can easily verify this.
On the Wall Steet in New York there is a 3-ton bronze statue of a bull - a classic holder of a long position.
What is this connected with? First of all, with inflation. Today, no one is surprised that every year the prices for certain products and services increase. Cars, food, clothing, medical care, etc. – the price either increases or remains the same. If there is a situation in the economy where prices, on the contrary, are falling, this, oddly enough, is an alarming sign.
One way or another, a constant rise in prices is a normal and beneficial phenomenon for the economy. It spurs consumer demand, which ultimately leads to job growth and scientific and technological progress.
How does this help you understand what is long and short? Let's return to the securities market. Stocks, like any other commodity or product, also rise in price under the pressure of inflation. After all, behind the securities there are very real production capacities: machine tools, drilling rigs, real estate, copyrights and innovative technologies. Thus, the gradual increase in prices for stock indices is nothing more than a reflection of inflation on the property that stands behind specific shares. From this simple rule, investors have formed certain behavior patterns that explain why short and long position that's what they're called.
Features of calculations of long and short positions
Outside the Frankfurt Stock Exchange, Bear, the traditional short-seller, is not shown alone; he is accompanied by an imposing bull.
Answering the question, " what is long and short on the stock exchange“It is also worth noting that traders always opened a long position “on their own”.
That is, they bought some asset as their property and could keep it in their portfolio, no matter how it changed in price. However, if a trader opens a short position, then he must borrow the asset from his broker, sell it, wait for the price quote to go down, and then buy it back at a low price, and then return the borrowed asset back to the broker, keeping the difference in the form of profit.
This is a rather complicated operation for an inexperienced investor, but this is how long and short positions.
Example:
Let's say the current stock price is $61. Are you sure that tomorrow its price will drop to $51 . At the same time, you have a friend who can lend 100 of these shares. You take shares from him and sell them today at a price $61 , and help out $6100 . Let's say the forecast turns out to be correct and tomorrow the shares are already worth $51 . You buy 100 shares again by spending $5100 , and return the securities to your friend. $1000 remains with you as profit.
Exactly the same mechanics work on the stock exchange. long and short operations.
But the broker is not your friend, and will not lend you an asset just like that.
For each day of using borrowed shares, you will need to pay interest, which depends on the key rate in the country. The higher the bet, the more expensive it is to be in a short position.
Thus, the trader should expect income that will exceed the fee for using the financial instrument. That is why it is not profitable to hold sold assets in a portfolio for a long time. Therefore, a position aimed at earning money from price reductions is called short.
What does long and short mean? on practice?
Buying an asset to make a profit is usually called a long position, and selling, accordingly, a short position. In English, a short position and a long position are referred to as “long” and “short”.
Curious readers may be interested in the situation when a trader opens long and short at the same time. In practice, this situation is impossible, because these are inverse operations and they cancel each other.
Eg, if you bought 100 shares Tesla, then you will not be able to open a short position on this instrument, because selling 100 shares will simply bring the trader to zero. In order to open a short position from this position, you must place an order to sell 200 shares at once. Of these, 100 will be sold those that were purchased earlier, and another 100 will be borrowed from the broker and sold “at minus».
However, the very idea of opening a position in “both directions” is not without meaning, and in practice, opening long and short at the same time Maybe. To do this, you need to use the derivatives market.
Eg, you can buy 100 shares Nvidia on the stock market and at the same time short a futures contract for 100 shares of Nvidia. As a result, the trader will find himself in “ null» position, because the income from the growth of shares will be absorbed by the loss on the futures account, and vice versa - the profit from a short position in the futures market will be offset by the loss from the decline of shares in the stock section.
If you open and close a short position within one trading day, you will not pay interest to the broker for it.
Opening such positions can be interesting for arbitrageurs, as well as for investors who engage in hedging. But in such a situation it is difficult to make a profit from exchange rate changes.
On the technical side, long and short operations also have a number of subtle points. In particular, the broker forcibly closes the client's short position in shares before closing the shareholder register. This is done so that the broker can receive dividends on securities that actually belong to him.
Poll: Which position do you prefer?
Short and long on the stock exchange - what is it?, what does it mean? In this publication, I will explain these, at first glance, incomprehensible exchange terms in simple words. After reading the article, you will learn what a long is and what a short is on the stock exchange, when, how and why all this happens. I will explain it in such a way that it will be understandable even to people far from the financial sector.
So, first, I’ll explain why people who are not involved in trading need to know and understand stock exchange terms, in particular, short and long. Everything is very simple: to competently interpret economic and financial news in the part where it is necessary and important for you to know personally.
For example, where will the dollar exchange rate move next? Is everyone interested? In any case, it should be of interest to everyone, because everyone’s financial condition directly and indirectly depends on this. If you yourself have little understanding of how to make some important financial decisions? In my opinion, the most reasonable thing here would be to focus not on the forecasts of analysts who write them, receiving money for it, simply doing their job and not bearing any responsibility for it, but on the actions of those who make transactions for themselves, risking their own money.
Various exchanges and portals that broadcast quotes have their own forums and chats where traders communicate. For example, if you are interested in the dollar/ruble exchange rate, it will be interesting to watch the chat on investing.com on the dollar/ruble currency pair page. Traders chat in their own jargon, and if you don't understand the terms, you won't understand the point. In particular, the terms “short” and “long” can be found there, perhaps, most often. So what do they mean? Everything is very simple.
Long (from the English long – “long position”) is a transaction to purchase an asset. It received this name because it was initially believed that all exchange assets (securities, precious metals, commodities, etc.) increase in price in the long term. At least thanks to inflation. Therefore, when a trader buys an asset, he can keep the trade open for a long time, it will be a long trade, and as a result it will still bring him profit.
Short (from the English short - “short position”) is a transaction to sell an asset. It’s similar here: initially, exchange-traded assets fell in price only for a short period of time, but in the long term they grew. Therefore, traders opened transactions to sell the asset, usually for a short period, fixing a small profit.
You can hear different variations of these terms in trading jargon. For example, long, long, enter long, exit long, short, put on shorts, sit in shorts, take off shorts, etc. - they all mean the same thing.
Traders even have their own variation of the famous phrase “execute cannot be pardoned,” where the profitability or unprofitability of a transaction also depends on the correct placement of the comma: “you can’t go long with a short.”
Let's look at what short and long mean on the stock exchange using an example.
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The essence of working on the international currency market comes down to opening and closing transactions and making a profit on the difference. In this case, transactions are divided into two types - buy and sell.
A long trade in Forex is a buy trade.
Alternative names for such positions are long trade, purchase, buy, long position. All of them will be found in the relevant literature, since without indicating the nature of the transaction it is impossible to explain any strategy on the international foreign exchange market.
A long in Forex is a transaction that is opened with the expectation of an increase in the rate of the selected asset and making a profit from the upward price movement. Translated into Russian, this word means long. This name was chosen because raising quotes is a much longer process than lowering them.
You've probably often noticed in the literature the contrast between bullish and bearish movements. This is due to the fact that market participants who open buying transactions are called bulls, and upward price movement is, accordingly, bullish. There is an association with a bull that uses its horns to push the value of an asset upward. In addition, long in Forex is the direct opposite of short positions, which are opened by bears, and downward price movement is bearish, as if a bear is knocking down the price with its paw.
Long in Forex - signs and features
For example, you want to work with the euro/US dollar currency pair. By opening a long position, you are actually buying euros with American dollars. In this case, the euro is considered the base currency, and the dollar is the quoted currency. Profit will be made if the pair’s quotes rise.
Thus, we can conclude that it is advisable to open a long trade only if you are confident that the existing upward trend will strengthen. For this, all kinds of trend indicators are used, as well as fundamental analysis, which takes into account factors such as the publication of major news, macroeconomic statistics, increases in interest rates of central banks, etc. If we talk about technical analysis factors, the most common buy signals are rebounds from the support level.
As for closing longs on Forex, profits are usually recorded when quotes reach the opposite boundary of the price channel. It's about reaching the resistance level. The MetaTrader trading terminal uses take profit to automate this process.
The profit received from long transactions is equal to the difference between the funds invested when purchasing the base currency and the funds received as a result.
